It’s totally normal to have concerns when you’re looking to purchase your very first property. There are so many things to look into. Location, price, amenities, infrastructure, density, and the list goes on and on. One concern that has increasingly popped up is the presence of nearby affordable housing. Let’s explore this and discover if the fears are warranted (or not!).
Q: After renting for many, many years, I’m now ready to get my own place. I’m a first-time home buyer, and I’ve been looking at some properties in quite central areas. As I’m looking at well-established and popular areas, these properties are mostly priced at more than RM1,000 per sq ft. So, it adds up to more than RM1 million for units 1,000 sq ft and above.
I’ve finally zeroed in on one property, but I noticed that there’s an affordable housing project close by. Do you think that’s an issue? Will the proximity of the affordable housing project affect the higher-priced properties around it?
I do like the area, because the area is mature, location is good, near amenities like schools, shopping options, public transport, etc. What do you think? Should I be worried about the luxury property’s value in the long run?
Firstly, congratulations on finding a property that fits your personal checklist and for taking the exciting step towards purchasing your first property, a luxury condo! It’s natural to have questions about factors that might affect your investment’s value down the line. One concern you’ve raised is the presence of nearby affordable housing.
This is a common concern; yes, there’s some truth to your concern. Studies have suggested a potential correlation between high-end properties and nearby affordable housing, leading to a slight dip in value. However, there’s a crucial Malaysian context to consider, which we’ll look into further below.
The location of affordable housing does effect your property value
Some studies suggest a potential correlation between lower property prices and proximity to affordable housing. This is partly due to a perception of a less exclusive neighbourhood and resistance to low-income housing developments nearby.
This is a global dilemma that is referred to as the “not-in-my-backyard” (Nimby) phenomenon, where communities are averse to what they consider as “less desirable” higher-density low-cost housing (LCH) projects within their immediate surroundings.
In a working paper titled “Living Next to Poor Housing – A Regression Analysis of Greater Kuala Lumpur” (Khazanah Research Institute, 2022), Gregory Ho Wai Son and Lim Han Hsuen used property prices to quantify the effects of living in close proximity to LCH in Malaysia.
Their research used the Hedonic Price Model to measure property price regression based on geolocating transacted residential data for the entire greater Kuala Lumpur region from 2015 to 2019.
Ho and Lim quantified that living in close proximity to low-cost housing contributed to lower house prices in Malaysia. In an unrestricted model, the Nimby effect showed a regression of about RM9,000 for landed properties.
As they progressively narrowed distances to examine properties closer to LCH, the Nimby effects were observed to be much higher compared to other attributes – between RM29,000 and RM39,000 for landed properties and between RM63,000 and RM71,000 for non-landed properties.
Since August 2000, properties sold for RM42,000 and below have been classified as low-cost in Malaysia, depending on land worth and location, catering for those with a monthly household income of RM1,500 and below.
It all depends on your building management!
Malaysia adopted a Zero-Squatter Policy in 2000. The policy’s goals were to be achieved by providing and facilitating low-cost housing and resettlement programmes.
Regulations require developers in Malaysia to include affordable housing in new developments to promote inclusive communities. This means it’s not uncommon to find a mix of property types within the same neighbourhood, especially in mature, well-planned areas.
Ho and Lim observed that this had led to a positive effect: LCH are quite uniformly distributed, creating an inclusive city where poorer communities have access to shelter regardless of where they are in the greater KL region.
However, the researchers noted that the deteriorating conditions of LCH due to lack of maintenance were the reason for the decline in surrounding property prices. Private non-landed properties managed by Joint Management Bodies (JMB) are plagued by non-payment of maintenance fees and sinking funds, which are required for the betterment and upkeep of the building. Some private LCH premises even lack a JMB to collect these fees.
On the other hand, government LCH is managed by a general public body. While maintenance can still be much improved, the researchers acknowledged that the government has emphasised maintenance in recent years through funding allocations.
Another reason behind the regression of surrounding property prices is the sub-standard nature of LCH, where some units are too small to fit a family, resulting in overcrowding or a lack of parking bays, which results in rampant illegal parking along neighbourhood roads. The researchers also called for more attention to raising the living standards within LCH and ensuring proper building maintenance.
Some have opined that putting a cap on the resale or sub-sale values of price-controlled social housing schemes such as Residensi Wilayah (RUMAWIP) and Rumah Selangorku (RSKU), the government intends to keep price speculations at bay and to ensure these houses remain affordable in the sub-sale market.
While this could increase the homeownership rate of the low-income group in the short term, this move could affect the value appreciation of these houses in the long run. Eventually, properties constructed under the price-controlled social housing scheme could end up sharing the same fate as low-cost housing, driving eligible buyers away.
Looking for a newly launched property? Discover the latest launches here!What are the government’s rejuvenation and revitalisation initiatives for affordable housing?
The quality of affordable housing in Malaysia has improved significantly, and the government’s initiatives to revitalise these areas, ensure proper maintenance, and create a more positive living environment for all are laudable.
Some of the initiatives announced in Budget 2024 include:
- RM460 million to aid 65,000 underprivileged individuals for building new or repairing worn-out house units in rural areas
- RM100 million to maintain low- and medium-cost stratified public and private housing nationwide.
- RM100 million is allocated to upgrading the infrastructure and community facilities in Chinese New Villages.
- RM2.4 billion to construct, improve and maintain the housing facilities for civil servants, teachers, hospitals, and the police, army and fire brigade forces under the Special Task Force on Agency Reform (STAR).
- RM400 million is allocated to maintain and repair all Armed Forces’ Family Housing.
- RM20 million to rejuvenate and revitalise downtown Kuala Lumpur into a creative capital.
It’s also important to recognise that the affordable housing landscape in Malaysia has evolved. The stigma attached to affordable housing in the 1980s and 1990s, when such areas were often associated with crime and neglect, is fading.
Today, many affordable housing projects are better managed and located in strategic areas with access to schools, hypermarkets, public transportation, and other amenities—factors that contribute positively to overall property values.
Location plays a major role in property values
Ultimately, the value of your property is influenced by various factors such as location, quality of your building’s management (JMB/MC), and the overall demand in the area.
So, should you be overly concerned? Probably not if your luxury condo is in a mature, peaceful, and well-connected neighbourhood with strong property management.
It all boils down to the fundamentals: location, amenities, maintenance, upcoming infrastructure, growing population, economic opportunities, and nearby catalyst projects. Luxury properties with these attributes will likely outweigh any potential concerns about nearby affordable housing.
Focus on the positive aspects of the location, the quality of the high-end development, and the proactive approach the Malaysian government is taking towards affordable housing.
Generally, rising property values indicate positive trends for a neighbourhood. They signal that a neighbourhood has become a desirable place to live and to locate a business and influence developers’ decisions to make long-term investments in its future.
While it’s prudent to be aware of the dynamics of the surrounding area, don’t let the presence of affordable housing deter you from making what could be a sound investment. With the right location and good management, your property can hold its value over time.
Remember, a well-informed decision is a confident one. Speak to your real estate agent or a property consultant for more specific insights into your chosen area.
Happy property hunting!