EVERYONE needs a roof over his head but affordability remains an issue. Bank Negara Malaysia’s Quarterly Bulletin for the fourth quarter of 2017 stated that houses remained seriously unaffordable in 2016 by international standards with a median multiple of 5.0. As BNM puts it, under the median multiple approach, housing is said to be affordable if median house prices are less than three times annual median household income. According to the BNM’s publication, the maximum affordable house price in 2016 was RM282,000. But in reality the median house price in the market was RM313,000, putting them “beyond the means of many, where the median national household income was only RM5,228”.
The Real Estate and Housing Developers’ Association Malaysia (Rehda) acknowledges housing affordability to be a perennial problem. But are they doing enough to help alleviate the “perennial problem”? Redha says there are enough affordable homes but there are no takers. Taking a developer’s perspective, Redha locates the problem elsewhere. The problem is end-financing and unreleased Bumiputera units, the association says. It is true that the banks and financial institutions can do better by taking a more socially responsible approach but to locate the problem in the unreleased Bumiputera units is mistaking the symptoms for the problem.
Firstly, Bumiputera units do not make the bulk of the unsold units. And even if they are released, Redha still needs to explain why numerous non-Bumiputera units remain unsold.
The answer obviously lies in the house prices. To BNM the reason is very plain: It is the failure in the market to produce a sufficient quantity of affordable housing for the masses. We agree. “From 2016-Q12017, while 35 per cent of Malaysian households can afford houses priced up to RM250,000, only 24 per cent of new launches were in that range, indicating an undersupply of affordable homes. This also reflects the trend in new housing supply which has been skewed towards the higher-end property segment since 2012.”
Little wonder that during the 2Q 2017, 82 per cent of unsold units were priced above RM250,000. Two years on, nothing much has changed. And perhaps nothing will. According to a source who is well-versed with the housing industry, developers are reluctant to build affordable homes because they make a net profit of only five per cent selling them whereas high-end houses earn them between 10 and 15 per cent. Economics beats sociology, one must conclude. In this game of reward and risk, developers are not the only one to be blamed.
Banks too need to shoulder some responsibility. Social responsibility, if you will. Financial institutions need to think out of their proverbial boxes. Instead of taking the business as usual approach, banks should explore the “rent-to-buy” model given the fact that Malaysian households’ median income is less than RM6,000. The banks may argue that they are not in the social responsibility business. To which we reply: social responsibility is the business of business.