KUALA LUMPUR: A STAGGERING 80 per cent of middle- and lower-income earners in Malaysia are likely to require social housing if interventions are not made urgently.

Khazanah Research Institute’s (KRI) “Making Housing Affordable” report last month found that Malaysia had a “seriously unaffordable” housing market.

It also emphasised the need for the housing sector to be viewed as a key economic sector rather than a welfare issue.

KRI research director Suraya Ismail said the housing sector was a key economic sector and must, therefore, be an integral part of the overall economic management.

“Unfortunately, this perception of housing as a key economic driver has yet to take root.

Housing is too often seen by governments as a welfare issue, requiring the transfer of physical or financial resources to low-income households that are unable to house themselves adequately.

“Available resources, however, are rarely adequate. As a result, government housing agencies limit their direct housing provision to a small minority of potential beneficiaries, ignoring the interests of most of the population.

By focusing on a small and limited housing agenda, these agencies fail to either understand or manage the housing sector as a whole.

“This can be seen from the growing concern among middle-income households regarding their capacity to purchase houses. This group is often ineligible for public low-cost housing programmes and yet unable to afford housing supplied by private developers,” she told Business Times.

PR1MA Corp Malaysia chief executive officer Datuk Abdul Mutalib Alias said the 1Malaysia People’s Housing (PR1MA) programme was aimed at transit-oriented developments to address the high cost of housing and travelling, as well as traffic congestion.

“Based on the demographic trends and evolution of cities like London and Tokyo, it will not be surprising that residential units in city centres will shrink in size and cater mainly for the rental market, especially for singles and young couples.

“Those with families will likely live in the outer city area and commute to work by public transport. Our rail infrastructure could facilitate this transition in a more orderly manner. “

As such, the government’s huge investment to improve transport infrastructure, especially rail, is critical and should be commended because we would only appreciate the benefits five to 10 years from now,” he told Business Times.

The mismatch between the supply and demand for affordable housing indicates that immediate housing reforms are needed.

Suraya said: “Until now, policies have focused on controlling prices once the consumer receives the house at the end of the production process.

The report took a different approach because evidence shows that it is far more efficient to enhance capacity on the supply side in order to develop a sustainable and responsive housing sector that caters for all sections of the population.

“The provision of affordable homes remains a major problem facing policymakers around the world.” In moving towards a high-income nation, the demand for affordable housing will only increase, thus a more refined and structured approach is needed.

Aside from the supply of affordable housing, Mutalib said another key challenge was ensuring that first-time buyers had access to affordable home financing.

PR1MA is addressing both the supply and affordability issues through its mandate to build 500,000 houses and pricing them at least 20 per cent below the market price.

“In addition, through PR1MA’s buyer assistance programme, where we have panel banks offering end-financing of up to 110 per cent and rent-to-own schemes with an option to purchase, we are providing easy financial accessibility to home ownership.”

He added that from a sample of 220,000 registrants, 86 per cent could afford to buy homes in the range of RM150,000 to RM400,000.

Real Estate and Housing Developers’ Association Malaysia president Datuk Seri FD Iskandar Mohamed Mansor said from a recent survey, the provision of affordable housing remained a challenge for developers.

High land cost, in particular, had made development of affordable housing unfeasible, he added.

Other challenges included increased overall cost of doing business and cross-subsidies from higher-end products.

“Sixty-seven per cent of respondents indicated that the Goods and Services Tax had caused property prices to increase,” he said, adding that despite the higher cost, 13 per cent of the developers opted to absorb the increase.

The KRI report stated that high house prices were often blamed on land costs, but the causality actually ran in the opposite direction.

Rising house prices led to higher land prices, as a developer was willing to pay more for new land when the market price for housing increased. However, construction costs in Malaysia had been falling with no attendant drop in house prices.