Financing strategies will not help people who simply cannot afford housing, says expert

by AFIQ AZIZ/ pic by MUHD AMIN NAHARUL

HOUSE prices must be affordable before innovative financing is introduced, said Khazanah Research Institute (KRI) research director Dr Suraya Ismail (picture).

Earlier this year, the government introduced the Home Ownership Campaign (HOC), offering discounts beginning at 10% and stamp duty exemptions.

The six-month campaign, however, did not achieve the desired results when only 1,144 property units (out of over 32,000 units) valued at RM650.87 million were sold as of June 7.

This has led the government to extend the HOC until year-end, while expecting more financing schemes on the plate.

“We can offer many (types of) innovative financing, but before that, houses must be affordable in the first place.

“(The) market has shown that these are not the desired prices, which is why we have overhang properties, and some have become gluts.

“And yet, we do not bring the prices down (enough). Instead, we ask the bank to give innovative financing so people (can) purchase houses at comparatively high prices. This is not right,” Suraya told The Malaysian Reserve (TMR) at the Hi HOME Property Conference in Kuala Lumpur yesterday.

Last week, TMR reported that the Housing and Local Government Ministry (KPKT) is expected to construct several loan schemes during the HOC extension, including the expansion of the rent-to-own programme and shared equity financing.

KPKT is also expected to focus on selling affordable houses ranging below RM300,000 under its umbrella. In the first round of the HOC, 88% of the houses sold were in that price range.

However, no indication was given on houses above that scale for the next six months of the campaign.

“House prices have increased four-fold, and this is just not sustainable,” Suraya said.

The mismatch of price increase against income increase was also attributed to homes being built in locations which did not meet people’s geographical preferences.

Suraya said those overhang units should be left as they were for market correction.

“Let the market decide. If the market does not want to buy, reduce the price,” she said.

Suraya denied claims made by certain quarters that purchasing power is low due to current lifestyles.

She said the Household Income Expenditure Survey 2016 had shown otherwise, adding that in fact, those who earned RM5,000 and below had to cut down on their most necessary consumption — food.

KRI’s report, “The State of Households 2018, Different Realities”, stated that between 2014 and 2016, despite consuming less food, households were paying more for it due to high food inflation.

For households earning below RM2,000, their remaining income after accounting for inflation was only RM76 in 2016, reduced from RM124 in 2014, the report said.

Moreover, Suraya said banks are now more prudent on their lending policy, which can be attributed to the high non-performing loan and bankruptcy rate in Malaysia.

The Insolvency Department was reportedly handling 303,415 bankruptcy cases as of December last year, with housing loans contributing to 14.1% of cases after personal loans (27.8%) and hire purchases of vehicles (24.7%).

“So, you cannot (simply) give innovative financing options and assume that would solve (all) the problems,” Suraya said.