12MP targets on prices, homes to hit property market

The move is to ensure to ensure housing remains affordable for the selected target groups


THE targets and measures stated under the 12th Malaysia Plan (12MP) are expected to cause further damage to the property market, despite the government’s focus to increase the supply of affordable housing and access to financing for buyers.

Under the 12MP, Putrajaya plans to introduce ceiling prices for affordable housing in the resale market in order to control house prices, especially in the urban areas to ensure housing remains affordable for the selected target groups.

CCO & Associates (KL) Sdn Bhd ED Chan Wai Seen said the government should be clear on the objectives of offering affordable housing and who are the targeted recipients.

He stressed the government should not impose any ceiling price for affordable housing fully paid by the buyers because this will deprive buyers of enjoying a potential increase in their investment value.

“Personally, the government has to clearly distinguish between affordable housing and free-cost housing. Due to the Covid-19 pandemic, the price gaps between the so-called affordable housing and free-cost housing have been reduced.

“Without clear distinction between the two, the affordable housing may flood the market, worsening the supply situation in the market,” he told The Malaysian Reserve (TMR) recently.

According to Chan, the government should make sure the affordable housing projects possess the desirable features among the targeted buyers.

He said the development of affordable housing needs to be planned and viewed from a holistic point of view and undertaken with one standard scheme for effective monitoring and implementation.

“In other words, no point developing affordable housing projects if the targeted buyers find them unattractive in terms of location and features.

“You can provide nice and affordable housing but what is the point if the owners have to incur high travelling costs to his or her workplace or lack of proper amenities around it?

“We have seen many projects such as 1Malaysia People’s Housing Programme, 1Malaysia Civil Servants Housing Project and other projects failed to take off due to poor planning or are located at undesirable locations,” he noted.

Chan added financial institutions should be given the freedom to adopt the appropriate credit policies when approving financial facilities to qualified buyers.

He said it will not do any good to provide so-called easy financing to purchasers when the buyers are not financially ready to service their financial commitments.

“Instead of helping the bottom 40% (B40) or middle 40% (M40) to own a property, unrestrained financing policies may push these buyers into a financial predicament when they are not able to repay the financing facilities.

“Please take note that many residential properties put up for auction comprise affordable properties owned by B40 or M40,” he noted.

Centre for Market Education CEO Dr Carmelo Ferlito said when discussing home-ownership and financing access, the government should also look at the other side of the coin, which is household debt.

He said homeownership in Malaysia is between 75% and 80% while household debt in 2020 reached 93.3% of the GDP and policymakers cannot address one issue without producing effects on the other.

Looking at these figures, he said the government’s main concern should be to address household debt rather than homeownership, particularly where the financial stability of many families is at risk, and with it the financial stability of the country as a consequence.

“These considerations should be at the root of any discussion on affordability and homeownership. Under the 12MP, the government is still concerned with homeownership and aims to facilitate access to financing.

What I see here is a wrong priority in policymaking, grounded in a flawed trade-off analysis,” he told TMR.

Ferlito argued the meaning of “affordable” is still not well-defined so far by the government.

He stressed the focus should be on home access rather than home-ownership, with the government eventually providing rent support to promote social mobility, rather than supporting home-ownership in locations that make the poor poorer.

Ferlito said setting a ceiling price is not a good idea as this could lead to shortage and an under-supply situation in the property market.

If the government puts a price ceiling, those who are not in a rush to sell for financial reasons will prefer to hold their property rather than placing it on the market if the price offered does not meet their expectations, he explained.

Therefore, there will be fewer houses available, rather than more.

“By creating a negative incentive to sell, and therefore limiting supply, the actual market price will increase, rather than fall and such an increase will be evident when ceilings are removed.

“These reasons will also not help the overhang situation in the property market, not only because the measure applies to the secondary market, but also because the ceiling will withdraw supply from the market.

“It would be enough to have a bit of insight on the international market to know that price ceilings have always created more problems than solutions, wherever they have been applied, both in terms of selling prices and renting prices,” he added.

Price ceilings also lead to corruption with property sellers giving priority to potential buyers who are able to pay the extra amount (difference between market price and ceiling price) which are “out of the books”.