The lack of adequate number of affordable housing projects in Malaysia has been an acute problem for a very long time. It’s a positive notion that new projects on developing affordable houses are being undertaken in the recent times, but the number of affordable houses is still way low compared to the massive public demand.

Recently PDC (Penang Development Corp) has released an RFP (Request for Proposal) for establishing the 9th affordable housing project of the state. The project will feature 321 low-medium-cost houses and 482 medium-cost houses on an area of 4.23 acres in the northeast district of Penang – on Sandiland Foreshore.

The land owner, Chief Minister Inc. holds a reserve price for the land at RM 125 per square feet. The RFP states that that there would be 241 units with an area of 1000 sq.ft. at ceiling price RM 400,000; 161 units with an area of 900 sq.ft. at a ceiling price of RM 300,000 and 80 units with an area of 800 sq.ft. at a ceiling price of RM 200,000.

According to a survey, the proposed site had a number of squatter houses, workshops, temples and go-downs, none of which had temporary occupancy licenses (TOL). The few residential houses which possessed TOL were located on a marshland suffering from heavy floods and high tides. The affected families will be offered a free unit from the project.

Why Affordable Housing Is Needed In Malaysia?

Not too many middle class Malaysians can afford owning a roof above their heads. Property prices are now sky-high and the middle-income wage workers are compelled to go for rented homes or choose a place at the outskirts of the city. The apartments or condominiums in Kuala Lumpur and Selangor mostly cost higher than RM 500,000 and the landing properties at matured areas like Taman Tun Dr Ismail or Petaling Jaya easily go beyond RM 1 million. This makes it nearly impossible for a person earning RM 5,000 per month to own a home.

The government tried to help the lower to middle income class people buy a home by introducing the My First Home Loan Scheme. According to this scheme, people who earn less than RM 5,000 per month or below, can apply for a 100% bank loan for a house instead of paying the 10% down payment.

However, the scheme is flawed and requires the eligible ones to pay RM 2,000 for a house with an RM 400,000 price tag. With time, the house prices are rising exponentially and it will become more difficult for the middle and lower income class of Malaysia to afford a home in the future.

Affordable Housing In Malaysia: The Current Scenario

The population of Malaysia has increased from 21.3 million in 2000 to 30 million people in 2013 with a growth rate of 1.6%. The birth and death rate have decreased over the years with an increase in the life expectancy from 71 years to higher than 73 years. The GDP has increased within this time along with the per capita income. The problem is, the housing prices have also increased by a record margin. In the last 5 years, the prices have increased by 12.3% annually all over the country.

According to the Housing Minister Abdul Rahman Dahlan, there is a 40% difference between the demand for affordable housing and its supply in the country at the moment. The Department of Statistics Housing Income Survey 2013 states that 80% Malaysians earn less than RM 6,900 per month and cannot afford houses priced at higher than RM 300,000.

According to the report of National Property Information Centre 2013, only 31.7% of the total number of housing units constructed in the year 2012, had a price tag below RM 250,000. The rising income of the middle class is finding it extremely difficult to keep pace with the price hike of housing units and thereby the need for affordable housing becomes more important than ever before.

How Government Can Play A Big Part In Making This Successful

The Tenth Malaysia Plan (10MP) includes establishing 78,000 affordable housing units, out of which 38,950 will be under the People’s Housing Program and 39,050 units will be under the programs conducted by Ministry of Rural and Regional Development.

Government has a lot to do when it comes to developing low cost and affordable housing for the people of Malaysia. Most importantly, in 2014 Budget, government is providing subsidy of RM30,000 per unit, which encourage developers to build more low- and medium-cost houses.

Starting 2014, developers must build at least 20 per cent low-cost houses and 20 per cent medium-cost houses in a housing project. The houses are open to first-time buyers with a monthly household income of RM3,000 for low-cost houses and a maximum of RM6,000 for medium-cost houses.

As an alternative to compulsory affordable housing construction, the Government can take initiatives to provide free land at strategic areas backed by efficient public transportation systems. They can also fix the price or the proportional rise in price per square feet for affordable housing units under the development projects.

However, if the government still wants the developers to hold the responsibility for construction of these houses, they can provide a nice incentive by constructing small shops and malls within the affordable housing areas. This will provide a decent profit to compensate the construction subsidy.

The Cooperation Of Malaysian Citizens

If there’s one exclusive feature of the Malaysian people when it comes to purchasing a housing property, it’s the emotions. While purchasing a property, the most important thing to do is to apply logical and rational arguments. It’s not at all wise to decide right on the spot instead of conducting a proper research on the developer and the housing project.

To put it simply, people should not dive into an investment just because someone recommended it. Many a times, people with low income fail to forecast the future financial situations and jump into purchasing an expensive housing unit well out of league.

When you’re buying an affordable house, you’ll probably be looking for the ones near the city hotspots. These two considerations are very unlikely to match. However, the government are constructing infrastructures keeping in mind the requirements of low cost housing residents. For instance, LRT Line 1 and 2 and MRT Line 1 and 2 extensions are under construction.

In the future, LRT Line 3 from Shah Alam/Klang to Petaling Jaya will also be constructed along with a number of new expressways and highways. The housing prices are more affordable in the Kajang or Sungai Buloh areas. So within a few years, it will be possible to buy a home there and still work in KL without the need to own a car.

Investors shouldn’t grab other people’s entitlement

The take-up rate of low cost housing is always overwhelming because supply is not matching the demand. As a responsible citizen, we should provide the opportunity to buy low cost home to the people who are really in need. I believe you’ve heard of those who manage to own several low cost houses through some loopholes, solely for investment purposes due to the great rental yield.

I strongly urge that these type of investors should stop doing so. If you are not entitled to own one, please don’t block other people who deserve it. Money should be made ethically.

Despite the so many challenges to build affordable houses in Malaysia, it’s true that we are living in one of the most exciting ages considering the economy and property market history of the country. The construction and sales business is a very big challenge in 2014.

There will be a changing panorama in the field of mortgage loans and home financing this year. But nevertheless, the purchasers and developers have to adapt to the new environment in a creative and positive manner, stimulating the entire industry.

The citizens of Malaysia planning to purchase affordable properties should consider the property markets in the most potential areas including the ones which are yet to be discovered. There are opportunities for everyone. If you’re looking for a property or planning to sell a property, you can make the best from best from both.

There are lots of strategic locations in the country, where the land price is minimum and yet there are scopes for developers to construct affordable houses and raise the community value. If more people are interested to invest in locations adjacent to affordable housing communities, the business will flourish and prospective home owners can also enjoy the facilities of an advanced residential area.

Although the government has the most to do when it comes to constructing affordable housing units for the greater population of the country, we need to have patience and wait for the right opportunity. Things will definitely change with time and more affordable houses will be developed.

There are lots of people who prefer not to choose a housing unit in a community developed under the banner of ‘affordable’ or ‘low cost’ housing. If well planned, most people would be happy to stay in such area with great connectivity and facilities, paying just a fraction of the cost of high-end condominium. I believe Singapore has done pretty well with their HDB flat development (it is many times more expensive than a decent apartment in Johor).

Considering the fact that a majority of Malaysian middle and lower class people focus less on savings, it might be a convenient way to afford better homes in the future. When the government successfully does their job, it’s all upto the people to cooperate and ensure that people from all classes can happily afford their dream homes!

References:
Another Affordable Housing Project in Penang

Middle Class Demand Affordable Homes

A Review on Low Cost Housing in Malaysia

Malaysia Population

Gap Between Affordable Housing Supply And Demand

Tackling The Issue of Affordable Housing

How Much Is Needed To Buy Affordable Housing


KCLau
KCLau

Personal finance author and trainer

    3 replies to "The Reality of Affordable Housing in Malaysia: How to Fix the Problem?"

    • Ibrahim

      I have the best technology which can help all middle and low class people to have better and affordable houses. This technology has to be control by goverment and private sector jointly to achieve this goal of House for All.
      I dont know how to be well connected to the right ministry or any goverment office which is dealing with afordable houses.
      If you know how to connect please help. This technology is the best.
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      • Anuar

        Hi Ibrahim, I am working with a developer and we are looking for a radical way to construct affordable housing at a much cheaper cost so we can sell it to the Middle 40% income group. Keen to know what kind of technology you are talking about. What is your email?

    • Puteri

      Personally, when I read your article it give more information for me as now I’m pursuing my thesis in Affordable Housing Ownership. Can I know where do you get all the source for your article? I’m pretty sure that your are article will help me to improve my literature review about Scenario Housing in Malaysia

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