Dot Property Malaysia

Thirst for affordable housing

Malaysia’s demand for affordable housing is a complex issue. 

A deficit in affordable housing is a common theme worldwide. As property prices have increased in value, investing in housing has become an attractive investment asset. Property has become not just somewhere to live, but a financial safety net too. However with this, many developers are lured by the profits generated from mid to luxury projects. This leaves the affordable segment far behind. This is despite there being strong demand for this sector.

It was reported in 2013 that there was a forty percent deficit in supply of affordable housing. This has been spurred on by rising property prices that make housing out of reach for some. The result is a big disparity when comparing the average income by the average house prices in Malaysia.

Research conducted by the Real Estate Housing Developers’ Association Malaysia revealed that people are prepared to spend MYR 300,000 to MYR 750,000 for a property. But although the demand for affordable housing is there, developers are shying away from this sector.

Why? Well profitability is the underlying reason. It costs to build. It does not make financial sense for developers to focus on the lower end of the market. This is emphasised by increasing land prices. The government need to incentivise developers in order to address the shortfall. In the UK developers must build a certain quota of affordable housing in any new project. Thus helping those seeking low cost housing whilst still allowing the developer to continue to profit from building mid and luxury schemes.


Could shell homes be the answer?

For Malaysia the lack of desire to fill the affordable housing hole is supplemented by the Goods and Services Tax. Levied at 10 percent this ups costs. Managing director Sarkunan Subramaniam at real estate firm Knight Frank has suggested the introduction of ‘shell homes’ to Malaysia could help resolve the problem. Simply defined as homes that are a shell. Not completed with rooms but with the fitting of basic plumbing and wiring. The law does not currently permit these but Sarkunan believes that this will help to kick start the affordable housing sector due to their lower price tags. He goes on to comment that many purchasers change their properties so this way people will be able to build what they want from the outset.

Regardless of these suggestions, for any change to happen the government need to back ideas like this. The problems are rooted deeper than just rising costs. Policies need to be put it place to help boast this sector. Taxes need to be addressed across the board in particular for those on materials. That way affordable housing will have a chance to succeed.