IN Malaysia, first-time home buyers are eligible for various assistance, such as a high financing margin up to 120% and exemption from stamp duty through the annual federal budget.

Despite the assistance provided, purchasing a house will still be an expensive option, which will involve household expenses trade-off.

Let’s say you are purchasing a RM300,000 house (the maximum price in the definition of affordable housing), a 35-year tenure loan at 4.35% interest rate will result in a monthly commitment of RM1,392.

This will lead to the burden of new and young established households who want to stay together, those who come to the city and decide to settle down, single persons, and the younger generation who want to purchase a better home.

The National Property Information Centre (Napic) third quarter 2022 statistics revealed that the overhang situation of affordable housing (below RM300,000) accounts for a significant proportion (23.8%, 7,040 units) of the total overhang, while the property developers continue to launch new projects below RM300,000, which account for nearly half (48.2%, 3,966 units) of the total new launches in the same period.

Unless wage growth outpaces housing price growth, the overhang situation for affordable housing will persist.

In order to achieve planning and cost efficiency, there is a need for the federal government to focus on supply side issues in housing policies.

Increase the efficiency of planning

Bank Negara Malaysia’s investigation in 2017 revealed that there are 12 federal agencies involved in affordable housing projects.

These agencies operate in a fragmented manner. At the same time, the state government also implements its own affordable housing, not necessarily coordinated with the federal government. 

The lack of coordination through the central agency also means that the applicants are unable to apply for affordable housing through a single channel. 

The author suggests that a single application window should be established at least at the federal level. The website would disseminate the information on all affordable housing projects from different federal agencies, embed a filtering function according to the applicant’s preference and eligibility and let the applicant apply for the project through the website. 

Housing-related data could be further consolidated to support planning. Currently, housing-related data is scattered across three different databases, namely Household Income Survey, Napic and the Local Government Development Ministry’s e-Pemaju. 

Prime Minister Anwar Ibrahim had previously stated that the government will further consolidate related federal agencies and place them under the two deputy prime ministers. 

It is hoped that this will reduce the number of unrelated agencies involved and further centralise some of the aspects, such as joint purchasing of construction materials, standardised design of housing projects.

Increase cost efficiency, labour productivity

The Real Estate Housing Developers Association survey indicated that the average cost of doing business had increased from 8% in 2017 to 18% in 2021. 

The cost increase in construction materials includes aluminium (55%), wood (52%), steel (38%), cement (19%), sand (18%), and concrete (16%). 

The Local Government Development Ministry had announced that, in cooperation with the cement industry, it will save up to RM5,000 in the cost of houses priced below RM300,000.

This could be a viable way to lower housing prices, especially for affordable housing. 

In the long run, it is also necessary for the federal government to improve the labour productivity of the construction sector.

The enhanced use of technology, such as industrialised building systems (IBS), helps to improve the labour efficiency of the construction industry.

Although the utilisation rate of IBS in Malaysia has increased from 14% in 2015 to 35% in 2019, the adoption of IBS in the construction of affordable housing is still at the preliminary stage.

Focus on housing liveability

The federal government should also pay more attention to the liveability of affordable housing.

Newly built affordable housing under the government must undergo liveability testing, such as wind tunnel testing, solar path analysis, thermal comfort analysis, and green building indicators.

The same inspection should be carried out on the existing affordable housing, and according to the degree of urgency, priority should be given by allocating funds to improve the liveability of such housing.

Coordination and cooperation between federal agencies and local governments is also required to ensure that affordable housing is located in a convenient place and accessible by public transport. – August 7, 2023.

* Nick Tan Beng Teong graduated with Bachelor of Economics at University of Malaya. A member of Agora Society, Tan believes in policy reforms in order to build a better nation.

* This is the opinion of the writer or publication and does not necessarily represent the views of The Malaysian Insight. Article may be edited for brevity and clarity.