Long-term solution needed to house the people

Affordable housing has taken centre stage in Budget 2016’s allocation to the property sector, which if implemented expediently, will help to promote home ownership among the low-and low-medium income Malaysians who have yet to make their first home purchase.

An allocation of RM23bil was made for three development projects to lure foreign and local investors. They are the Malaysian Vision Valley that will cover an area of 108,000 hectares from Nilai to Port Dickson, as well as Cyber City Centre and Aeropolis KLIA that should see accelerated growth to the south of Kuala Lumpur.

The Government’s affordable housing plan is to build a total of 317,000 housing units to help in addressing the house ownership issue for the low-medium income population.

The affordable housing initiatives include an allocation of RM1.6bil to build 175,000 units of PR1MA houses that will be sold at 20% below market price.

A total of 100,000 PPA1M houses under the 1Malaysia Civil Servants Housing Programme, priced at between RM90,000 and RM300,000, will be built by 2018. A facilitation fund of up to 25% of the development cost has been provided for the programme.

Under the People’s Housing Programme (PPR), an allocation of RM863mil has been made to build 22,300 apartments and 9,800 terrace houses. Two hundred million ringgit has been allocated under the First House Deposit Financing Scheme to assist first- time housebuyers of affordable houses to pay the deposit for their house.

A total of 5,000 PR1MA and PPA1M homes are to be built at 10 locations near light rail transit (LRT) and monorail stations.

Syarikat Perumahan Negara Bhd (SPNB) has been tasked to build 10,000 houses under Rumah Mesra Rakyat programme, with a subsidy of RM20,000 to be granted for each house.

In the vicinity of Bandar Kwasa Damansara, Kwasa Land (owned by the Employees’ Provident Fund) will build 800 affordable houses and Sime Darby will build 4,600 units in the vicinity of mass rapid transit (MRT) stations.

Forty million ringgit has been allocated to revive abandoned low-and medium-cost housing projects, and stamp duty exemption will be granted on financing instruments to the contractors who revive the projects and the original purchasers of the abandoned houses.

The Orang Asli indigenous people will benefit from the RM60mil allocation to the Department of Orang Asli Development to build houses for the community.

Meanwhile, 20,000 houses priced at a maximum price of RM70,000 will be built for the second generation of Felda settlers and 2,000 units each will be built for those in Felcra and Risda schemes.

Industry observers point out that having a single dedicated agency, such as a National Housing Board, to act as the main coordinating body for the master planning and implementation of the country’s affordable housing programme will ensure the objectives and targets will be better met. This matter has not been addressed in the budget.

The private sector developers have also not been roped in to be part of the team to build affordable housing units. By providing the dedicated land for affordable housing to the private developers besides to the government agencies, these private developers will be able to share their project planning and building expertise to help achieve the target of building enough affordable houses.

Knight Frank Malaysia managing director Sarkunan Subramaniam points out the need for a long-term policy to involve the private sector developers in building affordable housing schemes.

Sarkunan says while the housing needs for the low-to low-medium income groups are being addressed by the budget, it is the implementation that is worrying.

“In terms of the number of future supply, they may appear to be adequate to address the current shortage. However, while it is important to build affordable housing, it is also important that these homes will be build at the right locations, where there is demand for such housing, availability of amenities and facilities (including education, medical and retail facilities) and where there are good public transportation facilities such as LRT, MRT, commuter train and bus rapid transit. ”

He says developers have to understand the demographic profile of potential occupants in the various affordable housing programmes. Depending on the profile and locations of the housing programmes, it may be suitable to build terrace units while in others, it may be townhouses and apartments.

Precision in implementation needed

Malaysian REIT Managers Association chairman Datuk Steward Labrooy says of the Government’s affordable housing proposals: “Nice ideas but the devil is in the details and execution. It appears that the Government is leading the way but that is a lot of houses to be built. The issue is when and if they will be built.”

Labrooy says the local property industry has been slow in adopting the Industrialised Building System (IBS). Many contractors are not qualified and are averse to trying new technologies.

“However, it is not the construction cost that is the main issue but rather the cost of land and all the other layers of costs that add up to the total costs, that need to be addressed and urgently.”

He says the key issue is cost and the lack of available financing for first-time buyers because they lack a credit history.

“PR1MA is not the solution but rather a symptom of what ails the industry. The Government was never meant to be a developer and neither does it have the skill sets to manage such an undertaking, It’s the lack of product for the market that is forcing the decision to try and deliver these units.”

He says PR1MA was established under the PR1MA Act 2012 to plan, develop, construct and maintain high- quality housing with lifestyle concepts for middle-income households in key urban centres.

The goal is to build 80,000 homes every year. It was allocated RM500mil during the 2013 Budget to build 80,000 houses in major locations nationwide with the selling price ranging between RM100,000 and RM400,000 per unit.

“RM1bil was allocated to PR1MA in the 2014 Budget for 80,000 units and RM1.3bil for another 80,000 units in the 2015 Budget.

“But the problem is that PR1MA hasn’t taken into consideration the construction period and agreed with the 80,000 units a year target. Developers agree that it generally takes at least three years to deliver a condominium project.

“Up to-date there is very little data of what has been achieved. Some sources say that only 800 units have been completed over the past two years. This remains to be verified.”

CH Williams Talhar & Wong Sdn Bhd managing director Foo Gee Jen concurs with Sarkunan and Labrooy. He says while the programmes for affordable housing have addressed the requirements of first-time home buyers, however plans must be matched by actual deliveries.

“Our concern is that the actual number of affordable homes constructed may fall far below target. Demand for affordable homes still exceeds the current supply. With most of the new residential schemes that were launched being priced between RM500,000 and RM1,000,000, the population at the bottom 40 income bracket will still find these new properties unaffordable,” Foo says.

He says to involve the private sector developers, the Government may look into new incentives for them to develop affordable housing.

“Private developers have found it challenging to build affordable housing without the Government’s support, with land cost, construction cost and compliance getting expensive. Hence, the Government may need to look at additional incentives for new affordable housing supply, such as sale of state land at low price to the developers to build such housing,” he says.

Foo says efforts to build more affordable housing in the vicinity of LRT and monorail stations, including in Pandan Jaya, Sentul and Titiwangsa, will supply more affordable housing which have good accessibility to public transportation network.

Sarkunan agrees, saying that the plans for affordable homes to be built near the transportation lines of the LRT and MRT will receive good response due to their strategic locations. “Hopefully, with more upcoming infrastructure projects like LRT 3 and MRT Line 2, there may be an opportunity for the lower income group to own a reasonably priced home in these new and upcoming hotspots,” he adds.

Sarkunan points out the plight of Malaysians who will not be eligible for affordable housing under the various programmes.

“The needs of those who do not qualify for the affordable housing programmes and are not able to buy from the open market due to escalated house prices and tightening in bank financing have not been adequately addressed.

“For them, there is nothing to celebrate as there is no reduction in stamp duty (except for original purchasers of abandoned homes) and no revision in real property gains tax.”

He says measures to assist genuine first-time housebuyers who do not qualify for affordable housing should be implemented to help lower the property overhang in selected locations and to improve secondary market activities. This may require a review of guidelines for responsible financing for genuine buyers (non-speculators) and to lower stamp duty for certain price threshold.

Sarkunan also highlights the absence of measures under Budget 2016 to spur activities in the high-end and mainstream residential markets, which have slowed down as felt in the lower sales volume and pricing.

He says the slowdown in the mainstream property market (primary and secondary) is attributed to various factors, including the prevailing weak market sentiment with rising cost of living, concerns of a weaker job market, and higher loan rejection rate.

“The slew of cooling measures which are still in place, the slowing economy coupled with dampened market sentiment continue to see developers revising or lowering their sales target while deferring selected launches as potential buyers take a cautious stance by adopting a wait and see attitude. With the continued weakening of the ringgit against major trading currencies, construction costs will likely increase and with property products price- sensitive in this challenging market environment, it will inevitably affect developers’ bottomline as they continue to offer attractive packages to drive sales,” he remarks.

On the other development initiatives under Budget 2016, Foo says the Malaysian Vision Valley project will augur well for developers with land bank in these locations.

With improved connectivity and accessibility, these locations which generally offer more competitively priced housing products, may attract more buyers from the Klang Valley and nearby districts in Negri Sembilan to Malacca.

He says Cyber City Centre in Cyberjaya, a 60:40 joint venture between MRCB Land and Cyberview Sdn Bhd, will be on a 140-acre freehold land parcel with an estimated gross development value of RM8bil to RM10bil. To be developed over the next 15 to 20 years, the integrated development will comprise a convention centre, a business hotel, retail lots, offices and residential components.

Foo says the future MRT Line 2 ending at Putrajaya will benefit the Cyberjaya market as there is a proposed link connecting Cyberjaya to the MRT Link at Putrajaya Sentral. - BY ANGIE NG (StarProperty)