Malaysia’s central bank has consistently warned the development and construction industry about its ongoing misplaced focus and the lack of supply in the affordable housing category.
For example, Bank Negara Malaysia (BNM) had previously criticised the incoming supply of residential properties as being “severely unaffordable” when compared against the median household income of a large majority of Malaysians. In the current slow economic climate, this issue is further amplified with a growing demand for affordable homes and not enough supply to meet those needs.
In its recently released annual report for 2016, BNM said that the undersupply of affordable houses could actually worsen in the coming year. The problem, it said, has been long-in-the-making as the rise in house prices had “outstripped” the rise of income levels from as far back as 2012.
As such, BNM said prevailing median house price will continue to be beyond the reach of a large majority of Malaysian, a fact that does not bode well for both consumers as well as the development industry as a whole.
“This is primarily attributable to a gross mismatch between housing supply and demand, amid diverging expectations between households and developers,” the annual report cited.
According to the central bank, the issue has been compounded by the fact that the distribution of new housing supply has been concentrated in the higher-priced categories. The undersupply of housing is particularly acute in the affordable housing segment.
BNM believes the solution lies in the adoption of a carefully-designed strategy of policy intervention by the government. The goal should be to ensure households of all income groups are accommodated by the market.
“The establishment of a central agency to consolidate the provision of affordable housing, as well as a central repository, is key. Also, reducing costs associated with the development of affordable housing through the implementation of cost-saving and productivity-enhancing technologies would increase the speed and scale of delivery of affordable housing projects, going forward,” BNM said.
It added that refocussing attention on the rental market could help bridge the affordability gap and relieve pressure on the government to build all the affordable housing that is required by the rakyat.
“This should be complemented by more innovative schemes to fund delivery of affordable houses,” said BNM.