I bought my first property almost a decade ago; shortly after being confirmed in my position at work. Like most people my age at the time, the tendency was to buy a property as soon as you can afford it. The conventional wisdom was to set aside a sum for property even when you were still staying with your parents because while cars and other assets depreciate over time, property investments could only go up.
My choice for the first property was not wise at all. I would like to think that it was luck (or the lack of it) rather than uninformed decision; because I shared a common ground with thousands others who have to struggle each month to fork out a mortgage instalment for a housing project already classified as an “abandoned project”.
Abandoned housing projects that can cause havoc to thousands of households are a unique Malaysian problem. We have lived with this problem for a few decades without any substantial change to the way housing development is carried out in Malaysia. The laws are stacked against the buyers and there are loopholes that are often manipulated at the expense of the buyers.
The problems in the way housing development is carried out will be magnified significantly from this point onwards; as affordable public housing is poised to become a national issue for a few years to come. Various reports have been published recently that point to a possibility that a generation of Malaysians will be left out of the housing market completely as the prices have gone beyond their reach.
A good case to illustrate is my 26-year old staff who came for a quick financial advice last week. He told me that he wanted to buy a landed property around Shah Alam or Subang Jaya so that he could be close to his work place and family. I asked him how much he could afford to pay the monthly mortgage – he said “around RM1,000-ish”.
A monthly mortgage of about RM1,000 to RM1,500 per month is the maximum amount that most young graduates can afford nowadays as their monthly net pay is at most RM2,500. Most of them will have to fork out a big portion to pay car instalment and monthly fuel – which means most young graduates can only afford a property priced around RM150,000.
I was blunt enough to tell my staff that he would not be able to purchase a landed property worth RM150,000 in Subang Jaya or Shah Alam. His best bet is a flat slightly out of the way; even then there are not many newly built flats within that price range that can offer quality accommodation to a young family.
His dilemma is shared by thousands of others across Malaysia, especially those working in Lembah Klang, Penang, Johor Bharu and other big cities.
The Federal Government’s response to this is to introduce the “My First Home Scheme” which offers a 100% financing for qualified young people to buy their first property. The more significant impact of the scheme is the Federal Government’s acknowledgement of the housing crisis faced by the young families rather than an immediate remedy to the crisis.
The root cause of the problem is the lack of affordable quality homes for young families; not the financing. In fact, the availability of 100% financing did little to alleviate the financial stress each young family has to face each month because they have to carry the same mortgage due to the high property prices.
I feel there has to be a radical change in the way we look at housing developments in order to ensure each family can have access to a property that matches its requirement and financial standing. In the past, the responsibility for housing has been largely left to the private sector. Over the years, the rakyat has been at the mercy of the so-called “market prices” which had led to the present predicament faced by a substantial portion of the public.
Malaysia was never keen on large-scale involvement in public housing, unlike Singapore or the European countries (after the 2nd World War). Even the government’s Syarikat Perumahan Negara Berhad (SPNB) behaves as if it is a private developer and in fact (in many instances) competes with private developers.
Contrast this with other governments which benchmark their performance against the requirement to provide affordable and suitable housing for the public.
Singapore’s Housing Development Board over the years have become one of the most successful developers and master planners in the world, with the powerful mandate to even subsidise heavily property prices for the lowest income group to ensure that they too have access to a decent accommodation.
In some European countries, the government spent massively to build large public housing projects and council homes to cater for lower income families. Some of these families do not even have to own the properties – they continually rent them from the authorities at a rate they can afford; until such time they can “graduate” from the housing scheme.
All these concepts are alien to Malaysians because historically we have never embarked on large-scale public housing projects. We have built the tallest Twin Tower in the world; but not world-class public housing. We can be credited for ingenuity for some of our economic policies; but our housing development laws and policies remain archaic.
Thus, this is the challenge for the policy makers and planners at the corridors of power. The public expects a radical solution to the housing crisis facing an increasingly larger segment of our society.
This kind of radical solution can only come from a complete departure from the present housing policy frameworks and dictates of the industry. This involves a new commitment that the government will play an active role in providing decent accommodation to those from lower income group while it restructures the housing industry.
Finally, I will say this at the risk of being seen as partisan – a minor tweak to allow for 100% financing without any effort to alter the skewed supply of affordable housing to the young families does not pass the test of being radical to many people!
Published in The Edge (daily version) on Monday 9 August 2011. The published article may have been edited and differ slightly from this version.