THOUGHTS
24/07/2020 02:47 PM
Opinions on topical issues from thought leaders, columnists and editors.
By :
Masfaliza Mohsen

Property development is complex due to spatial and temporal variations. Besides many players, the location of housing projects varies. Therefore, a market study and feasibility report must strongly be made compulsory before developers rush into any development project as well as development of affordable houses. Since land developers are looking for a 20 to 25 per cent profit margin for high-end property and about 18 per cent on affordable houses, different phases of housing development projects may be viable. Usually, feasibility reports consist of:

  • Site/Locational Feasibility - relies on the site description, basic services, planning provisions, surrounding development and SWOT analysis.

  • Economic Feasibility - depending on population, employment, income trends and economic resources of the areas.

Market Feasibility considers demand, supply and price analysis.

  • Design Feasibility with reference to end-use allocation, design features and phasing overall themes.

  • Financial Feasibility relies on the projection of total project cost, profitability, financial requirements and rate of return (ROR) and return on investment (ROI) as measured by developer’s profit, payback period, net present value, internal rate of return and sensitivity and risk analysis of the projects.

  • Therefore, all housing-related information must be reliable, sufficient, responsible and up-to-date, and a coordinated housing data is required too. It may be in the form of a “housing information system (HIS)” consisting of different layers of data on location and sub-markets, contour house value map, transportation and infrastructure, planning and neighbourhood, selling, buying and leasing and renting, loan facilities, public amenities and facilities, property and housing rating and taxing, sale evidences and so on.

    However, there is no short cut to how to resolve the crisis of affordable housing. We would come to a resolution that would produce housing for the needy person in a way that is socially, financially and environmentally sustainable. Everyone knows that the real estate market is imperfect due to lack of information. However, a suggestion on the establishment of big data of real estate encompassing sub-markets is surely an option to ponder. In building up the real estate big data, experts in real estate are supposed to do a benchmark with the situation overseas and then make local adjustments wherever possible. At the back of their minds, they must be leading to the framework of a sustainable property market in Malaysia. Yet again, data must be coordinated using a housing network at every level.


    The main reason is that there exists a prevailing issue in the provision of affordable housing to affordable people – an insufficient supply of affordable houses; whether the price of an affordable house is a truly affordable price; the locations of affordable houses; whether there’s any proper system or medium to determine whether a person who owns an affordable house really occupies that house or rents it out; or any circular or rule that says each individual is eligible to own only one affordable house; whether it is easy to get a loan from a financial institution?

    Furthermore, are government and private bodies themselves doing enough to attract buyers to these affordable houses? Have they also done a study to find out why their housing schemes are not favoured by homebuyers? As such, property experts have to play their role in educating the people from every walk of life. We have to educate people on knowledge about real estate really.

    A research conducted in 2009 by Battellino, a researcher in property, showed an increase in the number of reluctant homeowners of less than 35 years of age in many countries over the last 10 to 15 years. The research found that the reasons for unsold, overhang, widening gap and abandonment between demand and supply were due to lack of self-satisfaction on the part of buyers as a result of lack of information on their requirements. Another researcher, Demographia, revealed in 2017 that housing is not adequate in most countries, especially in compact-populated countries like the UK, Singapore, Hong Kong, Japan, India, parts of Malaysia, Nigeria, New Zealand and China.

    Property overhang

    he new definition for ‘property overhang’, effective from 2003, is a completed housing unit with Certificate of Fitness for Occupation (CFO) from the local authorities remaining unsold for more than nine months after launch for sale on or after 1 January 1997. For sure, the big real estate database is supposed to consist of a bulk of property overhang, referring to location sub-markets, prices, period of overhang, types of houses and so on.

    Year

    Overhang

    (unit/value)

    Unsold Under Construction

    (unit)

    Unsold Not Construction

    (unit)

    2015

    10,897 unit/RM4.92 billion

    49,568

    8,032

    2016

    14,792 units/RM8.56 billion

    64,077

    11,622

    2017

    24,738 units/RM15.64 billion

    61,882

    12,626

    2018

    32,313 units/RM19.86 billion

    80,894

    19,865

    2019

    30,664 units/RM18.82 billion

    72,692

    16,774

    Table 1: Trend of Overhang, Unsold Under Construction and Unsold Not Constructed in Malaysia 2015 – 2019 (Source: NAPIC 2020)

    Based on statistics published by NAPIC (2020) as stated in Table 1, over a five-year period, the overhang value increased to more than 100 per cent from RM4.92 billion in 2015 to RM19.86 billion in 2018 and dropped slowly to RM18.82 billion (decreased 5.1 per cent by unit or 5.2 per cent by value) in 2019.

    The number of units of unsold under construction and unsold not constructed rose dramatically from 2015 to 2018, eventually showing a slow decline in 2019. Again, it was reported by the Valuation and Property Services Department (JPPH) that the average affordable houses within the range of RM200,000 to RM300,000 made up 18.19 per cent of the property overhang in 2019.

    Due to higher property prices, the overhang units and value rose dramatically. Therefore, the correlation between affordability, prices and property overhang must be established within the frame of the big real estate databases.

    States

    Overhang Status (unit)

    Unsold Under Construction

    (unit)

    Unsold Not Constructed

    (unit)

    Johor

    5,627

    10,392

    104

    Perak

    5,024

    8,891

    Nil

    Selangor

    4,687

    10,472

    1,156

    Penang

    3,353

    8,601

    1,437

    WP Kuala Lumpur

    2,605

    4,317

    8,645

    Kedah

    1,974

    1,681

    235

    Sarawak

    1,847

    3,816

    Nil

    Sabah

    1,544

    6,683

    510

    Pahang

    1,466

    5,086

    893

    Negeri Sembilan

    1,048

    3,620

    127

    Melaka

    678

    3,192

    1,406

    Terengganu

    498

    995

    214

    Kelantan

    210

    4,112

    478

    WP Labuan

    70

    Nil

    Nil

    Perlis

    33

    65

    536

    WP Putrajaya

    Nil

    769

    13

    Total

    30,664

    72,692

    16,774

    Table 2 shows unsold under construction and unsold not constructed status by state and type in 2019 in Malaysia. It shows that over 10 states in Malaysia faced the problem of overhang, unsold under construction and unsold not constructed for residential property.

    The data highlights that the overhang status indicates that Johor led (18.4 per cent), followed by Perak (16.4 per cent) and Selangor (15.3 per cent). Furthermore, Selangor led (14.4 per cent), followed by Johor (14.3 per cent) and Perak (12.2 per cent) for the status of unsold not constructed in 2019. Meanwhile, leading the unsold not constructed in 2019 was the Federal Territory of Kuala Lumpur (54.9 per cent), followed by Penang (9.1 per cent) and Melaka (8.9 per cent).

    It is a challenging task to provide affordable housing segmentation (as inputs for the big real estate database and sub-markets) in Malaysia, especially in urban areas. This is because the prices of affordable houses cannot meet the highest of land prices while there is a continually increasing shortage and under supply to match the demand focused on the low-income and middle-income groups in the urban areas.

    The affordable housing price set by the government in 2019 is below RM300,000 and any unit above RM300,000 is not considered as affordable housing. There is a difference in terms of affordability at state level, as prescribed by supply and demand. The lack of definition on the threshold of the maximum affordable price has led to the use of varied pricing structures in affordable housing in the country. The big real estate database should consider the use of land information, housing information and value/transaction contour map and so on.

    Price Range

    Overhang Status

    (unit)

    Unsold Under Construction

    (unit)

    Unsold Not Constructed

    (unit)

    High Rise

    Terraced House

    Semi-Detached & Detached

    High Rise

    Terraced House

    Semi-Detached & Detached

    High Rise

    Terraced House

    Semi-Detached & Detached

    Below RM200K

    1,835

    1,832

    78

    5,405

    4,920

    424

    1,088

    645

    569

    RM200K – RM300K

    3,863

    1,564

    152

    9,779

    7,751

    795

    5,348

    739

    101

    RM300K – RM500K

    3,438

    3,144

    1,082

    10,538

    7,171

    1,813

    1,754

    477

    337

    RM500K – RM700K

    3,280

    1,389

    651

    6,572

    3,184

    1,164

    1,694

    449

    65

    RM700K – RM1 million

    1,270

    1,190

    543

    2,372

    2,045

    608

    1,441

    466

    87

    Above RM1 million

    1,279

    762

    1,420

    1,824

    824

    1,332

    1,221

    13

    216

    Total

    14,965

    9,881

    3,926

    36,490

    25,895

    6,136

    12,546

    2,789

    1,375

    Table 3: Overhang, Unsold Under Construction and Unsold Not Constructed Status by Price Range and Type in Malaysia for the year 2019. Source NAPIC, 2020.

    The affordable house based on the latest criterion of the government is priced below RM300,000 and make up 9,937 units of the total overhang at 30,664 at 2019 in Malaysia as stated in Table 3.

    There are 3,745 residential units priced below RM200,000 per unit which remained unsold in the market in 2019. So, is there an under supply of affordable houses or shortage of supply for affordable houses in the market? The big real estate database must be ready for multiple cross-examined analyses in an accurate, reliable and representative manner.

    Despite the launch of more affordable housing, the report shows that overhang in affordable housing is a worrying and problematic situation. It contrasts with the latest info by Minister of Housing and Local Government Zuraida Kamaruddin who clarified that affordable houses were priced at RM500,000 and below.

    Therefore, based on the statistics recorded by NAPIC (2020), residential property overhang in 2019 reached about 30,664 units or RM18.82 billion worth in unsold houses nationwide, with 57.4 per cent or 17,601 units coming from government affordable housing projects that have failed to obtain buyers’ traction.

    In 2019, residential property priced RM500,000 and above accounted for about 38.4 per cent or 11,784 units of the housing property overhang. On the flip side, houses priced RM500,000 or less became half of the overhang numbers of residential property in Malaysia. The classification and categorisation of different attributes affecting “affordability” and “ranges of prices” as well as “band of values” shall be established succinctly.

    This might happen because of the difficulty in purchasing houses nowadays, constraint of financial instability (due to low income and lower savings) and access to loans in overall home ownership extent that the homebuyers now prefer to rent instead of purchase houses. From the highlighted data, it indicates that the housing market in Malaysia is still trapped in the mode of a volatile and weakening situation. Therefore, the big real estate database must be able to comply with the requirements of capital housing and rental housing market and all the attributes therein.

    Demand and supply

    Despite the various interventions, the gap between demand and supply is widening unabated. Thus, we need to analyse the reasonable prerequisite and constraints for the availability of affordable houses in Malaysia. House price, constraint of income, location of housing (poor connectivity, infrastructure and accessibility), availability of financial requirements and types of housing are the main possibilities that the power of purchasing affordable housing from prospective buyers is increasingly showing a decline. These attributes must be in-situ within the framework of the big real estate database.

    Hence, there are commitments and a need to rethink the delivery of affordable housing sub-markets that contribute to affordable housing stress. The issues of integrated planning at the federal and state levels, targeted beneficial buyers, method of financing for loans and implementation of regulatory policies and Standard Operating Procedure (SOP) will result in discrepancy in the delivery of affordable housing. In addition, there is a need to explore the big issue about homes in Malaysia being ‘severely unaffordable’ or very expensive to own or rent. The principal question is why the houses are so expensive and how to reduce the cost of construction? Policy-makers need to revise or rethink the incentives that will be beneficial to the prospective homebuyers to give them opportunities to own the houses within the framework of a big real estate database.

    In designing the big real estate database, the nature of legislative structure for affordable housing programmes must consider that there are three levels of government (federal, state and local government). Furthermore, there are districts and housing sub-districts. But, there is conflict in terms of housing policy implementation between the state and federal governments and there is a lack of specificity for federal programmes implemented at state or local government. These contribute to delays and problems in the overall development process for the housing market.

    All these findings are meaningful in framing the environment of affordable housing delivery, prices of affordable housing and peoples’ affordability at large. Anyway, Malaysia does need a National Housing Network.

    -- BERNAMA

    Ismail Omar has been President of the Land Professionals Association of Malaysia (PERTAMA) since 2014 and is a lecturer in real estate management at Universiti Tun Hussein Onn Malaysia.

    Masfaliza Mohsen is a registered valuer and a lecturer in real estate management at Universiti Tun Hussein Onn Malaysia.

    (The views expressed in this article are those of the author and do not reflect the official policy or position of BERNAMA)

    ABOUT US

    Malaysia National News Agency
    Wisma BERNAMA
    No.28 Jalan BERNAMA
    Off Jalan Tun Razak
    50400 Kuala Lumpur
    Malaysia

    Tel : +603-2693 9933 (General Line)
    Email : helpdesk[at]bernama.com

    Categories

    General
    Business
    Sports
    Politics
    World
    Features
    Thoughts
    Infographics
    Videos
    Images
    Exclusive Press

    Copyrights

    Disclaimer
    Privacy Policy
    Security Policy