The problem of housing affordability continues even after many cooling measures were put into place by the Government.
Malaysians will not be able to afford properties if housing prices continue to escalate unchecked, warned Datuk Charon Mokhzani, managing director of Khazanah Research Institute.
One way to contain the rising property prices is by flooding the market with supply to pull down the prices, so more people could afford to own property, said Charon.
Other ways are by employing technologies such as three-dimensional building plans and using the industrialised building system would help to reduce costs, hence lowering selling prices.
However, some fear that flooding the market with an ample supply may lead to a property market crash and its chain effect could have worse consequences on Malaysians.
An economist with an investment bank contacted by The Edge Financial Daily said, oversupply in the property market could result in a crippled financial system, similar to the US subprime loan crisis.
“The danger in doing this is that, if we look at the financial crises that have occurred, a lot of these were caused by a collapse in the asset price market, including property prices,” he said.
Speaking at a forum on “Does Greater Prosperity Come with Less Housing Affordability” last week, Charon said that housing prices in urban areas such as Kuala Lumpur and Penang are categorised as severely unaffordable and other less urbanised areas are facing the risk of descending into the same category if rising property prices are not contained.
Government subsidies and cheap home loans were not sustainable ways to address this, reducing housing prices was the solution, added Charon.
Although median household incomes (11.7%) have risen slightly more than median house prices (10.6%), the median house price in KL and Penang is still 5.2 to 5.5 times of median annual household income. According to Charon, this indicates the housing prices are severely unaffordable. An affordable market is one where the median house price is three times median annual household income.
With an increase of barely 1.1% extra, compared to the hike in median house prices, would growth of household income at a faster pace resolve the issue?
An economist, quoted in the same report by The Edge Financial Daily, acknowledged that the transformation of the economy from one that is geared towards low-skilled, low-wage to a high-skilled, high-wage economy is a long-term solution to address the issue of housing affordability.
“From all the investments that we have seen so far, the type of investments Malaysia is attracting is moving in the right direction towards creating high-income jobs,” he said. “But whether it will be enough for the country to propel to a high-income nation status remains to be seen,” he added.
Based on the economist’s observation, the government has not shown a strong commitment to curb the economy’s reliance on cheap labour and low value-added manufacturing to drive the economy.
[Source]
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