Affordable housing underserved

KUALA LUMPUR (April 19): The government needs to address the imbalances in the local housing market, as more developers gravitate towards the more profitable luxury segment.

RAM Consultancy Services Sdn Bhd chief economist Dr Yeah Kim Leng said the lure of higher gains in the luxury segment were the main reason for the shortage in the affordable housing segment, which covers properties priced at below RM150,000.

"Private housing and finance markets, in maximising profits, tend to undersupply housing on the affordable end," said Yeah in his presentation at the 22nd National Real Estate Convention on Wednesday.

Affordable houses dominated the property market last year, accounting for 54% of the total transactions. However, this was a decline from the 57% in 2010. Furthermore, market activity in the segment declined from 55% in January 2011 to 52% at the end of the year.

Yeah said in developed countries, affordable housing was normally provided by not-for-profit developers, or municipal bodies, which run on public subsidies.

He said the government needs to continue providing low-cost housing. Under the 10th Malaysia Plan (10MP) 75,000 units of affordable houses will be built nationwide. This is a year-on-year growth of 12.6%.

Yeah said the government needed to drive developers towards affordable housing with incentives.

"Well-functioning housing and land markets are necessary to address the high residential prices, but they are difficult to create and maintain in both developing and developed countries. We need to supplement this with interventions, in order to overcome the market failures in affordable housing," he added.

He added that it was possible to establish a "dual" residential property market, where the luxury segment would be more market-driven. However, he added that it was essential to control liquidity as an excessive level of debt could lead to the development of a property bubble.

High property prices have long been a concern for the government, which raise the Real Property Gains Tax (RPGT) to 10% from 5% previously to curb speculative buys.

Yeah said it was essential for developers to take an integrated approach in urban planning to address the supply constraints in the housing market.

Adopting a "smart growth" strategy to increase the density of residences near transport nodes such as bus lines and subway stations would create "compact cities" that rely on an efficient relationship between housing, transportation and the local labour market, he said.

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