Affordable homes are indeed crucial to the people as it provides signs and indicator of a stable economy.
Bank Negara Malaysia (BNM) expects affordable housing shortage to exceed one million units by 2020, with Sarawak and Sabah accounting for 50 percent of the total shortage.
In its 2016 Annual Report, BNM noted that the issue of affordable housing mirrors the supply-demand imbalances, which worsened in Malaysia in 2012 to 2014. It added that the slower increase in household incomes (12.4 percent) relative to the hike in home prices (17.6 percent) exacerbated the supply shortfall.
And despite the efforts by the federal and state governments through various programmes, the housing market still failed to provide sufficient supply of affordable homes for lower and mid-income households.
In fact, the problem is prevalent in all states, with Sarawak and Sabah making up half of the total shortage of affordable homes in Malaysia, which totalled 960,000 in 2014. Since the stock of affordable housing is not readily available, the report revealed that the estimation is based on the assumption that household can only acquire properties they can afford.
It defined affordable housing as those priced between RM248,000 and RM261,000 in 2014.
According to the report, affordability crisis persisted even as banks continued to offer to finance for housing purchases. With this, the share of affordable housing transaction is made as the proxy for the share of affordable homes within the market.
The shortage of affordable homes is determined by subtracting the stock of affordable housing with the number of low- and mid-income households.
The demand for affordable homes supported the expansion by banks in end-financing for residential property acquisitions. By end-2016, houses priced below RM250,000 accounted for 56 percent of outstanding loans, while 25 percent is accounted for by homes priced from RM250,000 to RM500,000. Rejection rates for housing loans also dropped to 23.6 percent last year.
With this, the report suggested four proactive measures - forming a central repository to monitor and manage supply and demand; rising supply and lowering the prices of affordable homes; diversifying financing sources via innovative financing schemes; and developing a thriving rental housing market by enforcing tenancy protection to make rental a viable option and not a last resort.