Property Price: The Affordable Housing Conundrum
In an interview with Siva Shanker, a journalist asked: "If most developers were focused on building properties worth above the RM1 million mark, what would happen to the B40 segment? How would they afford to buy the RM1 million property?"
Siva is a CEO for Agency of PPC International Sdn. Bhd and a Registered Real Estate Agent (E1771) with 34 years' experience in Valuation and Estate Agency. Catch his response below.
I'm not sure if most developers are focused on this market segment, but if indeed they are, and it looks like this is a common perception, then what will happen to the B40 segment? Ignore the B40 segment for a while; let's talk about what happens to the vast majority of people who are in the category called "middle classâ€. Surely the average middle-class family will not be able to easily afford a property worth more than RM1 million.
So who is focusing on affordable housing? This is a much bandied about the word in the world of real estate in the last few years. But it has merely remained, to a large extent, a word that is spoken about in seminars and conventions. Ask the average person on the street if he thinks he can buy properties in the affordable range, and most probably his answer will be a resounding no.
Until now, we are not even able to define what is affordable housing. Ask 10 property players what they think affordable housing is, and you would most likely get 10 different definitions. I realise that you can't just put a number on what is affordable. Of course in different geographical locations around the country, what is affordable must be different. But surely, after so many years, we must at least be able to fix a range which we can all agree is the affordable range. And it cannot be so wide as to be between RM50,000 to RM500,000. That simply will not do.
In my mind, a truly affordable range that will cater to the vast majority of the B40 segment would be for properties under the affordable category priced between RM200,000 and RM350,000. This price range would make these properties truly affordable.
Of course, this is a rather simplistic way to work at a complex problem. I am not suggesting this is the be all and end all of the problems. I am merely saying this would be a gigantic first step in the right direction.
Owning a home is the dream of nearly every Malaysian. All young persons I have ever talked to have said that their dream is to own their own homes. If most of the homes being offered for sale are priced out of their range, how then do we make these dreams come true?
Perhaps the time has come for us to look at this problem from another angle. Instead of buying a piece of land, then working out the cost of the building, and then using that to price the property, maybe we should put a price on the property first? Construction cost is easy to estimate. So, working backwards, it would be easy enough to work out exactly how much we are able to pay for the land.
Again, I'm not sure we can look at it in such a simplistic manner. All I'm saying is that this is a tough problem to solve and we should come up with innovative ideas to solve it. It's time to think out of the box.
Until then, happy hunting and may the force be with you.