Politically, the Barisan Nasional government also badly wants to win back the country’s most wealthy state
KLANG Valley residents might soon have more housing options – those of the affordable kind. More precisely, those priced below RM220,000, or just over S$90,000. Responding to complaints that a generation is being priced out of Malaysia’s most populous area, Prime Minister Najib Razak has assured them that his administration is looking into the issue. Over the coming months, it will undertake a programme in concert with the private sector to offer quality homes to be fast tracked via the industrial building system (IBS).
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It is heartening to hear more KL developers are heading to Iskandar M’sia because they believe the upside to be better. |
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It will identify government-owned land for the ‘Affordable Quality Housing’ programme, and co-opt private sector developers to assist with the construction. That more affordable housing is needed in the Klang Valley isn’t in dispute – the burgeoning population and diminishing sites have been pushing prices up beyond the reach of the average Joe who is increasingly leveraged and spends half his monthly income paying off loans.
Politically, the Barisan Nasional government also badly wants to win back the country’s most wealthy state from the opposition Pakatan Rakyat and cheaper housing is one way to win votes.
But one wonders if private developers feel a sense of dread at Mr Najib’s comment on how this programme may be implemented. ‘If possible, no profit will be taken from this project and companies can take it as part of their corporate social responsibility (CSR) programme,’ he reportedly said.
Publicly, they say they welcome the initiative, but point out that land on average only accounts for a fifth of a project’s gross development value. By their calculations, existing CSR initiatives are already burdensome and more than that required of other jurisdictions. Among these are that they allocate a significant portion of their development for drains, roads, utilities, schools, and religious structures.
A certain percentage of the project has also to be for low cost housing, and under affirmative action policies, another percentage of the development reserved for bumiputera buyers who, on top of that, are also entitled to discounts, sometimes of up to 15 per cent.
There is no automatic mechanism to allow slow selling bumiputera units to be sold to others, which raises holding costs. Invariably, the cross-subsidies are factored back into house prices and, together with construction and other costs, account for up to 70 per cent of the gross development value, developers claim.
The fact that an increasing number of local developers are venturing out to Singapore despite the vast difference in land prices perhaps underscores this point.
Other contentions include getting government-owned Syarikat Perumahan National, which was set up to provide affordable quality homes to low income earners, doing more.
Even so, many are unsympathetic as they perceive developers to be making millions of ringgit in profits and perhaps colluding to talk prices up. They are also prone to underlining their influence in the economy on the grounds that it supports over 100 sub-sectors.
But because economic development has been overly concentrated on the Klang Valley and Penang, other cities have been slow to progress. Until the various economic corridors gain momentum, migrants will continue to pour into the two areas where jobs are more readily available, thus compounding the housing issue.
Klang Valley and Penang residents hoping for a better quality of life have little reprieve from development as every available square inch seems earmarked for property projects, as such is the demand. Indeed, over the years, playgrounds and other public spaces have been converted – sometimes surreptitiously – into more housing or commercial units.
Whether the government, which had planned to unlock the value of its land assets, can find enough well-located cheap land to satisfy the pent-up demand remains to be seen.
Private developers have already observed it would be very challenging to build units for anything less than RM350,000 in the Klang Valley and Penang, unless they are built smaller, on government land, and with higher plot densities.
In that regard, it is heartening to hear more Kuala Lumpur developers are heading to Iskandar Malaysia because they believe the upside to be better now that much of the infrastructure is close to completion. House buyers there should arguably get more bang for their buck because land in Johor is still much cheaper despite its proximity to Singapore.
Economic benefits notwithstanding, the sooner Iskandar achieves its tipping point, the more even regional growth on the peninsular will be. It might even alleviate some of the congestion in Penang and the Klang Valley although one suspects house prices are unlikely to dip anytime soon.
Source: Business Times 9th May 2011