Affordable housing, the new way to win votes in Malaysia
KUALA LUMPUR, Nov 4 — Both Barisan Nasional (BN) and Pakatan Rakyat (PR) are vigorously selling their own housing schemes to Malaysia’s cash-strapped middle class in the hope of winning support among young adults, especially in the country's richest state, Selangor.
But a closer look at these schemes reveals some shortcomings including a lack of ways to curb speculation and questions of how really affordable they are in the first place.
The Selangor PR government had launched its scheme some three months after the BN federal government’s 1 Malaysia Housing Programme (PR1MA).
The message the PR wanted to send to the public was the same.
That it, like the BN government, was listening to people like Amir and Azlin, two newly-weds who are shopping for a house that they can afford on their combined RM5,000 income.
It’s not just house prices that they’re worried about, but how to service a house loan while dealing with the rising cost of food and fuel.
“God willing we will be able to afford one. We will really have to watch what we spend. There’s very little room for impulse buying,” says Azlin, a manager in a government statutory body.
According to government figures released in Parliament in 2008, about 79.3 per cent of Malaysians make RM5,000 or less a month.
The schemes make not only public policy-sense but also political sense. Each coalition is striving to prove that their programmes are better at tackling cost of living worries that will influence voters in the coming elections.
Both coalitions have designed their schemes for middle-class Malaysians who earn below RM6,000 a month and are most likely to be just starting out in their careers.
Emphasis is on the first-time house-buyer and restrictions exist to bar property speculators and to ensure owners actually stay in these houses.
The two BN plans are different but their intentions are the same. The Selangor government’s plan is similar to PR1MA but targets a more specific income group.
The My First Hope Scheme (SRP) is a financial tool meant to help those earning below RM3,000 a month get a 100 per cent loan to buy a house. Those under the SRP also do not have to pay the usual 10 per cent down payment. Houses can be from any developer but must be between RM100,000 and RM220,000 although Prime Minister Datuk Seri Najib Razak has now proposed to raise it to RM400,000 in Budget 2012.
PR1MA and Selangor’s scheme are both physical apartment projects in different parts of the country.
PR1MA’s units are RM220,000 to RM300,000 for buyers earning less than RM6,000 a month. Selangor’s are below RM100,000 for those earning between RM2,500 and RM5,000.
Theoretically, there is no stopping a house buyer from getting an SRP loan and using it to buy a Selangor affordable house.
Servicing what you buy
House Buyers Association honorary secretary Chang Kim Loong says the Selangor plan is aimed at the low-medium-cost market. PR1MA is broader in reach and would benefit most middle-class house-buyers.
In the past, the focus was on low-cost houses below RM49,000 for the poor, says Chang. Now both governments have realised that a similar housing programme is needed for the middle class who have seen house prices sky-rocket beyond their reach.
Although both governments are lauded for their programmes, building good homes at below-the-market prices in places like the Klang Valley and Johor Baru are only one part of the solution to affordable house-ownership.
The other part, HBA’s Chang points out in a recent iproperty.com.my article, is continuing to pay for the monthly instalments on the house itself.
Like Amir and Azlin, Shukor, a government officer, faces this challenge. The 34-year-old plans to start a family in a new RM112,000 apartment unit he bought at the BN Youth My First Home property fair.
Shukor and wife Fahanna could only get a loan at minus 1.5 per cent of the current Base Lending Rate of 6.3 per cent. Since they both have a combined income of more RM3,000 a month, they can’t get into the SRP.
He says more than one-third of his RM3,000 salary will have to go towards servicing the 33-year loan.
“God willing I can service the loan. But there are more toll and fuel expenses that I have to pay for because the apartment is in Sungai Buloh and I work in Kuala Lumpur. But I am quite happy with the place. It is still close to my office compared to living in Puchong or Shah Alam.”
The strain of high monthly instalments would be most felt by those earning less than RM3,000 in a combined income.
Chang of the HBA feels that what would really help them is the government capping the interest rate in the SRP loans at 3 per cent. This is roughly the equivalent of Malaysia’s official inflation rate.
This reduces the monthly instalments to slightly below one third of their monthly expenses and leaves them more money at the end of the month that they can save for emergencies, says Chang.
Despite these concerns, the public response towards these programmes, BN or PR, has been positive. People swarmed the developer booths at the BN Youth property fair in the hopes of signing up for the PR1MA schemes.
The majority of visitors to the bank’s exhibitions such as CIMB, Affin Bank and Bank Islam wanted to apply for the SRP. Syarikat Perumahan Negara Berhad (SPNB), the government’s house-building agency, drew a continuous stream of visitors who signed up for its cheap housing projects.
HBA’s Chang cautions that even property speculators are now cooking up ways to bypass the restrictions so that they can buy houses on the cheap and “flip them over” at double their offering price.
What’s also missing from these initiatives are details on how Putrajaya and Selangor plan to ensure that buyers will occupy the houses for 10 years, instead of renting them out.
“Developers must also guarantee that the houses will be complete and will be fit to occupy,” Chang says, adding that the governments should get developers to apply the build-then-sell concept in their schemes.
Another aspect that is being potentially overlooked is the mindset change that must follow when living in high-rise apartments, says a lawyer who often deals with real estate issues.
Khairul Anwar Shaharudin says that Malaysian apartment dwellers are slow when it comes to paying the fees to keep the lifts running and the halls swept. When the environment deteriorates, owners move out, rent their old units out and the place turns into a slum.
“This is a problem in many low- and low-medium-cost housing schemes that I’ve seen. Malaysians are not ready to live in strata properties, whether they are low-cost flats or high-end condos,” says Khairul Anwar.
Overall, these may still be viewed as niggling problems that can be absorbed. The more immediate worries are still about what to put on the dinner table.
Housing may take a big chunk out of their monthly expenses but it’s seen as something fixed and accepted, says Federation of Malaysian Consumers Association chief executive officer Datuk Paul Devaraj.
“What hurts most consumers is prices of goods which seem to regularly increase,” says Devaraj. In comparison, a house’s monthly instalment is fixed as the bank has factored interest and fees into the loan.
A great deal on a PR1MA unit or one under the Selangor scheme creates some financial breathing space, but it doesn’t necessarily mean lesser monthly expenses.
Wai Keong of Bandar Nusa Putra in Puchong, for instance, got a good deal when the developer of his new house absorbed the 10 per cent downpayment. But the location is forcing him and his wife to pay more to travel to work.
“You might pay less for your house loan if you live in the urban outskirts,” says Devaraj. But the extra fuel that you have to pay for the trip could negate those savings.
“At the end of the day, it all adds up.”