Malaysia is confronting a dual housing challenge marked by soaring property prices and a substantial inventory of unsold properties. Despite improved overall sentiment, the majority of the population, including middle and lower-income groups, finds homeownership increasingly out of reach. Simultaneously, the country is grappling with an overhang of 27,746 units valued at RM18.42 billion as of the end of 2022, though this represents an improvement from the previous year’s figures.
This paradox raises a critical question: How can a nation with a populace struggling to afford their first homes also face a glut of unsold properties worth billions? The answer lies in the development strategies pursued by some property developers, who continue to build high-priced homes that exceed the financial reach of most Malaysians.
As per the guidelines set by the Housing and Local Government Ministry, properties deemed affordable should be priced at RM300,000 or below, have a minimum built-up of 900 sq ft with 3+1 rooms, and be located in areas with robust public transport or connectivity. Unfortunately, only 23.5% of the overhang properties meet these price criteria, often failing to fulfill the crucial requirement of accessible locations.
The remaining 76.5% of overhang units, representing 92.7% of the total value, can be attributed to developers building beyond the affordability of the majority. The issue is complex, stemming from unmet housing demands due to various factors such as economic conditions, housing preferences, market sentiment, and demographic shifts. Addressing this requires a multifaceted approach involving all industry stakeholders, comprehensive market studies, and project feasibility assessments.
The government’s Home Ownership Campaign (HOC), launched in January 2019 and extended until 2021, aimed to mitigate the overhang by offering incentives to developers. These included full stamp duty exemptions for homes up to RM1 million, reduced stamp duties for properties between RM1 million and RM2.5 million, and exemptions on loan agreements, among other benefits. While this campaign helped developers offload some of their inventory, it also led to revenue losses for the government, indirectly subsidizing the sale of expensive properties and potentially skewing the market towards higher-priced developments.
Critically, these incentives also represent tax revenue forgone, which could have been allocated to vital public services. The discrepancy in stamp duty forgone between affordable and high-end properties raises concerns about the government’s role in promoting luxury real estate at the expense of addressing the broader affordability crisis.
Looking ahead, any consideration of reintroducing the HOC should prioritize supporting truly affordable housing priced below RM300,000. Such a focused approach would align government incentives with the actual needs of the population, helping to alleviate the housing affordability issue and ensuring a more equitable distribution of resources.