An article was widely shared recently. The main headline was that Malaysia needs 7.8 million homes. This is based on the 30 million population and a ratio of 4 to 1 home. The article further stated that as of today, Malaysia has around 4.7 million homes. Thus, you can see the huge gap between the actual needed versus the actual built ones. Actually, how many homes do we need in Malaysia? Majority of the answers are around 100,000 per year. Well, truth is, we have yet to build up even this level. This explains why many are saying the reason why property prices will continue to increase is because there’s way too few homes being built.
Actually there’s another point which is very important too, just that I do not think anyone would have this number except for the state land offices. The urbanisation is ever increasing and in the not so near future, Greater KL alone would have over 10 million population. This meant that the homes in the small towns may not be needed or even some may be abandoned once the young ones move to cities. The new homes to be built would thus have to be heavily skewed towards this trend. In fact, when you travel to smaller towns, I think the ratio of home is much lower than 4 : 1. The reason being, there’s just not that many population to go around with the existing number of homes. It might have been even 10 : 1 in the same home long time ago (during my father’s times) but today, perhaps just 2 : 1 or even lower. If the kids made it big in the cities and love their parents and can care for them, this would meant that even that their home in the village or small town would be sold off or just left empty.
In UK, the ratio is now 2.4 persons to one house. When you look at this number, it is also important to note that one major reason would also be because of the house prices being way too expensive and thus, the newer ones in good areas are now built smaller. Once you build them smaller to make it affordable, you cannot have too many within that home. Imagine a SOHO for 4 pax? Nah, I do not think this is the number for any SOHO. a typical family of 4 would still feel comfortable only with a 1,000sf home or higher. Anything lower, they can make do but definitely not an ideal space. I have stayed in a 700sf apartment for 5 years with my wife, my sister and even my brother, for a while. It’s cosy of course but not awesome. Thus, this ratio would continue to decrease because the units built in the better spots would be ever tinier to maintain affordability. In fact, Hong Kong launched this: 177sf micro-flats, so that it’s affordable enough.
The question of how many homes are needed depends very much on how the country continues to grow and where is the growth. Thus the plan for more homes is more on building in the right places and where possible, at the right prices. While the government wants to encourage the building of families and thus are always building units which are bigger, it can perhaps also think about building these smaller units too, especially for the younger population which would be getting married later than earlier. Instead of all of them fighting for huge units which they would need so soon anyway and thus pushing up the prices even further, maybe just maybe these smaller units may help in stemming the price increase. Happy thinking and investing.
written on 11 Nov 2014
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