IQI REPORTS STRONG AFFORDABLE HOUSING SALES, SUGGESTS BUDGET 2025 MEASURES

Press release: IQI REPORTS STRONG AFFORDABLE HOUSING SALES, SUGGESTS BUDGET 2025 MEASURES

Kuala Lumpur (9 September 2024) — Malaysia has made strides in affordable housing, yet key improvements are overdue. Juwai IQI Co-Founder and Group CEO Kashif Ansari offers insights on the path forward in comments released by the company today.

Market Overview

“I’m impressed by how much progress Malaysia has made on affordable housing,” Mr. Ansari said. “Like the government, I also see that we must do more to make affordable housing more accessible to those who need it.

“First of all, we have to understand affordable housing within the broader market. And that broader market is booming post-pandemic. In the first quarter, transactions jumped 17.2%, and their total value surged by 34% compared to last year.

“Residential property is the powerhouse of the real estate industry and drives the majority of these deals. The numbers speak for themselves: over 63,000 residential properties were purchased, dwarfing the 41,000 combined transactions in commercial, industrial, agricultural, and land sectors.

“Buyers spent RM25.25 billion on homes, marking a 21% increase from the previous year.

Affordable Housing Is Largest Segment of Home Market

“When it comes to affordable housing, 36% of all new residential launches in the first quarter of the year were priced below RM300,000. On top of that, the government has already constructed 400,000 affordable homes under the 12th Malaysia Plan (12MP). That’s 60% of its 2025 target, which is impressive given the inevitable delays caused by Covid.

“Prices for affordable homes range from RM150,000 to RM300,000, depending on location. However, in high-demand areas, homes priced up to RM500,000 also can be considered affordable.

“Even with all this new construction, demand is set to rise. Urbanisation is pulling more people into cities where prices are higher. As Malaysia approaches high-income status, the number of households is growing faster than the population. Smaller households mean we need more homes to house the same number of people.

Key Principles for Affordable Housing

“Some key principles underline the provision of affordable housing. First, affordable housing must be liveable and well-built. Quality design improves residents’ lives. You can see that in architecture guidelines such as the CIDB Affordable Housing Design Standard.

“Second, the program must be sustainable. We need to ensure that developers can afford to build, the government can afford to incentivise and manage the industry, and residents can afford to purchase or rent the new housing. As Malaysia’s wealth grows, it’s crucial that the incomes of the less fortunate rise equally, preventing wealth concentration among the privileged few.

“Third, there are several factors that make housing more expensive: higher land costs, escalating construction material and labour expenses, increased compliance costs, and higher financing charges. As average incomes rise, middle income, and high income buyers, push up land and home prices.

Suggested Affordable Housing Measures for Budget 2025

“We offer these modest proposals for improving the provision of affordable housing as suggestions for the upcoming Budget 2025.

“The government has been effective at leading the affordable housing debate this year, proposing bold ideas to ensure every Malaysian can afford a home. Reducing the housing cost burden will alleviate broader cost-of-living pressures.

“Our first suggestion is that budget proposals focus on both providing new housing and improving the quality of life for those already in affordable and social housing. Quality of life improvements can include installing new street lights, building outdoor sports parks, and renovating aging homes.

“Our second idea is that the government help alleviate some of the costs that have made housing so expensive. For example, developers that provide quality affordable housing could receive subsidies for construction materials. These cost are climbing at a rate of 3 to 4% per year. That’s high, even though the growth rate has come down from the extremely high levels of the pandemic period.

“Financing is also a barrier to new affordable housing projects. If developers can’t obtain financing at a price that makes the project sustainable, then the new housing simply can’t come into being. If government or banks could offer discounted construction financing specifically for affordable housing projects, that could also help more families secure homes.

“Our fourth idea is to obtain economy of scale in the purchasing of materials. The industry and government could collaborate to form buying consortia. That means pooling demand across multiple developers to secure better pricing on materials.

“Because it would purchase larger quantities of materials than any single project could, the consortia could negotiate lower prices. This approach has succeeded elsewhere, cutting material costs by as much as 30%.

“Our final idea involves leveraging Malaysia’s advanced manufacturing sector to build housing. If we use industrial construction techniques to build housing in factories and then assemble it on site, that could slash construction time and costs and provide new homes more quickly and affordably.

Conclusion

“Affordable housing is more than bricks and mortar. It is the bedrock of thriving communities. By addressing this critical need, we are not just building homes but laying the foundation for a brighter, more prosperous future for all the people of Malaysia.”

— end of press release —

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