Creating a New Affordable Shelter

Time to improve affordability, not build more affordable homes

Obvious relationship between oversupply and overhang

Despite the launch of more affordable housing, the report shows that overhang in affordable housing is a worrying and problematic situation. Based on the statistics recorded by NAPIC (2020), residential property overhang in 2019 reached about 30,664 units or RM18.82 billion worth in unsold houses nationwide, with 57.4 per cent or 17,601 units coming from government affordable housing projects that have failed to obtain buyers’ traction.

In 2019, residential property priced RM500,000 and above accounted for about 38.4 per cent or 11,784 units of the housing property overhang. On the flip side, houses priced RM500,000 or less became half of the overhang numbers of residential property in Malaysia. This indicates that the excess supply of affordable homes has not solved the housing woes of those in the B40 and M40 groups as they still cannot afford to buy a home.

What is Overhang?

Residential overhang is defined as residential units which have received Certificate of Completion and Compliance (CCC) but remained unsold for more than 9 months after launch. Reasons for such inventory in residential units goes beyond the simple issue of oversupply or lack of demand in the market, but should also be seen in conjunction with factors such as market mismatch, affordability and cost of living.

WHY IT MATTERS?

As of 2020, Malaysia recorded almost RM 19 billion worth of overhang residential units, standing for 29.5 thousand units in total. Historical data suggests that a period of 12 years (2003 – 2015) is required in order to restore the number of residential property overhangs back to its lowest level, which is from 9,300 units in 2003 to 11,316 units in 2015. In fact, the level of overhangs in 2015 was not fully recovered to the one in 2003, due to the excessive supply of 122,921 units in 2014.

The housing market is, thus, expected to remain a challenge in the coming years as the unprecedented large property overhang will take more time for the market to absorb before the housing market could stage a meaningful recovery. In the meantime, the government needs to wisely monitor any implementation of new builds, so as to avoid the outgrowth of housing supply to the overall housing need in the country.

What do our IRL initiatives currently mention for this?

Home Ownership Campaign

The Home Ownership Campaign (HOC) was designed to encourage the increase in home ownership among Malaysians.
Benefits of the Home Ownership Campaign?
- Full stamp duty exemption till RM1 million
- Partial stamp duty exemption till RM2.5 million
- Instruments on securing loans exemption
- 10% house discount
Encouraged the sales of unsold properties in Malaysia’s housing market.

Rent to Own Scheme

This scheme was introduced to allow Malaysians to own properties via renting, with the option to end with a sale.
Benefits:
- More affordable housing
- You get to ‘try it out’ before you commit
- Smart buyers can lock in a good price
Existing RTO in Malaysia:
- Maybank HouzKEY
- PR1MA rental homes
- Skim Smart Sewa to Ownership (2STAY)

How it Works

Government (KPKT)

Property Developer

Prospective Homeowner

Property developers will act as an interim landlord for overhang units in their inventory.
Upon entering the contract, the property developer and prospective renter will agree on the market rental rate for the property, as well as the lock-in price of the unit should the renter decide to convert his lease to ownership.
Successful renters will make rental payments representing for 80% of the market rental rate to the property developer in question.
KPKT will account for remaining 20% of the rental based on the market rental rate.
The renter is obliged to rent for a minimum of one year, to a maximum of five years.
After reaching the first year's mark, the renter will have the opportunity to convert his lease to ownership, where the selling price of the unit will be at the price that the renter locked-in upon agreement of the contract.
After reaching the fifth year's mark, the renter will have the opportunity to walk away from the unit without further obligations or commitment to the unit or parties to the contract.

What are DMM KPKT's suggestions for affordable shelter?

In light of decreasing the overhang by a targeted 50%, KPKT will be enhancing the existing Rent-to-Own schemes in Malaysia such as the Maybank’s HOUZkey and Skim Smart Sewa to Ownership (2STAY).

The highlight deterrent to homeownership is the high financial commitment required expected of prospective homeowners. On top of the monthly mortgage payments, homeowners would also have the financial responsibility towards utility and maintenance fees.

Hence, KPKT has proposed additional initiatives to the existing Rent-to-Own scheme as below.

What's New?

20% rental subsidy

25% rental paid contribute to mortgage

Maintenance subsidy

Utility subsidy

20% rental subsidy

In order to ease potential homeowners' transition into homeownership, KPKT will be providing a 20% subsidy to the market rental rate, payment of which made directly to the property developer.

25% rental paid contribute to mortgage

As of the present Rent-to-Own scheme, rental paid to parties to the contract are non-recoverable.

KPKT's initiative would be to subsidize 25% of the total rental paid by the prospective homeowner, contributing directly to mortgage payments, easing transition into homeownership.

Maintenance fee subsidy

In light of further consolidating the financial positioning of the prospective homeowner, KPKT will provide a subsidy of RM0.45 per square feet of the property in question.

There will be no additional subsidies for sinking fees or any further fees to be paid by the prospective homeowner.

Utility subsidy

The existing electricity subsidy of up to for B40 families will be further enhanced to include families applying for the newly reformed Rent-to-Own scheme to also apply to be eligible for this subsidy.

KPKT will further provide a RM10 per month, for water payment, equivalent to approximately 7246 litres of water, to each household under the new Rent-to-Own scheme.