Emprendimientos

Malaysia is part of the Association of South East Asian Nations (ASEAN). The nation consists of two regions separated by the South China Sea, that is, the peninsular of Malaysia and the states of Sabah and Sarawak, on the island of Borneo. Malaysia comprises a federation of 13 states and three federal territories. It is a dynamic country that has evolved tremendously since the 1970s from a country that produced raw materials, such as rubber and tin, into a multi-sectoral economy that driven by innovation and technology.

The mass housing industry contributes to almost 4% of the gross domestic product (GDP) income to Malaysia socioeconomic growth. Many downstream activities are dependent on this industry, and it creates a domino effect when the housing industry

is not performing: the whole construction industry is affected. It is important for the government to guarantee that this industry is working efficiently and at the same time supports the environmental sustainability agenda.

Notwithstanding the reputation of the mass housing industry to the country’s

development, the industry is tainted by several pertinent issues. One big issue is related to the supply of housing for young starters. Private developers give affordable housing programmes low priority (Tan, 2014) and are especially keen to concentrate on high- end properties in order to make more profit (Cagamas Berhad, 2013). The construction of higher-end properties has thus exceeded the target laid down in the previous 5-year Malaysia Plans (2011–2015) (Economic Planning Unit, 2010b). There is an oversupply of higher-end properties and new units remain unsold (Department of Statistics Malaysia, 2015a). The government has failed to meet its goal of supplying affordable housing to the middle-income group. According to the recent census by Department of Statistics

Malaysia, 2015a), the demand for residential units in the RM 250,000 – RM 300,0002

price range makes up 50–90% of the total demand and most of the units were easily sold. Given that the demand for homeownership is increasing in the market, the debate about current housing policy is shaped around the issues of affordability, particularly for the middle-income group (Cagamas Berhad, 2013; T.Tan, 2013). First-time house buyers (T.-H. Tan, 2013) or young starters aged between 23 and 30 years old (Cagamas Berhad, 2013). The middle-income group makes up 50% of the total population. Young starters constitute almost 60–70% of the middle-income group. The demand for housing is continually increasing, especially in the urban centers such as Kuala Lumpur, Selangor, Penang and Johor Bahru (T. Tan, 2009). However, the country is still facing difficulties in meeting the housing demands of young starters (Cagamas Berhad, 2013; T. Tan, 2012, 2013).

Homeownership, especially in the two most developed states in Malaysia (Selangor and Penang), remains inaccessible to many despite government incentives for ownership and housing programmes. Some of the reasons for this are caused by the location of the housing, especially in the prime area where the higher cost of land is driving house prices. Another issue is the deposit, income and credit obstacle: the middle-income group do not earn enough to meet bank lending criteria (Cagamas Berhad, 2013; Buang, 1997; MHLA, 2013). This is elaborated in the following section.Nevertheless, in order to accomplish high income status by year 2020, the government sectors and private have worked together to achieve the housing target . The government is open to new suggestions to improve the current business model, and any innovation and proposal are significantly welcome at this stage (MHLA, 2013). The thesis presents an overview of the need for mass housing in Malaysia. It also presents the problems faced by the industry, the forms of housing tenure currently available in Malaysia, the gap and solutions to the problems.

§ 2.3

Overview: The demand for housing in Malaysia

The world is currently facing problems caused by rapid urban growth. According to Tibaijuka (2013), almost half of the world’s inhabitants is now living in city areas. According to a census carried out by the Department of Statistics Malaysia(2015b), almost 72% of the population now lives in city areas. The United Nations has estimated that by 2050, 87% of Malaysians (37 million) will be living in urban areas. The need for housing is increasing everywhere, but affordability for young starters is decreasing partly due to the rising cost of housing in relation to income (T.Tan, 2012). In this research, the term ‘young starters’ is used to describe the people of a certain age (23 -30 years old), at the start of their careers both on the business and the housing market. While T.Tan (2012) labels them as first-time house buyers.

It is argued that although the goal of ownership is to have a roof over one’s head, the need for ownership has always been associated with a sense of status in the eyes of society, a sense of independence and a reflection of one’s financial capability (Bright & Hopkins, 2011). Investing in housing is considered the most important investment in one’s life. This is further supported by findings that young starters especially consider a house as an entity to reflect their identity and personality (Bruce and Kelly , 2013). Thus, the earlier definitions support the notion that the desire to become a house owner is high. The topic is also prominent and valid concern for policymakers. Since independence, the housing provision has been part of government’s social policy. It is crucial to ensure social and economic stability and to promote national development (Rahman & Alashwal, 2013), and for Malaysians to lead happy, productive and enjoyable lives (Cagamas Berhad, 2013). It is undeniable that residential and neighborhood satisfaction is an important indicator of housing quality and condition, which affect an individual’s quality of life (LSufian, 2008). The government has focused on numerous housing programmes in its Five-Year Plans (Malaysia Economic Plan), to provide affordable housing for the people. With the help from the private housing developers, the private sector has provide housing for all income groups. Malaysia, like other developing countries, considers the housing sector as fulfilling the people’s basic need and thus has the potential to be the catalyst to boost the nation’s economy (Economic Planning Unit, 2010b).

In terms of supply, in the recent Malaysian plan (2016-2020) the government plays a role to provide housing for its staffs (civil servants), low-cost housing for the low- income group and affordable housing for the medium-income group (Economic Planning Unit, 2015). But at the moment, the middle-income group has to compete with the higher-income group to buy a house on the open market. Due to skyrocketing land prices and raw materials prices, house prices have recently increased, encouraging private developers to concentrate on high-end properties. In Malaysia, developers

of developments exceeding 10 acres are officially required to allocate 30% of their units for public (low-cost) housing. However, there are reported cases where housing developers have managed to escape the guidelines by submitting the projects into smaller parts (Cagamas Berhad, 2013) and submitting them for approval separately (T.-H.Tan, 2012).

At present, houses costing more than RM 500,000 (€120,000) dominate the housing market, especially in cities. Private housing developers are more interested to invest on high-end projects due to higher margins and profits (Department of Statistics Malaysia, 2013). Nonetheless, under the affordable housing program, 2733 units of Rumah Mesra Rakyat (30% of the housing needs under the Home Ownership for the People (HOPE) projects) were completed in 2010 and another 60% of the units are under construction (at least until 2014) (Department of Statistics, 2013). Nevertheless, most of the units under this scheme were built outside prime areas and were mostly inaccessible via public transport (Cagamas Berhad, 2013).

In response to this, the government pledged in the 10th Malaysia Plan (2011–2015) to deliver a sufficient supply of affordable housing for both the low-income and the middle-income group. An estimated 500,000 affordable houses were expected to be constructed during the term. However, only 102,200 units were completed (Economic Planning Unit, 2015). The government also promised to tighten the law and increase enforcement to ensure that the quality of affordable housing is not compromised (Unit, 2010b). However, the focus of the present research was not on the lower-income segment but on the young starters who make up around 60–70% of the middle- income group. This is also part of the government pledge to fulfill the plea for housing particularly from the middle-income group and urban settlers (Economic Planning Unit, 2015).

Recent polls reported by (Cagamas Berhad, 2013) showed that a large number of Malaysians, and especially young starters, found that house prices were beyond their reach, and a significant number of them wanted more affordable housing at suitable locations and with better designs. At present, the affordable housing schemes to promote affordability by the government are as follows:

MY FIRST HOME SCHEME (SRP) PR1MA PPA1M

Target / Eligibility

the income limit for individual loans from RM3,000 to RM5,000 per month or joint household incomes for up to RM 10,000 per month and the eligibility to own property costs up to RM400,000

to provide 500,000 affordable homes in 50 cities nationwide with household eligibility income from RM6,000 to RM7,500 monthly.

RM 90,000 – RM120,000(joint income not more than RM 6000) RM 150,000- RM 220,000 (joint income not more than RM10,000)

RM 221,000- RM 260,000 (joint income not more than RM10,000)

18-35 years old and first-time buyers First-time buyers 18-60 years old

*only for government servant TABLE 2.1 Schemes for middle-income group in Malaysia. Adapted from: EPU (2015)

In the figure 2.1, the blue column shows that the middle-income group mostly consists of young starters, who form the majority in urban areas, could not afford to buy houses on the current market especially in the urban areas. At the same time, they are not eligible for low-cost public housing. Therefore, it is important for the government to revisit the term ‘affordable’ and to ensure the proposed affordable housing schemes (such as PR1MA, PPA1M and SRP) achieve its objectives. As much as the government’s effort to solve poverty in rural areas, the need to address urban young starters and the urban poor are also crucial for the housing industry.

Below 40%