DILEMMA OF MALAYSIA PROPERTY MARKET | OVERSUPPLY OF AFFORDABLE HOUSING

What's up, guys? And welcome back to the E-Hung podcast and today I want to talk about the very eye-catching headline of affordable

housing paradox. So, this is a article

housing paradox. So, this is a article from News Time talking about how crazy is our total property overhang in

Malaysia. But here it highlights that

Malaysia. But here it highlights that there are tens of thousands of completed units remain unsold. price below

300,000. This is a topic that I resonate with a lot because I've been talking about this phenomenon 5 years ago.

So sometime people think that the property developer profession is all rosy and very profitable but planning risk is very very high.

Um when we bought the happy garden land we submitted happily and then there was then suddenly they implemented that all developments must have 30% affordable housing. just dump on us like what this

housing. just dump on us like what this is new we not aware of that and then uh we spent a whole year appealing and say you know I'll land only two acres we'll end up doing 90 units you know it's really not much

point but the minister won't give in so we had to bash in and the irony is 5 years later they change the rule let's say I got new government I come

right the most important thing I must do is to gain votes then then the welfare approach kicks in I want give in. Oh, now

everybody got more affordable housing.

Who's going to pay the bill?

Correct. Right. So, sometimes populist strategy, populist um uh concepts quite dangerous.

Yeah.

Cuz sometimes, you know, they want to be popular with a rockyard, but you know, the ramification, you know, the consequences, the real cost, the reality will kick in and it will everything you

do will affect the industry. 30% rumor

whip threw our ball completely off.

What uh do you think about status housing like the Roma whips rumangua?

Do you have a lot of problems with I think for Roma is definitely good government initiative right uh all these affordable housing uh are good initiative

but again we have to answer this question you are targeting the the B40 segment first of all is it easy for them to acquire the loan and secondly if you're talking about a B

250,000 IMM or or Roma or 300,000 do they even have 10% down payment you know unless they can get a 100% loan that's why you

know it is well if they can easily get a loan approved then obviously no issue yep yep so that that is the part where you know uh some of them will face y but

you see a lot of rum we also auction right we also auction prima also auction then I don't know how like because if you implement more government or sustary

housing right it only push up the open market products Yeah. Eventually you will lose some form

Yeah. Eventually you will lose some form of money there. Then uh you need to take out money somewhere. Yes. So you load up to the open market or know everybody take like 1 2%. Right. Yep. Until now

there's no right answer. Yeah. I mean

see see assuming you're talking about 300,000. See versus an open market

300,000. See versus an open market product maybe 350,000. First of all I I'm not restricted in terms of rental or sale later on you know. Then secondly is that it may

you know. Then secondly is that it may be zero down. M yeah you know so I don't have to worry about my down payment.

Yeah. Yeah. So those are the consideration you know when they make you know their choices whether to go Yeah.

technically that was the real moment where Roma week came out after Prima. So

Prima if you guys didn't know it was introduced by the previous government administration. So once you take over

administration. So once you take over then now they want to do something of their own. So every state including

their own. So every state including Slango, Pera, Pinang, Joho all have their own version of affordable housing.

Then with me being very sat very passionate about this topic. I speak to a lot of different developers. I even

convinced some to come to the channel and share about it only to conclude one thing. Back then I've already foreseen

thing. Back then I've already foreseen there will be an over supply of affordable housing. And unfortunately

affordable housing. And unfortunately I am correct today. Very very sad because the whole and guess what this I

think is the main reason why a lot of houses within main countries are getting priced higher and higher. More and more people cannot afford houses. The main

reason is unthoughtful government intervention. Yeah I've said it. What

intervention. Yeah I've said it. What

does it mean? So what's the intention of the government? When political party

the government? When political party wants to win people's heart over they will try to resonate with the rockyard as close as possible right one of the main topic always will be a main topic

will be house prices being too expensive is unaffordable my children all cannot buy house anymore so what's the solution to that to build cheaper houses

everybody cheaper houses confir everybody would love it I also love it but at a particular time when this brand new government took power, they were

faced with even greater problems. So they have a lot of abandoned projects.

And if you were to really go deep down into the data, right? A lot of abandoned projects are actually government projects. Crazy, right? So fortunately

projects. Crazy, right? So fortunately

we have a housing minister that really took charge and rescued a lot of all these prima prima housing including the one that we have visited Prima in

Brickfields right after waited for so long I think about 6 to 7 years right imagine we getting married hoping for the house to be completed my kid go up

standard one ready room b crazy but at least now it's all completed then at the same time you need to provide more affordable housing to the people how do they do it? The easiest way

unfortunately is we all push this responsibility imposed onto developers because we all think that property developers make a lot of money right

everybody also think like that one property developer what they make a lot of money you imagine you look into their earnings and things like that right nobody talks about the risk at all and this becomes like a default move by the

government by authorities whenever there's complaints by the people for example now we not enough cheap housing, right? Then we need more affordable

right? Then we need more affordable houses. So now developers need to build

houses. So now developers need to build 30% of rumor we based on the number of units provided. So let's say if you were

units provided. So let's say if you were to build 1,000 units, 300 units must be rumor sold at a limited price. There

will be a ceiling price to all this Roma whip at 300,000.

The people yay the developer then the government authority soft we just wait for it. But a lot of people don't know this requirement is

added on to the existing requirement which includes 50% in slang 50% boommy kota then you got ISF infrastructure

improvement funds then when the people continue complaining about road being too narrow too many people developer poor planning okay so then we see

revised regulations and guidelines about roads needs to be wider need to include include bicycle lane, you need to include better trees, handrails,

walkways. So you imagine you got 2.5 m

walkways. So you imagine you got 2.5 m for one lane, 5 m for two lane, plus buffer about 6 m. 6 m plus another 2 m

here, 2 m here. That's like 10 m wide.

10 m you times let's say 50km. How much

area is that? You get what I mean? Then

people again complain, we need more greens. We need more public space. Now

greens. We need more public space. Now

keep flirting. we need more water retention ponds. So when a particular

retention ponds. So when a particular developer wants to launch something all these further will be included into the

plan to me all these are fine all these are fine actually like as a responsible developer I think as a developer we want to build sustainably we want to build

responsibly there'll be a balance between social economics sustainability and economics right so that's the perfect triangle where we need to find

balance but the problem is not many developers can play this game anymore.

And to further safeguard buyers now, they impose a share account under HDA, right? Which is the housing development

right? Which is the housing development act. They will impose a sharing account

act. They will impose a sharing account between the government and the developers. So they can monitor how the

developers. So they can monitor how the money flows for each and every project indirectly. Right? It means you just

indirectly. Right? It means you just need more cash flow in order to start a project. Again, higher entry

project. Again, higher entry requirements for developer. Again, is it sensible? Yes. Because one or two

sensible? Yes. Because one or two terrible players or rotten apples within the bunch actually misuse the fund for project A to start project B and up

project B cannot sell. So affected the progress of project A and things like that. Yes, I absolutely get that. That's

that. Yes, I absolutely get that. That's

why this thing also makes sense. And

four to 5 years later, all the affordable houses are being completed already. Look, congratulations. End up

already. Look, congratulations. End up

unsold. Meaning it's left there. So the

dilemma here is, hey, I thought you guys wanted cheap houses, right? You guys

want what's the affordable range?

300,000, right? And it gets worse with the research from Kazana Research Institute where they're using the median multiple approach where a home should

cost no more than three times a household annual median income. So it

means if I earn 5,000 1 year is 60,000 the price that I should buy is 180,000.

If I earn 10,000 a year I'll be 120,000 the house that is within my budget is 360,000 correct man this kind of thing

and that leads to the pricing of the rum whip or the rum langoku or the rum pinu whatever other schemes right all are based on these but now

but then look at it right what about those that people believe okay there are two scenarios right now you No like tree three they are very happy ones. So

congratulations right that one those are people who really buy this as a home within the location that they prefer and they start building their future from there. Money installment is pretty

there. Money installment is pretty affordable and affordable here also is in relative to the surrounding price because on the previous episode I've

also talked about this phenomenon where an Roma whip built in Bangsa south was auctioned at 370,000.

This indicates the whole school of thought that how these rumor whips affordable homes are heavily subsidized.

For those who don't understand what it means is uh so when the government impose this thing into the requirements when developer wants to seek approval to build their project they impose this

thing in right so a lot of people that oh yeah bro how much only 300,000 how can they lose money stop saying developer lose money okay so usually

developers will have uh different alternatives to choose one is to build the rum whip entirely in a different site meaning I need buy a land and I

build somewhere else, right? So,

whatever required, let's say if I build 1,000 units here, I need to provide 300 units of Roma with I put it there. So,

it's separated out in a different location. Why? Because the cost of land

location. Why? Because the cost of land in another location supposedly to be cheaper than this private land that I'm trying to build here. The other

alternative is to include that 30% of Roma or Roma Slangoku within the project itself. So different authorities impose

itself. So different authorities impose different format of housing and because of them being so heavily subsidized the price of 300,000 doesn't make sense

because the 300,000 for Roma weep in Bangza south in Mong Kiara will stand out so strongly as an investment product

because of how crazy the normal price market is. Let's say in Bangsa per

market is. Let's say in Bangsa per square feet is about 900 per square feet, right? The same 1,000 square ft²

feet, right? The same 1,000 square ft² unit cost 900,000.

Ruma week with 300,000. But when you rent out that is the magic market rent always covers the installment amount for

affordable houses. One because they are

affordable houses. One because they are heavily subsidized. We need to look

heavily subsidized. We need to look beyond just construction cost. What

about land cost? And that leads to the second scenario of buyers. A lot of people buy with the intention of renting them out. This is another whole

them out. This is another whole different discussion whether is it morally right to do so or not. To me,

it's a right and it's a guideline introduced by the government. So, if you can qualify for it, you're entitled for it, take it. If you want to rent it out,

up to you. Don't tell me.

Up to you. You want to make money out of it, up to you. It's your right. For me,

I wouldn't encourage, but to think about it, the criteria to qualify this entire Roma whip thing also is crazy. So,

typically for Roma whips, the maximum household income for a married couple to qualify for a Roma whip is 15,000. For a

single is 10,000. These in this scheme here is treated as people in need of help. You get my point? Okay. So we just

help. You get my point? Okay. So we just recently had a debate about the removal of subsidy for petrols for T20 right these are T20s when we talk about petrol

subsidies but these are poor people when it comes to housing you get my point what is going on and that leads to the third scenario of

buyers people buying rumor we really and they complain they complain about the density why so high density

Why subpar quality for the car park? Why

no facilities and etc. Ah well that being said right get out for a while. So all these no matter what kind

while. So all these no matter what kind of scenarios right congratulations if you have bought one. Okay but then the cost of these will be spread out to the

other products introduced by the developer. Confirm one. Let's say if I

developer. Confirm one. Let's say if I were to build again 1,000 units, 300 will be rumor whips and let's say cost

is 450,000. Let's say cost 450,000 every

is 450,000. Let's say cost 450,000 every house I need to lose 150,000. If I to build 300 units of them means the

developer will be losing 45 million.

Okay, this 45 million you think they will just swallow me. What they do? they

will spread out openly to the remaining 700 units and this also depends on whether is it a township developer or is it a pocket land developer. So if it's pocket land developer this will be the

approach. If it's a master plan

approach. If it's a master plan developer, maybe they don't want to do it too obvious because most of the time they will just calculate the total requirement of affordable house for the

whole township and they will settle once the Caligus meaning I'll just build two blocks or affordable housing all together. then the prices will be evened

together. then the prices will be evened out across 10,000 homes, 20,000 homes in the future. But all are priced in

the future. But all are priced in already, which results in a situation where in order to help those that we think are in need. No, no, no. Those

that the government thinks they are in need, I give them housing, affordable housing at the price of open standard market being revised upwards in price.

If this solves the problem, fabulous.

Right? If this solves the problem, fabulous. Right? We got it sorted out.

fabulous. Right? We got it sorted out.

Unfortunately, it doesn't. Now, we have unsold, overhang, affordable houses.

Yet, in the city, we have property prices that is beyond the affordability of normal Malaysians. So, to me, I can break down into three parts, right? So,

that's the whole entire dilemma that we are in now. We all complain about over supply, property overhang and Malaysia property market cannot make it CMI. But

yet on the other side, people are talking about property prices being too high, rental are being too exorbid to an extent, people are asking for subsidies for rental or they request local

authorities to control the rental rates of the market which is what UK government is doing right now with the renters act and looking at it is backfiring. I think we need to

backfiring. I think we need to understand these complaints comes from very different people and we cannot use

just one solution expecting to solves everybody's need. In my humble opinion,

everybody's need. In my humble opinion, in my humble opinion, people who complain about property market cannot make it over supply, over supply, over supply, right? Most likely these are the

supply, right? Most likely these are the people who've bought during the past cycle at the peak. So now they are losing money. Okay. So they are hoping

losing money. Okay. So they are hoping for government to impose restrictions on new launches so they can recover on

their investments because who in the right mind would want to correct an over supply when you couldn't afford a house.

Just imagine if the supply and demand is actually corrected. Let's say now

actually corrected. Let's say now government stops all new launches. Stops

all new launches, right? what's going to happen to the market. The prices for the new properties will explode, right?

Because there's no more new launch. The

only way to buy property or to move into one is in the existing one. So, so

that's the last thing that people who complains about property prices too expensive and people who wants to buy half cannot afford to one month, right?

You get what I mean? Also, there's a very very weird thing that I've been questioning but nobody picked it up.

Maybe too deep or too nerdy as a topic.

How come affordable housing are built at 300,000 with meaning upper right

upper okay at 300,000 but when we see projects that's done up by reputable developers right projects with superb facilities with securityities proper

landscape proper pools proper car park space at 320 to 350,000 I don't get it how harm. Private developers can do it

how harm. Private developers can do it but government projects cannot and technically for the government social housing right they should not have any

profit right for the private housing that is of within that price range right it comes with profit some more I don't understand why is this happening and

throughout all the talks within the events that I've done uh in the future the only two models that will make sense from development earn point of view will

be property that is either very high in density or very high in property price.

These two format of housing will only make sense moving forward because in the center right neither here nor there you are not targeting anybody because the middle class is actually shrinking

terribly in order to push down property price. Unfortunately the only two ways

price. Unfortunately the only two ways the only two ways is to shrink the size of the unit. Duh. Right. And to build more units. No other way. Okay.

more units. No other way. Okay.

Seriously, no other way. Really? If you

look into the cost structure for any development, there's land, there's construction, there's development cost.

And development cost here includes all the authority fee, licensing, compliance and things like that. So it's about 40 30 then you plus a bit profit. So how

much they can squeeze left will be the profit for the developer. Usually that's

the case. And and then throughout the channel we have visited enough ultra high density projects to know that high density is not the end of the world.

It's a solution actually to have more people position in the location that they want because ultimately in again in my very humble point of view it's not

that people want cheap houses. No no no no no no. People want affordable houses in the location that they want. That's

the point. So then how do we do that? So

uh we have seen the government trying their best to solve this by one is the URRA the urban renewal act to take over very very old buildings but that took a

hit a lot of people disagree to that when I leave to him I'm in no position I'm not taking any stand I chuck up okay the second thing is under highlight

right now is overqualified people living in low cost housing or social housing which leads to them driving very very fancy cars to an extent they choke the

car parks. They built illegal huts for

car parks. They built illegal huts for their cars and they built they extend their apartment and this apartment illegally extend their

apartment meaning you got you can extend only the exterior. It's

dangerous, it's irresponsible and technically you are overqualified for the house but they are never going to let it go. Why? It's convenient. Look

into all the location of these houses strategically within the city center. So

now there's no proposal or plan to constantly check on the existing status of these occupants whether have they progress in life or they still remain

status quo because I do think this opportunity let me go down we need to pay back to give the next generation if not we are just robbing from the future

it's time that this opportunity is given to a qualified second generation even a lot of developers said this, they are

okay if all these subsidies or all these compliant cost is targeted to those in need. Accurately where a proposal is to

need. Accurately where a proposal is to continue with this transit home concept, they built their own buildings and they be the landlord of those renting out to

people. I think there's existing

people. I think there's existing programs like this already. they should

do more of it because ultimately they retain ownership of the building and the land. In order for anybody who wants to

land. In order for anybody who wants to have a place within the city at affordable prices, you apply to the government and you can leave there.

Annually, you need a revision. You need

to submit your income statement again and again to reapply. So that comes with the extension criteria of the teny which makes a lot of sense and I don't understand why they aren't doing it.

Maybe because I think the management part is actually very taxing. It's very

mafan. A lot of work actually a lot a lot of work because logically speaking not many countries are providing social housing like Malaysia already because it

loses a lot of money tax money a lot then you let opportunities buy it and rent it out to make money right that's the big check part another idea by winging also during the interview they

are supposed to set up this fund where occupants of affordable houses get to pay backs from the earnings after they sell the house into the fund. It means

let's say if you to buy at 300,000 when 10 years later moratorine lifted you can sell at 600,000 you earn about 300,000 50% or 60% of that needs to be given

back into the fund so you get to enjoy whatever that's left over which I think it's very very fair because you already enjoy the house at a subsidized price you want to sell for profit can you need

to share the profit which ties to the lease extension for land in Slango let's say if you left 40 years in order to extend to 99 years again it will cost about few hund,000 which uncle auntie

who stays around PJ can afford this kind of amount in cash right so there's an option where you can pay 1,000 ringit you extend to 99 years again and if you were to sell if you were to sell let's

say the property price increase by 500,000 because of the new lease you need to share 50% with the state government which I think it's very reasonable

the lease will just expire because Abayabun and based on what I'm seeing right now from the market like our ultra luxury homes are selling like hot cakes

and they are making even more money when they hand over. There's one next to a golf course within uh Damasara PJ site

right they bought 1.8 4 years ago now subsal at 2.6 to 2.8 and it's hot selling rental is about 8 to 12,000 a

month. So then suddenly by looking at

month. So then suddenly by looking at this right they soon will be a category of home when you sort out all the categories right does this project come

with government housing or not a project without makes more sense if I got budget so if I got a lot of budget money is not an issue I will prefer a project that

comes without affordable houses then there will be the hybrid one where they are open market ones with affordable projects within then there's a pure your building that is all affordable houses.

So not later but actually now we are seeing a lot of people who write in right saying that hey this project got affordable house I pay a little bit more I will take the one without affordable house. So from a investment point of

house. So from a investment point of view, which one should I go for now, right? Very obvious, right? We all

right? Very obvious, right? We all

aspire to go to the extreme end, which I think is also weird again with the dilemma, right? So I'm in very dilemma

dilemma, right? So I'm in very dilemma mode today. We all think that the buyers

mode today. We all think that the buyers of all these affordable homes, right, are very poor people who cannot make ends meet. No, the criteria is 10,000

ends meet. No, the criteria is 10,000 ringgit a month and 15,000 for couples.

They're way above the median. So I don't know. I think we should just focus on

know. I think we should just focus on one particular group, that one particular group which is the hardcore poor and we start from there. Stop

trying to tell hardcore poors to buy a house. Seriously, like now you got no

house. Seriously, like now you got no money. Government offer guarantor

money. Government offer guarantor program. If you cannot afford the price,

program. If you cannot afford the price, we lower down the price for you. Instead

continue with the transit home system where you have government housing at very affordable rents available within city center. So they are close to their

city center. So they are close to their workplace at least they can build up from there. When they overqualify

from there. When they overqualify meaning your salary is more than 6,000 a month already. I think you can move out

month already. I think you can move out to a normal open market one already. You

can rent first if you want to buy then then only continue buying. The challenge

to that will be space and available resources to do that. So this one then I think you can impose on developers again but with a model that works. I bet all

developers with sensible mind will agree to this one. If not they are contin just pouring money down the drain without solving anything because by right with

all these affordable houses with all the subsidies with all the additional tax or whatsoever right people won't be complaining about property price being too expensive really because it's almost

impossible to go up but in reality it's not. Second is to look into existing

not. Second is to look into existing government housing and filter through the users. This sounds like but this one

the users. This sounds like but this one a bit hard like if you are the existing government right if you chase people out from homes and this becomes a very very sensitive issue

but technically hey bro you got a type R C you want to stay in the 60,000 house man you got that altis you got that Toyota vio GR sticker but the GR don't

know real or not but you get my point at least run through the numbers but honestly speaking if you look into numbers like tens of thousands of affordable houses overhang. We also got

to look at it with the amount of houses being sold, right? Because in order again in order to push down the property price, we need to build a lot on one

piece of land and not all so one, right?

Yeah. So this is the over supply of affordable house dilemma in Malaysia.

In conclusion, I can see property prices in prime location keeps going up. We are

hitting record highs for addresses in Mongiara, in Desapak City, in Bukit Jal, in Iscanda, in Pinang. Even with all

these new requirements, new affordable house compliance all keep being slapped onto the developer, right? The property

price keep going up, keep going up, keep going up and people still prefer this over this side of things. And who

suffers is those in between. Because if

your property is about half a million, right? The amount of competition that

right? The amount of competition that you get is way more. So you are diluting the middle class property and the lower price property. So then those stuck in

price property. So then those stuck in between will either aspire to be on this side work really hard to achieve so you can pay rental of 4,000 to 6,000 a month

or just swirl downwards unfortunately.

Yeah. So that's my rent for today. Uh I

don't know whether I will publish this also or not. This supposedingly is my very wholesome take on the entire housing market in Malaysia. There's a

lot of loopholes here and there. People

who knows the game still make a lot of money like our community right we are still making tons of money leveraging on the opportunities available then bull run is also taking place really we look

into transactions in Pinang in iskaputri they are taking the lead in K we are feeling it already especially in properties around the public transportation system all those are

appreciating especially after the energy crisis took place and things will get worse if the subsidy keeps taken out which I think they should, right?

Because now we Malaysians are living in a very heavily subsidized world.

Chicken eggs oil energy water all being subsidized. And now the government

being subsidized. And now the government even want to introduce Hagarama unto cement hoping that will control the price a

little bit. But that's a that's a very

little bit. But that's a that's a very small fraction out of 30% of the cost of a building only. So you'll end up about 3 to 5% go around not it's not going to

be very very impactful but it helps definitely it helps but this will be my observation this will be my conclusion it's harder and harder to be a property developer today because margins are

being squeezed left right center no more chance really only old school people ogs of the market or land owners with tons

of land only can play the game in the future so my greatest fear Right now my greatest fear is the monopoly of market by only selected players. You're

technically right again how to make property price lower is to encourage more supply but then at one hand we are complaining about over supply but we all forget that the main

characteristic for property or real estate is it's finite damsara land duja you cannot build more you cannot manufacture more land to be called

damsara you can change address technically damsara south damsara north or you want subanga you want to extend greater sububang even greater sub

greater greater sububang or greater greater clang valley then you can play with that but eventually no more land really want and I guess that's all for today thank you very much for listening

to this rant uh this is a genuine observation not really suggestion or whatever just observation of the market from an enthusiast documented the entire

industry for the past 10 years really so kurang feel right and for those who still have any questions regarding real estate state, do just email me at t a n

i h e r n t a n i h e r ngmail.com or you can just DM me on Instagram ih e r.

I'll do my best to reply or see you guys on the next one. Ciao.