StarProperty's roundtable deep-dive into Budget 2024
By Yanika Liew
Eyes are on the state as the publication of Budget 2024 approaches, bringing with it far-reaching implications for all sectors of the economy. Every year, property developers submit their budget wishlist, covering industry concerns, challenges and future-forward recommendations.
The StarProperty Budget 2024 Round Table gathered 11 industry leaders to the forefront of the discussion in identifying the key pain points across the property sector, utilising a survey before presenting the findings to the roundtable committee. The highlighted issues are housing loans, housing policy, government initiatives, labour issues and incentives for green initiatives.
FIABCI World Council of Developers and Investors president Datuk Seri Koe Peng Kang acted as the moderator for the roundtable, with extensive experience in corporate governance at an international level. The roundtable discussion included;
- Gamuda Land chief operating officer Wong Siew Lee
- Glomac Berhad chief operating officer Tuan Haji Zulkifly Bin Garib
- Matrix Concepts Holdings group managing director Ho Kong Soon
- OSK Property chief operating officer Seth Lim Sow Wu
- Real Estate Housing Development Association Malaysia (Rehda) president Datuk NK Tong
- Scientex executive director Beh Chun Chong
- Sendayan Properties Sdn Bhd director Louis Ting
- Sabah Housing And Real Estate Developers Association (Shareda) president Datuk Chua Soon Ping
- Sime Darby Property Bhd group managing director Datuk Azmir Merican
- Sunway Property executive director Chong Sau Min
As reported by the Department of Statistics, the property development sector made up 3.5% of the country’s Gross Domestic Product (GDP) in 2022, encompassing an RM170.8bil gross output, 1.19mil employees and RM33.4bil paid in wages and salary, giving it a key role in nation-building.
However, as the years have gone by, house prices have increased dramatically as wages stagnate. The national affordability line falls below RM300,000, however, 76% of Malaysian households earn less than RM8,333 and only 36% of available units are priced below RM300,000.
Housing has long since breached the threshold of unaffordable, alongside issues which plague the property sector, such as infrastructure development and policy misalignment.
The private and public sectors have to work together to address issues at a macro level to ensure a sustainable industry, Koe said.
As an example, he pointed to the realities of his own family. His two children had just graduated from university, and when he saw their salaries, he knew that if they wanted a home, he would have to subsidise the cost for them.
“The points put up here are what we’ve been hearing from our members,” Tong confirmed.
As president of Rehda, an organisation which acts as a bridge between the private and public sectors of the property industry, Tong is a veteran in the detailing of these very issues. Utilising on-the-ground data, he provided keen insight into the operation of public-private partnerships and the necessity of future-forward solutions as the industry develops.
Inaccessibility of loans
The monthly mean household income increased from RM7,901 in 2019 to RM8,479 in 2023, however at a lesser growth rate of 2.4% as compared to 4.2% in 2019. Currently, only stable income from conventional methods like salary, self-employed, rental, investments and interests are taken into consideration for loan applications.
However, with the rise in second jobs, part-time and online work, more Malaysians are earning wages that are not being reported in conventional methods.
This phenomenon is expected to spread as companies offering gig jobs are making it easy to join and are always on recruitment, while at the same time, wages in the formal economy stagnate.
These Malaysians are classified as people without a steady income or low income, due to a reporting mechanism that has not been updated to reflect the current workforce. Leading to increased bank loan rejections. Developers call on Bank Negara to accommodate the changing economy by adjusting the methods of risk profiling when considering these housing loans.
These come with recommendations to the state government for an increase in step-up financing initiatives and an improvement in the methods of potential valuation in property development.
During the construction period, home owners will only be paying interest. Their debt-to-service ratio (DSR) is in actuality, lower during the period. This should be taken into account when ascertaining their payback capacity, rather than basing the DSR solely on the repayment of the entire amount.
“When I was young, my wife and I had the same good, reasonable earning but we could not afford some property that was actually suitable for my family, and we think that we in future, we can afford it, but we were faced with a wall, and we missed our opportunity and it will never come back,” Koe said.
The step-up instalment initiatives would progress as the wealth of the buyer progresses, allowing buyers to take out loans based on their potential.
Another key issue with the property sector is the inconsistent affordable housing policy across different states. The cross-subsidisation policies, the low-cost building requirements and the bumiputera quota, all of which aim to increase home ownership and affordability, instead bring confusion to housing planners and property developers.
“Every state is very confusing… Johor has Johor, Selangor, and then Penang has Penang.” Beh said.
When it comes to affordable housing programmes and initiatives, developers point to RSKU, Rumahwip, RMMJ, PR1MA, SPNB, Residensi Wilayah and more.
“Consistently throughout the state… among us developers, we have seen people running from Selangor to KL, KL back to Selangor, and then, now trying to get out of Klang Valley,” Lim agreed, referring to this discrepancy between state policies and the ensuing developer reaction.
However, developers are calling for an evaluation of the efficacy of the different state policies and a rewrite to ensure a standard policy throughout the nation. With a more efficient housing policy, the state would also be able to match supply and demand.
“We need a collective effort, to get a more fantastic, more sustainable property development,” Ho said.
In line with the agenda of housing for all, developers call for the state to create a home ownership grant policy for the low-income population, allowing the public to retrieve up to a certain percentage of the house price from the grant to buy homes from the open market.
There are alternative solutions brought forth by differing members of the roundtable, ranging from allowing the federal government to take custody of the land allocated for affordable housing development, to creating a centralised agency to hold the land in the form of an independent trust.
“How do we mitigate all the risk and make it all sustainable and what are the root causes of the problems we have to look at? How can we make the household income better, improve the household income and the cost of delivery to be lower, these are the areas we really have to look into,” Ting said.
“Because purely looking at the subject matter itself, we are not heading anywhere, because we are not addressing the root cost of the problems,” he pointed out.
The Malaysian Institute Of Economic Research (MIER) Q2 2023 outlook report describes concerns among consumers for the current and future finances, as well as business conditions at 82.4 for the current quarter, the lowest since before the Covid-19 pandemic.
While inflation is slowly reducing across the board, it remains higher on food and non-alcoholic drinks at 5.9%, as well as restaurants and hotels at 6.7%. The reality of inflation on necessities is felt across the Malaysian public.
With these financial constraints and economic challenges in mind, the government introduced the i-Miliki initiative to replace the Home Ownership Campaign. The programme would allow Malaysians an easier time procuring home ownership, however, is set to expire in December 2023.
Developers recommend an extension of the i-Miliki initiative for three more years, subject to the improvement of the economy. Future iterations of the initiative would also account for inflation.
“We do what we can to help, especially social housing,” Koe said.
Having participated in low-cost housing development prior to his retirement, he noted the sense of pride when it came to creating homes for the less fortunate.
Sustainable labour needs
The importance of workers was further compounded by the Covid-19 pandemic when the economy saw a shortage of both blue-collar and professional workers as the borders closed. During the roundtable discussion, developers pointed out that there was a stigma attached to construction work.
Its reputation as a low-status and low-income career discouraged Malaysians from participating, leading to an increase in foreign labour demand.
The current restrictions on foreign workers continue to inhibit their potential as productive employees, and the industry would not be able to keep up with progressive job demands.
Developers call for a more holistic and sustainable policy on labour, increasing foreign workers’ employment period, providing incentives for the upskilling and training of these workers, as well as encouraging Malaysians to take up employment through an increase in wages and proper employment benefits.
Through these policies, the state could encourage the creation of a strong Malaysian construction industry.
As the emphasis on environmental sustainability continues to stand at the forefront of the property sector, more and more highrise, townships and landed homes are developed with green features in mind.
Developers are increasingly focused on environmental, sustainable and governance (ESG) programmes, from green building certifications such as GreenRE to renewable energy infrastructure.
By providing incentives for green initiatives, the federal government encourages widespread adoption, cementing its commitment to environmental sustainability to the local and international community.
Developers recommend allocations towards providing incentives for green certification, green-certified building materials, renewable energy infrastructure and more. From construction to completion, these would include sustainable financing, offering packages to purchasers of green developments, as well as to developers adopting sustainable building practices.
Through ESG-centred policies, the property sector will be better equipped to develop a skilful and structured workforce ready for the future.
Sabah and Sarawak remain states with significant differences in political, economic and social dynamics. The challenges of the East Malaysian property sector can be felt strongly across all industries, from the transportation infrastructure, lack of employment opportunities and mismatched policy implemented to suit the population of Peninsula Malaysia.
“The policy of not one-size-fits-all, we can feel very strongly in the Sarawak region,” Ting said.
He pointed out that before these policies could be implemented, the federal government needed to understand the needs of the population.
“Regionally like Sarawak… the spending habit and everything is very different from the urban dweller,” he added.
East Malaysia representatives recommended a special fund to provide developers and buyers with the means to address its affordable housing crisis. An allocation for the improvement of transportation and basic infrastructure throughout the region would ensure the growth of livelihood and economic market.
Developers reported the necessity of a reassessment of the current housing regulations to create high-impact policies, encouraging East Malaysia’s economic growth through the facilitation of critical manufacturing industries.
Through these assessments, veteran voices of the industry hope to chart a course for sustainable and inclusive growth, with the participation of all stakeholders in the role of nation-building.