making housing affordable

134 Pages·2015·1.38 MB·English

S
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I
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makIng houSIng
affordablE
KHAZANAH RESEARCH INSTITUTE 1
2 KHAZANAH RESEARCH INSTITUTE
making housing
affordable
©2015 Khazanah Research Institute
August 2015
Perpustakaan Negara Malaysia Cataloguing-in-Publication Data
Making housing affordable. – Kuala Lumpur, Malaysia:
Khazanah Research Institute
1. Public policy – Malaysia. 2. National Business Systems for Housing – Malaysia.
3. Affordable housing – Malaysia. 4. Institutional arrangements.
5. Economics of governance. 6. Construction procurement route.
I. Title: Making housing affordable. II. Khazanah Research Institute.
ISBN 978-967-12929-2-1
This work is available under the Creative Commons Attribution 3.0 Unported license
(CC BY3.0) http://creativecommons.org/licenses/by/3.0/. Under the Creative Commons
Attribution license, you are free to copy, distribute, transmit, and adapt this work,
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Attribution – Please cite the work as follows: Khazanah Research Institute. 2015.
Making Housing Affordable. Kuala Lumpur: Khazanah Research Institute. License:
Creative Commons Attribution CC BY 3.0.
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disclaimer along with the attribution: This translation was not created by Khazanah
Research Institute and should not be considered an official Khazanah Research
Institute translation. Khazanah Research Institute shall not be liable for any content
or error in this translation.
Published August 2015
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“You cannot write with the view to impact or to response. That way you distort the
latter and corrode the integrity of the writing itself.
You cannot anticipate the context of the motives of readers in unconstrained futures.
So all you can do is write what you should, whatever that means.
A very different sort of obligation.”
Tony Judt (as cited in Homans, 2015)
KHAZANAH RESEARCH INSTITUTE III
This report was prepared by the researchers of Khazanah Research Institute,
Dr. Suraya Ismail, Intan Nadia Jalil and Puteri Marjan Megat Muzafar.
It was approved by the editorial committee namely, Dato’ Charon Mokhzani,
Dr. Muhammed Abdul Khalid, and Wan Khatina Wan Mohd Nawawi.
It was authorised for approval by Dato’ Charon Mokhzani.
ACKNOWLEDGEMENTS
We would like to extend our deepest gratitude to the following without whom
this report would not have been possible: Sr. Mazli Mohamed Ayob, Operon Asset
Advisory Sdn Bhd; Sr. Hj. Jailani Jasmani, JUB Central Sdn Bhd; Professor Emeritus
Ezrin Arbi and Associate Professor Dr. Sr. Wan Nor Azriyati Wan Abdul Aziz,
University of Malaya; Sr Khuzaimah Abdullah, Sr Aina Edayu Ahmad and Amy anak
Pirah, National Property Information Center; Terence Wong, CIMB Group Berhad;
Richard Blakeway and Alan Benson, Greater London Authority; Hj Zainuddin
Ahamad, Town and Country Planning Department Peninsular Malaysia; Siti Hajar Md
Saleh, Syarikat Perumahan Nasional Berhad; Datuk FD Iskandar, Aslinda Mohd Noor
and Karen Yeong, REHDA; Ar Kamrudzaman Mat Rejab, PRIMA, Datuk Seri Michael
Yam, InvestKL; Tn Hj Azahari Mohd Raslan and Tan Keng Chuan, Department of
Statistics; Professor Shlomo Angel and Nicolás Galarza, New York University (NYU);
Christopher Herbert, Joint Center for Housing Studies, Harvard University; Hugh
Pavletich, Annual Demographia International Housing Affordability Survey; Tan Sri
Dato’ Dr. Lin See-Yan, IGB Reit; Chang Kim Loong, House Buyers Association; Dr.
Mohd Yusof Saari, Institute of Agricultural and Food Policy Studies; Mohd. Misbah
Rembun and Mohd. Rafizan Idris, Construction Industry Development Board
(CIDB); Brendan De Frank Gamin, Perbadanan Pembangunan Perumahan (Sarawak);
Fauziah Fakurudin, Perbadanan Setiausaha Kerajaan Pulau Pinang, Januario Jesus
Atencio, 8990 Holdings and to the 12 firms (property development, construction and
architectural firms) that participated in the five Malaysian case studies.
Special thanks are due to Rosli Haron, Assistant Town Planning Officer from the
Town and Country Planning Department, Penang for assisting us in constructing the
maps used in the report.
We are particularly grateful for the contributions from our colleagues at the Khazanah
Research Institute: Yap Gin Bee, Theebalakshmi Kunasekaran and Adibah Abdulhadi,
and not forgetting our hard-working interns: Nicholas Khaw Hock-Lu; Siti Hajar
Bakri@Hashim; Muhammad Nazhan Kamaruzuki and Sivananthan Ramasamy.
In writing this book, we have benefitted tremendously from the contribution of the
people mentioned above. However, any fault lies entirely with the authors.
IV KHAZANAH RESEARCH INSTITUTE
AUTHORS
Dr. Suraya ISmaIl is a Director of Research in Khazanah
Research Institute. Before joining the Institute, she was in Think
City (a city-making initiative of Khazanah Nasional Berhad),
and had previously taught at the University of Malaya. Her
research interests include theories of the firm, the economics of
governance and the history of economic growth. Suraya was
educated at the universities of Malaya, Reading and UCL. She
holds a PhD in Institutional Economics and Governance.
Dr. Suraya Ismail
Director of research
Intan naDIa JalIl is a Deputy Director of Research at
the Khazanah Research Institute. She was previously the World
Bank’s Country Economist for Malaysia. Prior to that, she was
an economist with Khazanah Nasional Berhad’s Research and
Investment Strategy (KRIS) division. Her research interests cover
the interactions between public policy, economic development,
urbanisation dynamics and social inclusion. Nadia holds an
MSc in Regional and Urban Planning Studies from the London
School of Economics and Political Science and graduated from
Intan nadia Jalil
the University of Cambridge, United Kingdom with a BA in
Deputy Director of research
Economics.
PuterI marJan megat muzafar is a Research
Assistant at the Khazanah Research Institute. Her fields of
interest are in the relationship between economic growth and
social development with a special interest in educational issues.
Puteri Marjan was a Yayasan Khazanah scholar. She holds a
first class degree in Economics from the Multimedia University.
Puteri marjan
megat muzafar
research assistant
KHAZANAH RESEARCH INSTITUTE V
Our website (www.KRInstitute.org) has interactive versions of all the charts
in this report, where the underlying data can also be downloaded. If you are
reading this on the PDF version, the charts link directly to our website.
CONTENTS
ABBReVIAtIOnS IX
SECTION 4
executIVe SummARy XI
IntRODuctIOn 1 POLICY RECOMMENDATIONS 74
Chapter 9: Key Findings and
SECTION 1 Policy Recommendations 75
Develop Measures to Improve the
THE STATE OF HOUSING 4
Efficacy of the Construction
Chapter 1: The Malaysian Industry’s Delivery System to
Housing Market 5 Supply Housing at Affordable Prices 75
Chapter 2: How Affordable is Develop Measures to Reduce
Pressures Leading to Rapid
the Malaysian Housing Market? 11
House Price Escalation 78
Develop Measures to Plan for
SECTION 2 a Steady Supply of Housing at
Affordable Prices 79
HOUSING DEMAND, SUPPLY,
AND INTERVENTIONS 27
CONCLUDING REMARKS 82
Chapter 3: Housing Demand,
Supply, and Prices 28
Chapter 4: Housing Factors
APPENDICES
in Malaysia 30
Formula of Growth Rate
Chapter 5: House Prices
Calculation 83
and Speculators 42
Affordable Housing Schemes 84
Speculation, Herding and
SECTION 3 Market Inefficiency 86
Methodology for Case Studies 91
THE STATE OF HOUSE-
Institutional Economics and the
BUILDING IN MALAYSIA 48
Economics of Governance 96
Chapter 6: National Procurement
Details of Procurement Routes
System for Housing 49
According to Functional Form 100
Chapter 7: Case Studies 56
11th Malaysia Plan Measures
Chapter 8: The New Way – Related to Affordable Housing 103
A New Institutional Structure for
a New Method of Production 68
SOURCES AND REFERENCES 108
VI KHAZANAH RESEARCH INSTITUTE
FIGURES
Figure 1: Number of property Figure 13: Number of residential
transactions by type of properties properties launched, by transacted
(units), 2002-2014 7 price and house type –
Figure 2: Value of property ‘moderately unaffordable’ and
transactions by type of properties ‘affordable’ markets 22
(RM billion), 2002-2014 8 Figure 14: Number of launched
Figure 3: Number and value of residential units by price range,
residential transactions, 2002-2014 8 2004-2014 24
Figure 4: Malaysia’s house price Figure 15: Composition of
index, 2000-2014 9 residential units launched by
price range, 2004-2014 24
Figure 5: Breakdown of house
prices by state, 2014 10 Figure 16: Relatively inelastic
housing supply meeting relatively
Figure 6: Growth in household incomes
elastic demand 29
and house prices, 1997-2014 11
Figure 17: Malaysian population
Figure 7: Percentage distribution
size (‘000), 1970-2040 30
of households for each income
category in Malaysia (%), 2014 15 Figure 18: Number of households
and household size in Malaysia,
Figure 8: Distribution of house
1970-2020 30
prices, when the median multiple
is three times (units) 15 Figure 19: Population density
according to mukims in Greater
Figure 9: Simulations for median
Kuala Lumpur, 2010 31
multiples of two, three, four, five
and eight times (units) 16 Figure 20: Urbanisation level by
state (%), 2010 34
Figure 10: Housing affordability
relative to median household Figure 21: Percentage of monthly
income (RM), 2002-2014 17 expenditure on goods & services
by expenditure category (RM), 2010 35
Figure 11: Number of residential
properties launched, by transacted Figure 22: House prices and
price and house type – ‘severely construction costs according to
unaffordable’ markets 21 states, 2008-2014 38
Figure 12: Number of residential Figure 23: Public affordable housing
properties launched, by transacted schemes in Malaysia 40
price and house type – ‘seriously
unaffordable’ market 21
KHAZANAH RESEARCH INSTITUTE VII
FIGURES TABLES
Figure 24: Theory of housing prices 42 Table 1: Home ownership rates
Figure 25: The industry value chain 52 for selected countries, 2010 5
Figure 26: Construction sector Table 2: Comparison between DoS’s
growth and Malaysian economic housing units and NAPIC’s existing
trend, 1988-2014 55 housing stock, 2010 6
Figure 27: The industry value chain Table 3: Percentage of home
– application to the five case studies ownership in Malaysia, 2010 6
in Malaysia 59 Table 4: Demographia housing
Figure 28: The functional form affordability categories 13
and the selected governance
Table 5: Comparison of housing
structure of the five case reports 61
affordability based on annual
Figure 29: The DECA Home household median income and
Residences developed by median all-house price across
8990 Holdings 62 states in Malaysia, 2014 19
Figure 30: Examples of the Table 6: Range of down-market
Company’s housing units 64 penetration ratios for selected
Figure 31: The industry value chain: states, 2014 23
case study in the Philippines 67 Table 7: Housing demand and
Figure 32: The functional form and supply interventions in Malaysia 39
the selected governance structure of Table 8: Revised RPGT rates 43
the five case reports and the
Table 9: Brief profiles of companies
suggested new governance structure 72
in the Malaysian case studies 57
Figure 33: The functional form and
Table 10: Monthly gross income
the suggested new governance
breakdown of the Company’s
structure 76
home-buyers 63
Figure 34: Planning and
Table 11: Comparison between
implementation of a National
8990 Holdings and Malaysian
Housing Survey 80
property developers 68
BOX ARTICLES
Box 1: Indicators for housing affordability 12
Box 2: BNM measures to reduce the burden of households’ housing debt 36
Box 3: Measures to curb house price speculation – examples from
other countries 44
Box 4: Fragmentation and the social organisation of construction projects –
the case of traditional general contracting 49
Box 5: DECA Homes Pre-cast Technology 64
Box 6: Key Findings from Section 3 75
Box 7: Key Findings from Section 2 78
Box 8: Key findings from Section 2 and 3 79
VIII KHAZANAH RESEARCH INSTITUTE