New rules needed to balance housing supply, affordability

KUALA LUMPUR - The government is proposing stricter policies for developers, requiring them to sell at least 15 per cent of completed residential units before approving new construction projects to reduce housing overhang.
Senior lecturer at the Faculty of Economics and Muamalat, Universiti Sains Islam Malaysia, Dr Muhammad Iqmal Hisham Kamaruddin, said this measure aims to tackle the issue of unsold houses priced between RM300,000 and RM500,000 in the country while also preventing oversupply in the market.
"To balance excessive supply, the government can enforce stricter regulations, such as making approvals for new residential development projects subject to the existing property overhang in a given area.
"For example, if the number of unsold residential units exceeds 15 per cent in a particular area, the government should tighten approvals by not allowing new residential construction until the number of unsold units decreases,' he told Bernama.
Houses priced between RM300,000 and RM500,000 have been recorded as the most common unsold properties in the country during the third quarter of 2024.
According to the National Property Information Centre (NAPIC), these unsold units represent 31.9 per cent of the property market segment, comprising 7,003 units valued at RM2.78 billion in 2024.
Muhammad Iqmal added that the government should also ensure that property prices in any area correspond to the affordability and average income of the local population.
As an example, he said if the average household income in a state allows for purchasing property worth RM500,000, then houses should be offered at prices not exceeding RM500,000.
He explained that the imbalance between household income and housing prices is the main reason for the high number of unsold houses priced between RM300,000 and RM500,000 in Malaysia.
"The primary cause is that household income does not align with the housing price range. The median household income in Malaysia was around RM6,338 in 2023, while the latest Malaysian House Price Index (MHPI) indicates an average price of RM483,879.
"In this situation, most houses priced between RM300,000 and RM500,000 require a minimum monthly commitment of RM1,500 to RM2,500, which means the household needs an income of at least RM4,000 per month. This represents over 60 per cent of the individual's monthly income,' he said.
Additionally, Muhammad Iqmal pointed out that the ability to provide a deposit of at least 10 per cent of the property value is another factor.
Meanwhile, he said the trend in average house prices, as shown by the MHPI, indicates an increase in property prices in Malaysia up to 2024 despite many units remaining unsold.
"For example, the average house price in Malaysia was RM465,604 in 2023 and increased to RM483,879 in 2024.
"In 2023, the average price of a single-storey terrace house was RM238,600, rising to RM251,500 in 2024, while for two-storey terrace houses, the average price increased from RM442,549 to RM466,506 during the same period,' he added.
He noted that this contradicts economic theory, where an oversupply would typically lead to lower prices.
"In this case, housing prices have not only failed to decrease but have continued to rise over time. The assumption that unsold houses older than five to ten years will drop in price is incorrect.
"Therefore, existing homes need to be discounted and offered rebates to remain competitive with new housing developments,' he explained.
Muhammad Iqmal added that an oversupply of unsold houses could also impact the macroeconomy, as developers who fail to sell enough units risk defaulting on loans, which could affect the financial and banking sectors. - BERNAMA

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