BNM: Affordable housing shortage may deepen property market imbalances

By Bernama | March 24, 2016 2:51 PM

KUALA LUMPUR (March 24): The continuous undersupply of affordable houses, in contradiction with oversupply of office and retail spaces in several major cities and towns, may lead to deeper imbalances in the property market, with negative spillovers to other parts of the economy.

Bank Negara Malaysia (BNM) said a comprehensive and carefully-designed national planning policy is needed for the property market to help support the government's aim of delivering more housing, whilst managing the oversupply of commercial properties.

"The conversion and repurposing of under-utilised surplus commercial space should be a part of that overall strategy, with the cost being borne by property owners rather than taxpayers.

"Ensuring that the low- and middle-income households have access to quality affordable housing involves not only a commitment from the government, but also the support of the private sector," BNM said in its 2015 Annual Report released here yesterday. 

The central bank also sees a need for the consolidation of multiple providers of affordable housing across the state and national levels and an equal focus on the rental market. 

In addition, it said macroprudential and fiscal measures that are in place, such as the loan-to-value (LTV) measures, Responsible Lending Guidelines, higher real property gains taxes (RPGT) and the prohibition of Developer Interest-Bearing Scheme (DIBS), remain instrumental towards maintaining the long-term sustainability of the property market and mitigating potential risks to financial stability.

BNM said an estimated 202,571 new houses are required annually between 2016 and 2020 to match the estimated growth in households during this period, about 2.5 times the number of houses built annually in the previous five years.

"The shrinking size of households, combined with continued growth in incomes and population, as well as rapid urbanisation, are expected to remain important drivers of the overall demand for houses, especially in the major urban areas," it said. 

For the office and retail space market, BNM said there is a risk of oversupply, particularly in the major cities, with a report by Jones Lang Wootton foreseeing an average of 4.9 million square feet of new office space being added to the market each year over the next three years.

This, it said, is significantly higher than the historical average of 2.8 million square feet of new office space added to the market annually between 2001 and 2015.

For the retail segment, BNM said there are signs of oversupply, particularly in Penang, Johor and the Klang Valley, despite the vacancy rates in some of these areas improving in recent years.

"By 2018, prime retail space per capita in the Klang Valley and Johor Bahru is projected to increase by about 43% and 119% respectively from their already relatively high levels.

"The emergence of more new shopping malls is likely to increase competition for tenants, resulting in higher vacancy rates, lower rentals and increased risk of dilapidation," it added.