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Housing is the main agenda for every country in the world. This is because housing is
not just a physical structure that provides shelter to its inhabitants but is also related to
The importance of housing to the national economy can be measured in the form of
contribution to the Gross National Product (GNP) in terms of value of investment as well
percent of GNP. Investment in housing will make changes to GNP and the changes will
involve changes in the non-housing sector. Therefore investment in housing will double
the investment in other sectors and thus stimulate the economy of a country. Based on
the importance of housing in the economy and the development of a country, housing-
related issues are still the subject of ongoing discussions for academics as well as
policymakers policies.
HOUSING MARKET
The housing market is basically subject to market mechanisms as well as other goods
and services where house ownership plays a major role. The balance will be achieved
in the event of interaction between demand and supply at a certain price. However, the
balance in the housing market is difficult to achieve as housing demand and supply is
not only affected by price alone but also by other factors such as economic, social,
the demand and supply of housing. The mechanisms linking supply and demand are the
exchange processes that take place in the market namely home stocks to households.
The process of conversion takes place due to factors of economic growth, exchange of
population demographics.
From the economic aspect, housing is not elastic in the short term. Housing supply can
not be produced within a short period of time despite high demand. The process of
housing development takes time to implement and generally can not expect what is
going to happen in the future. In this case developers can not wait until there is a real
demand in deciding to develop a housing project but the decision to build is based on
conditions, the developers will build more housing units. If uncontrolled supply surpluses
occur in the event of a recession during the spike and the market will be filled with
In 2011 to 2015 the housing market in Malaysia was in surging. The situation was due
During that period, its GNP has increased by more than 20%. In addition, the number of
mortgages also increased, interest rates declined, the unemployment rate also declined
and gave more spending power. The economic activity caused home ownership to rise
and consequently caused inflationary situation to occur. To curb the situation, the
Government has taken steps to slow economic activity by raising interest rates. In the
early 1990s the GNP has decreased, the loan amount also decreased and
The housing market is constantly changing that occurs in the market volatility. This
change will affect the economy, the market and the parties involved. Changes that
occur dramatically will lead to losses rather than profits to the parties involved. There
are various factors that cause instability in the housing market apart from economic
objectives of the housing itself. The government is a 'key player' in making the housing
HOUSING IN MALAYSIA
The national housing policy is to provide adequate, quality and affordable housing for all
people from all walks of life especially for those with low incomes. Thus, the government
has formed certain policies and programs to achieve the national housing policy goals.
Regulations and guidelines for the housing industry include the Control and Licensing
Housing Developers Act 1966, 1988 and 1989, the allocation of 30 percent quota of
low-cost houses, 30 percent quota for Bumiputra, Housing Developers Account 1990,
The authorities responsible for housing development are the Ministry of Housing and
Local Government. The Ministry plays a key role in implementing Government policies,
ensure low-income and low-income groups have the opportunity and affordability. At the
state level, the State and Local Authorities are responsible for implementing the
Government's policies and also acting as the governing body of the housing industry. In
terms of housing program implementation, not only involve the involvement of the public
sector but also the private sector. The public sector plays a role in implementing
housing programs especially for the lower income group while the private sector is more
on housing development for the entire market, especially for medium and high-class
households. To achieve the country's housing goals, the government has allocated
Among the incentives that have been given are the incentives for upgrading the home
identifying and privatizing appropriate housing projects and promoting and conducting
The Government has introduced several incentives that are basically promoting home
ownership: -
i. Stamp Duty Incentives
Stamp duty was introduced on 5 December 1949 and was the tax imposed upon the
transfer. This incentive involves the exemption of stamp duty payments and the
reduction of ceiling rates upon the transfer of real estate. This incentive was introduced
in stages starting in 1996, but only involving low-cost houses. Later on Jan 1, 2002 to
June 2, 2002, stamp duty was abolished and subsequently extended to the Economic
The Government has announced the increase in lending credibility for civil servants
through the 2002 budget presentation. The incentives can increase the ability of home
buyers among civil servants. In addition, the Government through its Circular No. 12 of
2002 has announced the financing of mortgages for second property. The incentives
are seen as attracting civil servants to invest in housing and can overcome the problem
of excess supply.
The withdrawal of EPF savings is necessary to reduce the cost of home purchase
especially in prepayment and other payment. On Jan 1, 2001 the expenditure for the
approved by the Foreign Investment Committee (FIC). The parties involved only need to
Foreigners are allowed to own all types of residential units, shops, office space and
completed. Further relaxation is under the Siver Haired Program (the elderly) which
v. Housing allowance
All civil servants are given housing allowances and these incentives can be used to
purchase a home.
The Government has taken steps to increase the gross income of civil servants or the
private sector by reducing the income tax rate and also reducing the EPF deduction rate
from 11 percent to 9 percent. With the reduction of these rates, disposable income will
Real Estate gains tax on property disposed off within one year from 1 January 2003 is
exempted.
The Government's move to introduce such incentives is to achieve the goal of the
country's housing that every citizen can have the right home and thus stimulate
economic growth.
Lately, the rapid economic development has led to rising demand for residential housing
between urban areas in Malaysia. When looking at housing prices in Malaysia, housing
prices have risen dramatically either in big cities or small towns and dependent on
certain locations. More than ten years ago, the property market in Malaysia has
housing almost reached the sky. Although the real factor behind the non-logical
increase is still a question, there are several possible reasons why housing prices rise.
i. Growth of population
The first factor that can be seen is population growth. Today, Malaysians are
increasingly growing and need more homes to live, but housing production is relatively
slow as there are many laws, rules and procedures in relation to construction. In a study
by Tze San Ong (2013), he found Vermeulen and Van Ommeran (2006) states that
"people will move to areas where houses are built, but houses are not necessarily built
in areas where people want to settle ". This may be due to workplace transfers. Usually,
people will buy a house in a certain area because they work in the nearby area or the
rental fees are the same as their monthly housing costs. Knowing that, developers will
take the opportunity to profit by raising the price of housing due to demand. People will
definitely buy the house because it is a necessity for their careers. In Malaysia, the lack
of affordable pricing options has forced many Malaysians to enter the rental market and
housing. But we can not deny the fact that one of the important factors is the growing
population.
In addition, the second factor affecting the rise in housing prices is high interest rates.
Bank loans can affect housing prices in various ways. The price of housing is the same
as the price of any asset. The interest rates can be determined by the future flows of
discounted cash flows. If financial banks increase credit availability, it means that the
bank will provide lower lending rates and promote current and future economic
activities.
Basically, better availability of credit will result in increased demand for housing when
borrowed households are constrained (Barakova, 2003). Growth in demand will make
higher housing prices. The relationship between housing prices and household loans is
two-way, ie real estate prices can affect household loans through various wealth effects.
When housing finance interest rates are low, people will be able to make some
investments, such as buying more homes. The bank's capital value will also affect the
movement of housing prices on credit supply. That is, housing estimates increase the
value of residential properties owned by banks. In addition, the value of the loan is
secured by mortgage lending. Therefore, fluctuations in housing prices will affect the
ability of banks to take risks in investment. So, banks are willing to lend more to the
public. In conclusion, for homeowners, they are focusing on changing interest rates as
they have a direct influence on property prices. However, interest rates also affect
capital availability and demand for investment. Capital flows affect supply and demand
for real estate and, as a result, they affect property and housing prices
The third factor is the rising cost of raw materials. It is one of the most well-known
reasons often used by housing developers. Nowadays, all the prices of goods are
getting higher because of one of the factors that cause it is the rise in petrol prices. This
is because most of our daily activities are related to the use of gasoline. Related to
construction, production of materials used, packaging, and delivery, all involve the use
of petrol. That is why the price of the goods varies depending on the price of petrol. This
situation will be worsening during inflation, most societies working in the economy will
increase their prices. So, in order to reduce this cost burden, developers take into
account the increase in housing prices for which the burden will be handed over to the
buyer. For high-income people it is not a big problem, but for medium and low income
people it will definitely reduce their purchasing power and also cause them to suffer
from poverty.
iv. Labor
Other factors affecting the rise in housing prices are labor. In a research study by Tze
San Ong (2013), if large numbers of workforce are involved in construction, the cost of
housing will increase. Additionally, construction involves many professional workers with
high levels of education, such as engineers and architects other than less educated
workers. This will cause housing prices to rise due to the cost of building a home unit
will increase. Developers without hesitation, will charge a high cost to the buyer.
Therefore, buyers are forced to buy at a higher price. Additionally, the new Malaysian
labor policy on the recruitment of foreign workers has changed which states that wages
for recruitment of foreign workers for construction work is a minimum of RM900. For
example, labor from Indonesia. As we can see, developers are sure to take foreign
workers rather than locals as they are more experts and better in carrying out their
Housing is a sector heavily influenced by the state's economy. The achievement of the
housing program is also dependent on economic conditions. There were three levels of
real estate market surpluses ie from 1963 to 1964 to 1972 and 1980 to 1981. Then it fell
into the recession period from 1982 to early 1987. The recession not only has
dampened housing has even caused some serious problems in the housing industry
such as bidding does not meet target needs, too high prices, squatter growth in major
In the early 1990s the country once again experienced a surge in real estate market.
Many housing projects emerge as mushrooms, especially in major cities such as Kuala
Lumpur, Shah Alam and Johor Bahru. At that time, there was an increase in residential
property ownership substantially at 165,272 in 1990 to 270,538 in 1997, an increase of
63 per cent, involving a value of RM 16.6 billion to RM 53.13 billion. This high point is
due to the rapid growth of the economy over the period from 1990 to 1997. During that
period, Malaysia has been deficient in GDP per year by 8 per cent consecutively. The
economic situation has led to an increase in the construction industry in the real estate
sector and residential housing. The number of medium and high cost houses
constructed by the private sector in the Seventh Malaysia plan far exceeds the target
where the medium cost housing category reached 187.5 per cent while the high cost
However, the country once again experienced an economic crisis in 1997 as a result of
the Asian financial crisis. The impact of this economic crisis has led to a large surplus in
the housing market. The excess of supply was referred to unsold residential properties
within nine months from the date it was completed. The total number of residential
properties that can not be sold is estimated at 93,600 units at the end of June 1999.
Beginning in 1998, the government and Real Estate Developers Association of Malaysia
(REHDA) launched several home ownership campaigns to reduce the amount of stocks
that can not be sold. The first home ownership campaign was launched on 12
December 1998 for one month and second campaign from 29 October to 7 December
1999. Various incentives were offered during the campaign including stamp duty
exemption and a minimum five percent discount on houses priced at RM 100,000 and
10 percent for over RM100,000. The Financial Institutions also offer various incentives
such as financing up to 95 percent, the processing fee waiver and the repayment term
of the loan is extended up to 30 years. Legal fees for sale and purchase agreements
are reduced. Changes were also made to the Guidelines on Foreign Investment
Appointments by loosening the terms against the purchase of houses for foreigners. On
21 May 2003 the Government once again launched a new package to stimulate the
economy and some more interesting incentives have been announced in relation to
housing. The attractive incentive introduced was the stamp duty exemption on
instruments for the purchase of residential property not exceeding RM 180,000 for
residential properties purchased within 1 hb. June 2003 to 30 th. May 2004. In addition,
income tax relief on first-ever housing loan interest rates ranging from RM 100,000 to
RM180,000 was also provided for completed homes purchased during the period.
All the Government's incentives are aimed at promoting the housing market and thereby
reducing the unsold properties. According to the Real Estate Market Report 2002, the
real estate market was active and stable following the achievement of the Malaysian
economy as a result of the measures in the 2002 Budget. Increased salaries to the
public sector, benefits from tax cuts, low interest rates, attractive loan packages and
incentives from developers are encouraging more buyers to buy residential real estate.
especially in the residential real estate sector. However it is unclear whether these
incentives affect buyers in buying a home. Hence the question of what effect of
government intervention through the incentives that have been launched into the
housing market. Will these incentives revitalize the housing market? Does the incentive
affect home ownership? Are consumers buying a home because they are interested in
i. PR1MA
PR1MA stands for 1Malaysia People's Housing or in the English Bahamas it is known
For the purposes of PR1MA, the middle income group is defined as a community with a
monthly income of between RM2, 500 and RM7, 500. It has been established by the
Government as a way to help certain groups to manage the cost living in urban areas, in
particular, in increasing their chances of having a home during a rise in property prices
in Malaysia. PR1MA is one of many good efforts by the government to help people
manage the cost of living in urban areas. PR1MA will be the leader who is targeting the
middle income group by offering houses ranging from RM100, 000 to RM400, 000
This scheme is one of the steps announced by the Government in Budget 2011 to help
young people to own homes. The scheme allows home buyers to secure 100%
financing from financial institutions, this scheme also allows them to own homes without
having to pay 10% down payment. Cagamas SRP Berhad will guarantee the bank's
financing, ie at 90% if the borrower receives full funding, Cagamas SRP will guarantee
10% (from 90% to 100%) of the financing. This Scheme is open to all Malaysians aged
35 years and below (the age of the next birthday is 36 years or less) with gross income
not exceeding RM5, 000 per month for single borrowers and gross income not
exceeding RM10, 000 per month for joint borrowers (based on a maximum gross
iii. PPA1M
PPA1M is a 1Malaysia Public Employee Housing Program that allows civil servants with
household income of RM8000 and below to be able to buy quality affordable homes in
Putrajaya launched by Datuk Seri Najib Razak on April 18, 2013. A total of 10,336 units
market rates under the PPA1M program. The PPA1M launch initiative is aimed at
helping to overcome the burden of civil servants to buy homes in major cities. The price
of cheap houses offered will be in the range of RM150, 000 to RM300, 000, with built-up
areas of between 1,000 and 1,500 square feet, as well as other basic amenities
CONCLUSION
In conclusion, prices and housing ownership are now too high, especially for the lower
income group. It is a heavy burden for them financially. Therefore, in the effort to tackle
this problem, the federal and state governments, developers, the National Bank and all
the communities should work together to implement improvements as there are many
ways to reduce high housing prices to help the people affordability to buy homes and
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