KUALA LUMPUR: A study by a real estate database technology company found that four out of five families who move into affordable housing — also known as low- and medium-cost housing (LMC) — like PPR and its variations will live there for virtually the rest of their lives .
This finding, recently presented by PropertyGuru DataSense General Manager Joe Thor, aimed to uncover the attractiveness of LMCs in Klang Valley.
“We looked at residential real estate transactions identified as LMC housing projects based in Klang Valley starting in the 1980s,” he said recently at the Rights To The City (R2C) conference organized by Think City here.
According to Thor, it was important for authorities and planners to understand why four out of five residents are unable or unwilling to leave their LMC accommodation once they are rooted there.
“Only 20% will leave their LMC house and move into private apartments (built by developers).
The reason for abandoning LMC housing is primarily because such families have become larger and so have mainly moved to townhouses with land (and even then to the outskirts, as they are cheaper),” he said when reviewing the results of the The study examined presented the various motivations driving the B40, as well as those on the verge of moving into the M40 income brackets.
LMC housing has been part of Malaysian housing policy since pre-independence times, with rapid urbanization driving demand. Since the 1980s, a key feature of LMC housing policy has been the option for those who are not so affluent to have a fair chance at homeownership – with B40 communities allowed to buy a home through various schemes, be it through loans or rent-to-own systems. To prevent speculative activity or abuse, there is usually a five to ten year moratorium on underselling after an empty holding is obtained.
During the 1970s and 1980s, LMC housing was mainly built in locations in central Kuala Lumpur. These would have included terrace and cluster apartments and 5-storey walk-in apartments. Naturally, as the city grew, the radius of built LMC housing expanded. For example, Perbadanan Kemajuan Negeri Selangor (PKNS) projects are mainly located in Petaling district of Selangor and Kuala Lumpur. The earliest projects include PKNS Ulu Kelang in Kuala Lumpur, PKNS Serdang Jaya in Petaling, Selangor, and PKNS 17 Kampung Kerinchi, Kuala Lumpur. Of course, there’s also the PPR (Projek Perumahan Rakyat) housing later in the equation.
“By understanding what happens to these properties once they enter the open housing market, we can uncover insights with potential implications for the broader housing market,” Thor said as he introduced the different types of LMC homes that are used by their target audiences to be favoured.
It was estimated that in 2013 more than 1.7 million Malaysians lived in social housing in KL and Selangor, spread across more than 3,000 social housing projects. This problem thus affects a significant number of Malaysians.
The PropertyGuru study of its database examined approximately 7,900 LMC projects in Kuala Lumpur and Selangor, analyzed approximately 139,500 sales transactions dating back to the 1970s, and examined residential real estate transactions identified as public housing projects from the 1970s onwards with LMC housing prices ranging from RM25,000 to a maximum RM350,000. Although LMC apartments represent only 10% of the total number of housing projects in these locations, they accounted for 18% of the total sales transactions, which already indicates a demand for this type of housing.
“The dream for LMC homeowners is a country home and all the perceived benefits that it brings – more personal space and privacy while maintaining a certain sense of neighborhood,” said Thor, adding that cluster homes actually compare to high-rise buildings like the Preference for the former seems to offer more privacy, a sense of space (of being on land) and promotes a sense of community.
“The main reason for moving out of LMC shelters is that once people start a family, their need for space and privacy increases. So ideally, LMC apartments should be a transitional step in your real estate journey – we’ve seen the average time from initial purchase to exit is seven years. Unfortunately, this is not the case for four out of five LMC owners,” he said.
It has been thought that those unable to leave may face a lack of options or lack of access to financial resources. Those who don’t want to leave may feel this way because their current home may be in a strategic location (close to public transport, major employment centers, amenities like schools, etc.).
This lack of upward housing mobility may have some implications for planners and authorities as they attempt to ensure affordable and decent housing in urban centers where land is becoming scarce and increasingly expensive, coupled with rising construction prices.
“If an LMC resident in KL wanted to upgrade, their options would be severely limited. The next available option would be to move further afield to another district, as the ideal form of housing for LMC residents is townhouses. “There’s a reason LMC cluster homes in Kuala Lumpur saw prices per square foot increase by 537%. It’s not about preferences, it’s about the options available,” Thor said.
There are several implications from this PropertyGuru study, and the most obvious is that if the goal is majority home ownership, the government must continue to build or subsidize affordable housing as most of the population still depends on it. This is especially true when the majority of LMC residents do not upgrade or move out of such accommodations for various reasons.
For LMC homes built in the 1970s-1980s in what are now considered strategic locations, demand for these properties remains robust after development has finally ‘caught up’ with these locations, such as in the United States. B. the emergence of new business centers or the expansion of the light rail or other facilities. These old properties usually suffer from a lack of quality of maintenance, which detracts from the overall appearance apart from things that directly affect the quality of life such as: E.g. often broken elevators and insufficient parking spaces.
However, buying into older LMC apartments in strategic locations is a compromise Malaysians are willing to make for the sake of convenience.
“There’s a reason why 30% of LMC homes when they hit the open market are bought by real estate investors, while the remaining 70% are first-time home buyers,” he said.
It must also be recognized that not all LMC apartments are created equal – although PPRs sell for RM42,000, PPRs in Kuala Lumpur or the Petaling district will appreciate faster than in Hulu Selangor or Sabak Bernam. In order to dampen demand and give affordable housing subscribers a fairer deal, different pricing needs to be introduced to differentiate between different property costs in more popular locations and locations where a much slower increase in value is expected.
“On the other hand, there is an overhang of private housing, so I think a public-private partnership should be another option with the government helping the B40 group to rent in the private market. A shared equity rent-to-own (RTO) scheme could also work in this case and solve housing stock problems and now consolidate the fairly fragmented market,” said Thor, who also urged authorities to think outside the box solutions if the overall goal is to provide protection (rather than encouraging full ownership from the start).
“A build-to-rent model could also work here, in which the authorities pay part of the rent or pay a corresponding amount into a fund. The money in this fund can be invested and used over time as a down payment on a property of their choice when they are ready to modernize it.”
