Economist: Cap for affordable housing will only drive prices up

Property News/ 30 September 2021 Leave a comment

penang properties

Setting ceiling prices for affordable homes, even if temporary, will not address the shortage of affordable housing, an economist says.

In the recently tabled 12th Malaysia Plan, it was revealed that the government would implement price caps for affordable homes on the secondary market and limit the number of units a person can buy, to keep these properties accessible to those who need them.

However, CEO of the Center for Market Education Carmelo Ferlito said artificially manipulating the housing market with a price cap will only drive up costs.

“If you put a price ceiling, those who are not in a rush to sell will opt to hold onto their property rather than placing it on the market, if the set price does not meet their expectations,” he told FMT.

“Therefore, you will have fewer houses available, rather than more.

“Furthermore, by creating a negative incentive to sell, and therefore limiting supply, the actual market price will increase rather than fall, and such a spike will be evident if the ceiling (price) is removed.”

In addition, Ferlito said, this could create a market for corruption in the housing market, with sellers incentivised to find buyers willing to circumvent the ceiling price with “off the books” payment.

He called for a more sensible approach to prioritise access to good homes over ownership, as even with price caps, the majority of buyers would still need to take up loans to buy these homes.

With household debt at the end of 2020 reaching 93.3% of the national gross domestic product, the emphasis on ownership should be replaced by offering rental support so those in lower-income groups are able to live in areas that provide better opportunities, he said.

“The government should be promoting social mobility, rather than encouraging people to buy affordable homes in areas that are generally low-income, which would result in the poor remaining poor,” he said.

Source: FreeMalaysiaToday.com

  1. LingLongLeng
    October 1st, 2021 at 12:28 | #1

    A moratorium of 5 years for affordable housing, during which no transaction is allowed or allowing transaction with a ceiling price is a good move in keeping speculators away.

  2. tahusamatahu
    October 2nd, 2021 at 08:03 | #2

    Prices of property in fact, were driven by the surrounding environments of the whole world.
    Our property prices look set to go up amidst the “high inflation” affecting the world !

  3. feifei
    October 15th, 2021 at 09:04 | #3

    It is highly likely that inflation would tick up, building raw materials will be more expensive which would result in higher cost of building new homes, therefore higher home prices. But be careful, if you think you can buy a home, flip it and make money just because of inflation, you could be dead wrong. As long as there is more supply than “real” demand (not speculative demand), no matter how high the cost of building homes is, you’d still be begging for buyers and renters (just like what’s happening now), therefore rents will remain very low compared to home price.

  4. darthx
    October 29th, 2021 at 16:51 | #4

    Actually, the government should place a price ceiling for affordable housing while limiting the number of affordable housing in areas such as the city where land cost is high. If not, what is the point of having affordable housing when people have the mindset of selling these housing. It should be for people to own a house, not for profit making. Profit making should be from other types of properties that are driven by supply and demand.

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