Bank Negara Malaysia (BNM) said developing alternatives to home ownership, such as a well-functioning rental market, should be made as a policy priority.
Notably, various alternatives were discussed at BNM’s fourth Economics Research Workshop themed “The Housing Market: Issues and Policy Options”.
“The suggested need for alternatives highlights the adverse consequences that poorly designed incentives to increase home ownership can have on housing affordability over the longer term,” it said in a statement.
“It also provides a viable route to help low-income and early career individuals onto a path towards eventual home ownership. Better enforcement is also critical to prevent the abuse of schemes intended to assist specific household segments to own or rent homes.”
BNM noted that there is a broad consensus that policy considerations must balance the objectives of providing Malaysians a minimum quality standard of housing, while preventing the buildup of imbalances within the housing market.
Policy measures that ensure access to credit should be pursued with concern for the protection of buyers from financial difficulties that could lead to foreclosure as well as poorer welfare.
“Discussions noted that incentives for increasing home ownership should be carefully considered so as not to blunt the effectiveness of market mechanisms, which work to correct housing imbalances,” said the central bank.
“The need to ensure that price thresholds adopted for affordable houses are appropriate was highlighted, noting that house prices remain out of the affordable reach for many low- and middle-income households.”
The workshop – which was attended by representatives from government agencies, financial institutions, academia, property developers and think tanks – was conducted to examine the major issues facing Malaysia’s housing market.
There were six research papers presented at the workshop. Among the key findings were that key determinants of home prices were credit and income, with the two variables closely linked given that income is the main criteria for gaining access to financing.
BNM revealed that several participants at the workshop underscored that the 2007 global financial crisis, which had its origins in sub-prime mortgage lending, should serve as a reminder on factors that may increase housing market risks, with far-reaching effects on financial as well as macroeconomic stability.
Mangalesri Chandrasekaran, Editor at PropertyGuru, edited this story. To contact her about this or other stories email mangales@propertyguru.com.my
