The government should be careful not to directly intervene in the housing market and create distortions, said the Institute for Democracy and Economic Affairs (Ideas).
The warning comes after the National Affordable Housing Council (MPMMN) unveiled plans to develop one million affordable homes by 2028.
Ideas senior fellow Dr Carmelo Ferlito believe that the plan is an ambitious one given that the entire private sector was only able to deliver an annual average of 200,000 new launches across all price ranges during the property market’s best years.
Nonetheless, he underscored that his concern is not on the targeted number of homes per se, but on the fact that the government’s involvement could hurt the industry in the long run, reported The Sun Daily.
He explained that market information is dynamically created and modified via billions of market interactions. It is by nature dispersed to individual minds, hence, not collectable by one central planner.
“Therefore, while a central planner can possess the necessary technical knowledge in order to build one million affordable houses, what is impossible to be gathered is the entrepreneurial knowledge about the actual market needs (including the conditions of time and place),” he said.
“This is what makes impossible for the government to know what the market truly needs. It is best to leave the market to the entrepreneurs since they are the players who are continuously engaged with the market process.”
Development plan must not only be implemented; it should also be timely revised due to new information acquired through market interactions.
“A central plan would suffer from rigidity and would lack the necessary interaction with market forces in order to discover if it needs to be revised; this would bring about losses which, in the case of government enterprises, fall on taxpayer’s shoulders.”
The government previously revealed plans to conduct an open tender in order to engage the private sectors in providing affordable housing – which is described by Ferlito as a move in the right direction, instead of building homes via ministry agencies or government-linked companies.
“I believe there is demand for affordable houses and I also believe that only private entrepreneurs can elaborate sound plans in line with the real market needs. This does not necessarily have to be focused on home ownership, but also toward new rental schemes,” he added.
Image source: Free Malaysia Today
Win up to RM3,000 CASH just by sharing your thoughts on the Malaysian property market! Take the PropertyGuru Sentiment Survey here.
