This blogspot has quietened down for long time but will be reactivated for short series of post on key matters
Today, I will be writing a short article to give you an idea about housing crisis, why it happens and potential solutions. This article (plus the series) intended for anyone who want to get a basic grasp on what’s happening. Structure of the article is summary style and where applicable, charts will be added.This article will take more from Malaysian perspective but deriving examples elsewhere.
- The price of housing today is way beyond the means of purchase. New subdivisions and lots of houses are being built but the supply is not meeting the right demand.
- Majority of the houses built by private sector in Malaysia are built at prices beyond the means of the lower income group. In 2013, 70% of the private sector built housing is beyond 1.2 million Malaysians who do not own a home yet
- Even if the government sector intervenes (in Malaysia), the price tag of state built homes are beyond reach.
- Residing in Malaysia (especially for lower income groups), the wages they earn is largely consumed for daily necessities, servicing their car (due to poor public transportation), school related expenses (increased due to declining educational standards) and other loans. A little of their disposable income is available to re service housing loan.
- Low wages (which is very true in Malaysia) which impacts both graduates and other low income groups reduce their options to search for houses and as mentioned before, affordable housing quantities remain low.
- Price speculation are pushing people further away from their job locations and compounded with poor public transportation, people had to fork out more to maintain their personal driving (and tolls).
- Is there any proper mechanisms to protect home buyers during recession when they are servicing 35 year loan?
- Governmental policies (i.e. San Francisco) building too many luxury housing units which reduces the land to build affordable units
- Rising Rents reducing the disposable income needed to finance a new home.
- In Australia, those who are seeking accommodation are increasingly being turned away
- Commercialization of housing concept. House is originally built for shelter but now viewed as exchanger of value
- Property centric development geared for top income earners
- Abandonment of state geared housing programmes or retreating the role to private sector
- Certain massive projects (i.e. new highways to propel new growth areas) fuel new round of property speculation
- One author attributed one source to financialisation of capital. Depressing wages which led to initial super profits of capitalists has reduced consumer demand growth needed for more profits for capitalist class. They in turn invest in real estate which deepen speculation and scarcity of lands (increasing price of land needed for housing)
- Collusion of government agencies and private developers in driving up the prices.
- Government bodies building market rate housing on their public lands or not delivering sufficient affordable units (despite the lands available)
- Poor policies on government side that encourages market rate development in hoping to subsidize affordable units. However, it delivers the opposite effect, where market driven rates fuel a new round of price increase of housing next to new development
- Tax breaks encouraging competitions between investors and home buyers
- Growing rental rate that is growing faster than inflation (i.e. Australia)