Penang affordable housing glut?
Penang property developers see a glut swelling in the affordable segment, which has about RM7bil worth of mid-range properties planned to date.
These 34,608 units, targeted exclusively at the first-time home ownership market with prices ranging between RM200,000 and RM400,000, will enter the property market over the next three to four years.
Some 15% of the 34,608 units are in the RM200,000-RM300,000 range, while the rest are at the RM300,000-RM400,000 range.
The state government’s income eligibility limit of RM8,000 for a RM300,000 unit and RM10,000 for a RM400,000 unit is slowing the take-up rate of affordable properties, according to the Real Estate & Housing Developers’ Association (Rehda Penang).
“Prospective buyers are ineligible to buy because their salaries exceed the RM8,000 and RM10,000 gross household income limit.
“Many are also barred from buying because they already own a property, because they cannot get a bank loan, and because they do not live in Penang.
“So what happens if the eligible buyers endorsed by the state government fail to qualify for the necessary bank loans?
“There will be an oversupply of affordable properties, resulting in such projects being abandoned or not taking off at all,” Rehda Penang chairman Datuk Jerry Chan told StarBiz.
He said a solution is to allow developers to sell the units in the free market to ‘unqualified buyers’.
“However, to curb speculation, the state government must require the ‘unqualified buyers’ to hold the properties for a specific period before they are allowed to sell it in the market,” Chan added.
Rehda deputy chief Datuk Toh Chin Leong said that if affordable properties were to enter the free market, the sale must be regulated to prevent another round of speculation that would impact secondary property sales.
“More than 30,000 new affordable units will enter the market in the next three to four years to compete with secondary properties,” Toh added.
Of the 34,608 units, some 20,950 are planned for the island, of which 830 ares to be built by the state government, and the remainder by the private sector, involving 12 developers.
The other 13,658 units are planned for Seberang Prai, concentrated largely in South Seberang Prai, Central Seberang Prai and North Seberang Prai.
Penang Institute fellow and urban studies head Stuart Macdonald said the affordable housing prices of RM300,000 to RM400,000 on the island was still too high for the average household with a yearly income of RM60,000, based on the 2012 Household Income Survey.
Macdonald said the price of an affordable unit should be between RM180,000 and RM240,000, three to four times of the average household yearly income, which is in accordance to the international benchmark pricing for an affordable housing unit.
Ideal Property Group executive chairman Datuk Alex Ooi said due to the rejection rate of bank loans hovering at 30% to 40%, the group finds it hard to sell the 4,840 units under the One Foresta and I-Santorini affordable schemes, priced between RM300,000 and RM400,000, launched recently.
“Over 90% of the buyers are in the late 20s or early 30s.
“Their gross household income, if they are married, hovers around RM6,000.
“If they take up a loan for 35 years, they have to service an interest payment of RM1,700 per month.
“With other commitments such as car loans, most of their salaries would go to servicing loans.
“The bank loan rejection rate for this income group is the highest,” Ooi said.
Ooi said the state government should revise those policies hindering the sales of affordable homes.
“There are first-time house buyers who qualify for bank loans, but because they stay in overseas or in another state, they are prevented from buying.
“The group has made plans to implement 10 projects with affordable components for the group’s 288 acres land bank on the island,” Ooi added.
Source: TheStar.com.my
“…..There will be an oversupply of affordable properties………He said a solution is to allow developers to sell the units in the free market to ‘unqualified buyers’.”
Developers ask for a super high plot ratio on the pretext of building affordable homes for young people who do not own any property yet, and after getting the super high plot ratio, they say the SOLUTION to sell these over supplied units is to sell them in open market??????
If the developer reduces the price to rm200k, I don’t see why the banks will reject their loan applications. The developer is obviously stating the obvious, they should reduce the price and they will sell all the 4860 units in a minute.
@Rw
I agree, it’s super high-dense, 900sqft, basic renovation and it’s priced at 400K, how is that affordable?
I really hope the developer would consider lowering down the price to at least 300k or 350k including upgrading package and a car park.
Or they should increase the size of the house, maybe >1000sqft for 400k and above, divide it into a few blocks and let people choose.
From what I’ve seen, most of the HDB in Singapore are 1200sqft priced at SGD500K which is cheaper than us (if using their currency)
sell at free market with condition only can resell after 30 years or resell with original price, then investor wont cum kacau and goreng
@Rw
I dont think developer would take any action on price reducing, but at least if they market on 300k for 900sqft, they should include the a/c point and giving proper tile, instead of asking buyer to pay more on those cheap renovation cost. Moreover if the CP mark on 20k to 25k should be sound afforable than current the developer offered.
It looks like even with the State Government initiatives to build “affordable house” in Penang, the house is still not “affordable” by the qualified buyers.
It is sad that majority of Penangites are still living in the relative poverty line….
Was there a typo? 830 acres or 830 units to be built by state government ?
people earn more than 10k a month won’t buy these affordable unit one la. so many rules and regulations, so tedious, plus all those complicated upgrade package, super high dense some more. actually these developers are not selling at discounted price, they are selling at higher than current market price..
@jeff
It’s acres~~ LOL they using land size la
@hopeless
Yes, this make no sense. Another case of developers acting in cahoots with the state to squeeze more money from the people’s pockets?
Srsly, affordable housing glut? Many ppl who work in penang still don’t have their own house. The Rehda guy must be using his knee to think while talking.
ha ha, Rehda Png plays Mr nice guy and victim again. Their affordable houses are so expensive giving that they are small size, high density, high maintenance fee, poor spec, limited facilities, etc and with so many rules from state govt, that’s why they are unattractive and low take-up rate lo. Clearly, it is still unaffordable and unattractive ma. So, now what, they want to sell to unqualified buyers and pretend to concern about speculation. Keep manipulating.
Isn’t that greedy developers and encouragement of speculative activities that caused penang properties became highly unaffordable, thus need affordable houses ? Back to circle round and round again. Back to square one again.
@Dan
It is 830 units are to be built by state government. are, not ares, not acres la. ha ha.
Base on the article above, we can see that majority of the buyer are coming from age 20’s – 30’s
The affordable house scheme are actually targeting those 1st house buyer.
How is “Affordable House” affordable? It certainly draws many answer. For a fresh grads who wish to purchase a new house, assuming a standard RM 3000 monthly income earner, clearly you can only afford to buy a house priced at RM 200,000 ( Loan 90%=RM180k, be it 30 years for loan tenure, your monthly installment should b around RM1000) so you wouldn’t end up eating grass at the end of every month, bcoz u still have to take transport loan/insurance etc into account. Assuming that you are single, have no financial support from your family, you are only afford to buy a house priced RM200k which has to come with base renovation+furniture for a proper stay.Basically i would suggest people at this income range instead apply for LMC but not the affordable house because the purchase price stated are often refer to a basic unit/original/plain unit only, and you have to come up with ur own money for renovation+furniture, and so it makes u cannot afford it! Ya i know, u will complain lmc low standard, high density, no facility or maybe small unit. At this moment your head is this big, so don’t wear a hat that is too big for you. Wait untill u get promoted in salary only thinking to get a bigger house laaa….If you are married, husband and wife total income of RM6k, you should not be having problem buying RM200k-RM300k house above affordable house.
@Adeline
I thought the whole batu kawan is built by state govt so 830 acres should be the land size. Well I might be wrong. Thanks yea
830 is no. of units build by state government on the island. state is building 11,800 units at batu kawan. the rest are private developers building.
generally human beings very greedy. both developers and buyers also greedy. developer greedy wanna make money. buyers greedy want cheap and big. so, government step in provide allowance to build more ie. become higher dense so developer bring down price. fair enough. rm300k for 850sf = rm353psf. versus normal market price for condo 1k sf = rm550k = rm550psf. about 35% cheaper di. however, some buyers still claim 300k not affordable.
so comes to your income la. if your income rm3k a month (fresh grad) then pls dun greedy want to apply this type of house pricing. pls apply lmc. or go work a couple of years first then when income is about 6k then only come apply for affordable home category. same thing goes for your car ma, if you know you cannot afford vios or city, then buy myvi or axia. i don’t see people go make noise to the government that vios or city cars so expensive make it cheaper. acutally in fact if government remove vehicle tax the price will be lower than locally branded cars.
Those developers are very smart, they are providing a studio @450sq ft and wanted to sell it as LMC @ RM200K. Moreover, those studios are located beside the lift, the people stay in will be disturbed day and night.
Evil developers GREED knows no limits …. disgrace to the human race !
Of course lah, greed where got boundry one? That’s human nature, and that’s precisely the thing that keeps up the momentum of human progress, PROVIDED it is kept within a constructive boundary. So the authority plays a very important role to regulate. If the state fails to regulate, fails to keep things within a boundary, and even worse, looks like they are condoning such hideous acts of consumer bullying, then……aiyo…..too bad lor. Hehehe.
For u, those house might be affordable. but no hard trying.
300K is indeed un-affordable for fresh graduate. So where is the point of affordable?
Looking at various sources around the world, seems like house price 3x annual household income is affordable, and 4x is probably pushing the comfort limit.
Now, look back at our Affordable housing qualification: 6K monthly income qualifies for house rm200k, 6-8K income qualifies for house rm300k, and 8-10K income qualifies for house 400k. 6K husband+wife monthly income would mean 216K in three years, ignoring bonus; 8K would mean 288K, and 10k is 360K. Not too far off from the 200k/300k/400k categories.
Now problem is, as mentioned in the article:
Imagine a young couple, 28 year olds, junior executives, bring home a combined RM6,500 monthly. 3x annual income they are looking at houses RM234K to be truly “affordable”. Under the law, they are qualified for houses between 200-300k, which is about right, but see, only 15% of the 34608 units are affordable for them.
The other 85% of the units seems to target senior executive couples who’s probably older and probably already have houses and not qualified to get another one.
tl;dr The developers/government targeted the wrong crowd.
As an investor, I don’t really think fresh graduates that just came out from the college/universities and working for their first company should make such a big commitment in life. Buying a house is a life long investment that you should plan and have proper savings before even consider whether your salary is sufficient for maximum loan. A home buyer is advised to have at least 20% of the property price as stand by ie. 10% for downpayment and at least another 10% for miscellaneous such as legal costs, MoT, stamp duty etc. You may draw out from EPF Acc. 2 but only after you have made the 10% downpayment.
So a 28 year old would have worked at least 7 years and would have some savings before even considering getting married and buying a home. The average income in Penang for a 28 year old engineer/white collar professional is about RM3.5K but some may argue it is lower while others may argue it could be higher. If it is lower, you should be applying for LMC not Affordable Home. If your income is higher, you may not even be eligible for Affordable Home. So, consider if each of these 28 year old is of proper planning and saves RM500 each per month for the past 7 years, they will have a combined savings of RM84K (excluding interests accumulated over the past 7 years). With such savings and financial planning, it is possible for the young couple to purchase a RM400K property.
However, many people that are rushing into the property market does not have financial planning. They are just rushing into buying a property because they feel that the general property market which is now about RM550K and above is out of their reach and if they don’t buy an Affordable Home now may it be RM400K, RM300K or even RM200K, they may not have an opportunity in the future. These people are not ready and will always complain that the prices are not affordable.
Don’t blame the government as they have made an effort to make prices below the market average by more than 20%. Blame the developer? Maybe, but in case you have not done thorough research many developers are building Affordable Homes without any subsidy from the government as Penang Affordable Home is not PR1MA. Developers can choose not to build Affordable Homes as it is not compulsory. The average construction cost including of land, building and various other payables is about RM300 psf. nowadays. Of course the cost can be lower if the developer own the land since long time ago or the land is at less matured locations.
Of course you can dispute my opinions, this is the internet. Freedom to voice your opinions. But I’m just sharing experience and knowledge. If you decide to ignore it’s your choice.
The other 85% of the units seems to target senior executive couples who’s probably older and probably already have houses and not qualified to get another one.
tl;dr The developers/government targeted the wrong crowd.
I agree with you Chris. I am looking for an affordable upgrade but too bad I already own a house (700sqft). Feeling cramped for 3 generation staying under one roof.
@Chia Lat
I agree with you that people (semi professional and above) who are in their late twenties and early thirties should have no problem buying a 300k-400k property.
But if the state officials had gone down to the ground talking to people, they would have realized by now that the main grouses are that people are not willing to pay that kind of money to live like sardines.
So what have we done (or rather not done) to cause such predicament? Just as recent as 5 years ago, one could still buy a comfortable sized apartment at around 400k, but today, 400k means sardine cans.
Clearly, our state has been slow in responding against speculative activities. Worse, the state has been very friendly to these developers, allowing them to destroy green lungs, to practice unfair sales tactics (bulk buys, insider tradings etc), to build excessively resulting in soaring land price, too much wastage, too much greed.
The state allowed developers to build shoe-box apartments and called them “affordable apartments”, namely those tiny apartments at Penang World City. And oh yes, big tracts of state land was sold to Ivory, which was subsequently flipped by Ivory to Tropicana to make quick bucks!
Instead of being the custodian for the penang people for property matters, they have instead standing on the developers’ side.
And what do we have today? 400k sardine cans!
My friend,don’t blame the gov???
@fcuk
human nature ? are u justifying the unscrupulous greedy developers , i think you are one of them .. low life scums of society
@LiveHigh
I understand what you are trying to say but the government is not that stupid. Of course they know that nobody wants to live in a small bird cage. The “affordable apartment” you mention at Bayan Mutiara is of a different category all together and should not be lumped into this Affordable Home category debate. The “affordable apartment” market by Tropicana Ivory Sdn. Bhd. is of 455sf. @ RM400K as is sold to the free and open market. This would bring the “affordable apartment” psf. to RM880psf. This is no where near the affordable psf. pricing I mentioned earlier which is about RM375psf. to approx. RM500psf. which is still cheaper than general property prices in Penang nowadays. (Island of course, Mainland is cheaper)
Using the same psf. pricing to a larger unit will increase the absolute price of the property ie. 1,000sf would mean the property will be priced at RM375K – RM500K in the SPA. If you read earlier arguments from other commentators in this forum, you will understand that many are not even able to buy a RM300K property what more to say a RM375K property.
Furthermore, if you’re really neutral, you will do thorough research. About 30% of Penangnites are actually living in your so-called “Sardine Cans” in Low Medium Costs and Low Costs. These are 650sf. and 500sf. respectively. Many of these LMCs and LCs are selling at prices of up to RM400K in the secondary market. A good example will be Symphony Park, a LMC by status which is upgraded to 700sf. sold by developer at RM150K upon launching and priced at about RM350K in the secondary market now. So, if LMC owners themselves are that greedy to push the property prices up that high to earn a substantial profit, this creates a benchmark for many property seekers applying for government properties such as LMC and Affordable Home hoping to make profits from such opportunities. So blame the government? Why not? It’s always easy to point fingers? Blame ourselves? Maybe. Since I believe if I don’t help myself to succeed, nobody will and definately not the government.
Yes, Ivory did make a quick buck there. Did they pay for it? Yes they did. Please research the amount of fines and premiums they had to pay because it is not cheap. Therefore, a portion of their profit goes back to the government (of Penang) and in turn is used for infrastructures such as the road they are building at Paya Terubong. On top of that, I’m sure they got on the bad side of the state government. Since general public like us knows Ivory flipped for a quick buck, the state government with “eyes” everywhere is aware. I’m sure they have gotten on the bad side of the state government and will have many difficulties in obtaining local authorities’ approval for their up-coming and future projects. [News Flash] Their development at Tanjong Tokong namely The Latitude just complete and they are seeking for CCC (Certificate of Completion & Compliance). Let’s see how long it takes for them to get it. Generally developers with no bad track record should be able to obtain CCC within 1 month. The delay of a CCC can cause a developer to incur heavy loses due to Liquidated Damages of Late Interests. Sometimes a government can abuse such power to teach the developer a lesson. Just like taking away “playtime” from children that don’t want to abide to rules.