KUALA LUMPUR: Khazanah Research Institute (KRI) has suggested a migration to the 'build-and-sell' housing buying scheme in Malaysia, where housing developers must complete a housing project before selling the houses in order to protect the consumers.

Its director of research, Dr Suraya Ismail explained that under this system, homebuyers would not bear the commercial and construction risks associated with housing development.

"Other Southeast Asian countries have implemented consumer protections against developers' negligence. However, we lack a similar consumer protection act here," she said during the KRI Webinar "The Financialisation and Commodification of Our Homes", today.

Currently, Malaysian developers practice the 'sell-then-build' (STB) scheme, where houses are sold, and progress payments are collected while construction is ongoing.

Suraya also urged relevant parties to make housing prices genuinely affordable.

According to data from the National Property Information Centre, Department of Statistics Malaysia, and KRI calculations, the median house price rose at a compounded annual growth rate (CAGR) of 23 per cent from RM170,000 to RM270,000 between 2012 and 2014.

She said the housing market consistently scored above 3.0 (the affordability threshold), indicating that it is 'seriously unaffordable'.

In contrast, median household incomes grew at a slower CAGR of 11.7 per cent, less than half the rate of increase in house prices.

Citing a Bank Negara Malaysia report, she said that the household debt-to-gross domestic product (GDP)  ratio increased from 67.2 per cent in 2002 to 84.2 per cent in 2023.

Suraya added the total household sector loans have consistently grown over the years, surging from RM332 billion in 2006 to RM1.26 trillion in 2023.

"Housing credit constitutes the largest proportion of total household loans, increasing from 36 per cent in 1997 to 60.5 per cent in 2023, followed by loans for motor vehicles and personal use," she said.

She also suggested discontinuing housing mortgages with long durations, such as those exceeding 35 years or intergenerational loans.

"The longer the mortgage period, the more house prices will increase due to financing. Reducing mortgage periods will make house prices more affordable and create sustainable price increments in the market," she added.

TAGS: Khazanah Research Institute, Housing Loan, Home, Mortgage