Affordable housing is not something new. The city hall has plan to build 50,000 affordable homes in federal territory. Based on the information published on RUMAWIP as many as 10,000 affordable homes to be built by year 2020. Most of the properties are to be completed before then.
What is RUMAWIP?
Rumah Mampu Milik Wilayah Persekutuan (RUMAWIP) is established to outline the direction and to provide a basis for local authorities and developers to design and develop affordable housing.
Will affordable housing affects property prices?
Unlike commodity, where prices are the same per unit. However for property, there are many distinct types and design of housing. When demand for housing rises in an area, rents will rise, regardless of the type or quality of the housing. Some areas might have old 3-storey shop houses, 70’s buildings, and brand new luxury buildings like we have near jalan Ipoh. If the demand is rising in that area, rents for all types of these units will rise eventually.
When there are no vacant lands for development to supply rising housing demand, a solution is to reclaim the leasehold land by the local authority and to build higher density properties.
See also How To Calculate ROI On Rental Property
Back to the question whether these affordable housing would affect property prices around the area they are built? The chances for these homes to affect the prices are relatively low even though affordable homes are mostly high dense. The reason is because the requirement to buy such properties are very strict. Not everyone is eligible to buy such properties. Some of the projects are allocated for certain income bracket buyers, whether they are bumi and to some extents – they are only offered to buyers that are working as civil servants. Furthermore, the buyers cannot sell their properties within 10 years. This prevents speculators to make a quick profit from flipping. All we can see after good 10 years in the future is the issue with state consent for transferring of ownership.
If affordable homes unlikely to affect property prices, then what’s the impact?
The direct impact of such great numbers of affordable homes is the rental income. With more properties out there in the market, people have the options to shop around for best rental. One of the conditions for buying these homes is that the owner shall not rent the property out without the consent from RUMAWIP management. The rules are in place, but are they really enforceable and will the enforcer be able to look into thousands of homes? This is something that the enforcer could not control and indirectly affecting the rental prices around the area where the properties are built. The owners can simply rent the property out without the need to stamp the tenancy agreement.
The assumption above are only based on thousands of properties in selected areas. What about other non-RUMAWIP conventional properties? Taking account all these projects for both conventional and RUMAWIP, the numbers can reach more than twenty thousand if not more. Most properties are to be completed between years 2017 – 2019.
By 2020, there are more of these properties to be built and the rental can only sustain if the economy is growing (e.g., businesses are growing, wages are rising, new business are starting, new jobs are created, and people move in to the area to fill those new jobs), the growing demand will bid up rents. The scenario above will only realise when the government’s initiative to provide more affordable housing is achieved as plan. This is something for investors to look into before investing in certain areas.
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Danny KO @ RPC
If this article is useful to you, feel free to buy me a coffee ☕
