Land Economics In The Malaysian Market: An Essay.

Mixed Economic Framework in Malaysia

Discuss aboout the Land Economics Malaysian Market .

The Malaysian government employs and uses a system that employs Mixed Economic framework that is where the Economic system operates the forces of demand and supply ensuring stability of the economy.The mechanisms of the market dictate the prices to be charged for the housing market just like any other good and service has to depend on the forces of demand and supply to set the price. Government policy intervention is basically of four main elements which are regulation of the market, capacity building, shaping and designing the market and lastly market stimulation and all these responses serve their purpose distinctly from each other[1]. The housing policy in Malaysia is set to provide and supply housing more so for the low-income groups. As such it ensures that even the lower incomes individuals have access to a decent and adequate housing. Such a policy provides that a huge number of the Malaysians have proper and appropriate housing. The system ensures that the supply of houses is continuous and constant to the poor household who continue being incorporated in the housing plan. It is a system that came into force to ensure that there was housing for all[2].

Affordability in the Malaysian context applies in the sense that the houses are affordable within the range that population can quickly secure sources of finances to purchase such homes and possess them as owners. The government of Malaysia saw the need of a program for housing that was to be formalized so as to ensure that the national objective of ensuring that there was adequate housing that was affordable was met[3]. The housing program gives an outline of the supply of houses defined by the housing type regarding the low cost, medium cost and high-cost homes that are to be produced by the private and the public in a span of five years as dictated by the development plan. Affordable housing and housing affordability that is often interchanged in Malaysia but each represents two categories of problems. In one way, affordable housing caters for the supply of homes about the median income of the household. On the contrary, housing affordability is the methodology employed din qualifying individual’s ability in honoring a mortgage. Affordable housing represents the supply side whereas the latter is demand oriented. In one way government intervention at times costs a lot of money[4]. The argument behind such a proposition is the fact the intervention in the housing market has to be exact, where the provision of homes by the government has to be in line with the median income of the household that is not beyond the maximum of RM 165, 000.However, the price should be ranging RM 185000 per unit in the urban areas. One of the Housing Program in Malaysia by the name 1Malaysia is fighting hard to ensure that there is a segment of an affordable market. Surprisingly, all the projects undertaken within the Klang Valley are above RM200000.1Malaysia is, therefore, providing competition to the private developers in the Malaysian market. Since the government has no mandate to undertake construction projects, the private developers have a task of building homes that are affordable within the set thresholds. Unless the government offers subsidies that can suppress costs involved in land, private developers fail to honor projects that limit their capacity to earn. As a result, the only way for such developers is to provide homes that far above the median income.  Government intervention began in 1952 during the colonial period by the British and it was the Housing Trust that was mandated to carry out housing construction work at low cost. Since independence, the government of Malaysia assumed the role through ensuring that there were small costs involved in construction for the public. The private developers in most cases get involved in supplying high and medium cost housing. However, in the late 1980s, the government now fully integrated the private developers to provide housing at low cost. The private developers played a leading role in the Fourth Malaysian Plan when they reached the total targeted units that were required. It is since then that the private sector accounts for more than 65% of the low-cost housing in Malaysia[5].Government intervention assumes seven forms in the economy, use of quotas, maximum and minimum price policies, issuing subsidies, regulation and legislation and government ownership. However, there are various perspectives that government employs as intervention plans more so in the real estate market where the government has control over the development of land. The intervention of the government in the housing through subsidies is necessary for some ways. One is that there is the provision of improved health facilities regarding clean water supply[6]. It is the duty of the government to ensure that water is made available in places where there is a settlement. Drainage is also crucial to ensure that contaminated water and sewerage have a channel of being disposed of as they may bring water-borne diseases such as cholera which is catastrophic.

Housing Policy in Malaysia

Subsidies also have the effect of ensuring that there is fairness and maintain social equilibrium. A good example is a program that provides housing in the slum where there are individuals classified as low-income earners. In such a program that ensures that there is adequate housing in the slum, it ensures that the gap between the rich and the poor is minimized as there is access to the basic need and that is housing. Subsides reduce inefficiencies associated with the real estate market. There are no monopoly profits for the private developers as is the case where there is no government intervention. As such, there is equilibrium in the real estate market, and the public is not exploited with high prices as is the case with most monopolies. Quality is also not compromised as the government is keen on ensuring that all the classes get the best[7].Economic growth gets stimulated through the housing program. As noted, housing does not only create employment but also helps in developing other industries related to housing. Industries that manufacture and produce construction materials used in housing benefit from the housing program through creating more jobs and also have a source of revenue. Housing subsidies in most cases stimulate the economy as compared to other types of government intervention. As portrayed in the United States, most of the institutions that were residential in nature were set up by the government during the recession and were intended to boost economic growth.

One of the objectives of the government is to ensure that there is the adequate housing of high quality for all people irrespective of the social stratification. The government has a leading role in ensuring that there are programs to achieve the necessary housing program. The government has sin place some incentives and programs that provide home ownership and also aim at ensuring that there is growth in the economy. The intervention of the government in the real estate industry is significant as it curbs the problem associated with speculation. Where there is speculation, there is also the issue of having raised prices for the real estate in the future so as to ensure that quality remains constant. In such a case, buyers who purchase homes and investors who buy to rent will be pleased by investors who operate on short-term. Government intervention acts as the control for the developers. According to the budget in 2014, the Malaysian government prohibited private developers from implementing projects that were affiliated to DIBS. Such a move ensured that developers were not incorporating the rate of interest on loans to buyers while building the house in the price of the house. The government has also implemented some property acquisition guidelines that are aimed at controlling ownership of real estates by foreigners in Malaysia. Stabilization of prices in real estate is critical so as to prevent speculation exceeding beyond certain levels and also provide many opportunities for the locals to have access to properties that are of high quality being less than RM1 million more so for the residential units. Government intervention in real estate plays a crucial role in impacting the budget on the property on either a long term or short term duration[8]. The planning economic and social and political frameworks depend on government intervention. The government has the power to control the forces of supply and demand that determine the price to be charged and as such facilitates resolution for economic problems in conjunction with the private sector.

Affordability in the Malaysian Market

According to research that was conducted, it proved that the nominal prices of houses had increased drastically since the 1990s.In some countries such as Spain and Britain, there has been 100% increment in the prices something worth worrying. The degree of increase in prices of the houses made economists have something to research on so as to provide the solution to the problem of increased prices. As a result, many researchers came to a conclusion that the increased costs were as a result of house price bubbles in such countries[9]. However, recently the housing prices seem to be dropping and as such the current slow market in the housing sector is a good indicator for the long-term growth. It is predicted that real estate market is to remain constant in this year amidst the many challenges[10].The number of unsold units continues to rise and currently, stands at 16% which is a slowdown in the real estate market[11].The stringent requirements when securing a loan and the uncertainty in job security are some of the factors making consumer expenditure on housing drop significantly. Real estate market is expected to slow down in 2017 due to the economy slowing down and as such the prices of the housing will fall.[12]Selling of property in Malaysia has been crippled after the Ringgit depreciated and as such the prices for the housing have dropped. The real estate agents have taken second jobs to have their end meet as there are few jobs in the real estate market. One person who used to sell two to three apartments in a month sells nothing[13].However, despite the recent economic downturn that has crippled the real estate market, there are prospects for the Malaysian market in future. The demand for housing will always provide better prices for the houses. It is for such reasons that the government intervenes to ensure that there is economic growth[14].

References

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Mahalingam, Eugene. 2017. "Property Market To Consolidate Further". The Star Onlinehttps://www.thestar.com.my/business/business-news/2017/01/19/property-market-to-consolidate-further/.

Ng, Angie. 2013. "Reducing Speculation In The Property Market". The Star Online. https://www.thestar.com.my/Business/Business-News/2013/11/09/Reducing- speculation-in-the-property-market-Tough-measures-drawn-up-in-Budget- 2014/?style=biz.

ROSLI, FIRDAOS. 2014. "It's Not Just About The Price". New Star Times. https://www.nst.com.my/news/2016/12/196646/its-not-just-about-price.

Ruban, A, Opalyn Mok, and Julia Chan. 2017. "Unsold Units Continue To Dampen Property Market In Malaysia". Malaymail Online. https://www.themalaymailonline.com/malaysia/article/unsold-units-continue-to-dampen- property-market-in-malaysia.

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Zainuddin, Zaemah. 2017. An Empirical Analysis Of Malaysian Housing Market: Switching And Non-Switching Models. Ebook. 1st ed. New Zealand.

Tibajuka, Anna. 2008. The Role Of Government In The Housing Market. Ebook. 1st ed. Nairobi. https://mirror.unhabitat.org/pmss/getElectronicVersion.aspx?nr=2538&alt=1.

ROSLI, FIRDAOS. 2014. "It's Not Just About The Price". New Star Times. https://www.nst.com.my/news/2016/12/196646/its-not-just-about-price.

ROSLI, FIRDAOS. 2014. "It's Not Just About The Price". New Star Times. https://www.nst.com.my/news/2016/12/196646/its-not-just-about-price.

Zainuddin, Zaemah. 2017. An Empirical Analysis Of Malaysian Housing Market: Switching And Non-Switching Models. Ebook. 1st ed. New Zealand.

Zakaria, Suriati. 2017. "GOVERNMENT INTERVENTION IN PROPERTY SECTOR". Academia.Edu. https://www.academia.edu/9445007/GOVERNMENT_INTERVENTION_IN_PROPERTY_SECTOR

Zainuddin, Zaemah. 2017. An Empirical Analysis Of Malaysian Housing Market: Switching And Non-Switching Models. Ebook. 1st ed. New Zealand.

Mahalingam, Eugene. 2017. "Property Market To Consolidate Further". The Star Online. https://www.thestar.com.my/business/business-news/2017/01/19/property-market-to-consolidate-further/.

Ruban, A, Opalyn Mok, and Julia Chan. 2017. "Unsold Units Continue To Dampen Property Market In Malaysia". Malaymail Online. https://www.themalaymailonline.com/malaysia/article/unsold-units-continue-to-dampen-property-market-in-malaysia.

The Sunday Daily,. 2017. "Malaysia Real Estate Market Outlook For 2017". https://www.thesundaily.my/news/2143610.

Farquhar, Stuart. 2017. "Why Malaysia’S Market Woes May Soon Be Over". Property Report. https://www.property-report.com/why-malaysias-market-woes-may-soon-be-over/.

Ng, Angie. 2013. "Reducing Speculation In The Property Market". The Star Online. https://www.thestar.com.my/Business/Business-News/2013/11/09/Reducing-speculation-in-the-property-market-Tough-measures-drawn-up-in-Budget-2014/?style=biz.