Budget 2023: Property Industry Expects Affordability Measures And Firm Financial Management

While Malaysia’s new government organises itself, the property industry is already considering how Budget 2023 may change in the weeks ahead to support housing market stability and affordability.

Muhazrol Muhamad, Head of the Bumiputera Segment at IQI, part of Juwai IQI, released these comments today. Juwai IQI is Asia’s largest proptech group.

“The new government has signalled that it will revise the proposed Budget 2023 to more closely match its own policy priorities,” said Muhazrol.

“We expect property-related measures in the revised budget to focus on two key areas: housing market affordability and access on the one hand, and on the other, firm financial management to support economic growth and employment.

Housing Affordability and Access

“In the area of preferences for Bumiputera, we expect continuity and stability in the new budget. Prime Minister Datuk Seri Anwar Ibrahim has stressed that his coalition government will preserve the status of the Bumiputera. We are not likely to see many changes in this area in Budget 2023.

“Housing affordability and access will likely be a top policy focus for the new government. These policies will be a response to the high cost of living pressures in the country and the long-standing barriers that make it difficult for young people and the Bottom 40% to purchase their own homes.

“It is vitally important that all Malaysians have access to housing. Housing is the cornerstone of financial security and wealth creation for Malaysian families.

“The new government has declared that protecting low and middle-income groups from rising prices is a top priority. While we face some challenges, in Malaysia inflation is lower and economic growth is higher than in similar countries. This year’s 3.3% inflation compares to a global rate of 7.4%. Lucky, housing costs have not risen at the same rate as consumer goods.

“Potential budget measures that could help with affordability include down payment assistance, incentivising the construction of desirable affordable homes, and reducing the long-term costs of ownership through mortgage guarantees and similar policies.

Financial and Economic Management

“The property industry will be looking to the new government to continue to provide firm financial and economic management. A stable macro environment will give the real estate market a basis for stability and growth in the second half of 2023 and beyond.

“The high cost of materials is one factor affecting the housing market. Materials costs have had a serious impact on the construction of new housing in 2022. This pressure has already begun to ameliorate, with prices for steel, bricks, and so on now significantly below their peaks. The unit price index for steel in September dropped about 2% from its August high but is still about 9% higher than in September of 2021. Prices for bricks and steel and metal section have evolved in a similar way.

“We expect 2023 prices for major building materials to remain elevated compared to their long-term levels. This could help constrain the construction of new supply, thus indirectly assisting developers to further clear their unsold inventory.

“When building materials are so expensive, it is difficult to build affordable housing in a financially sustainable way. Margins on affordable projects are already low, so ballooning construction costs can make them entirely unbuildable. One solution is to continue to develop our domestic production of major building materials. That’s especially appealing since their rising costs have resulted from international factors like the Russian invasion of the Ukraine.

“Good fiscal and policy management of the economy will give confidence to both local businesses and foreign investors. This will stimulate investment, hiring, and income growth. Income growth is a key factor in property market performance, and good economic management is a key factor in generating income growth.

Housing Outlook

“During 2020, 2021, and early 2022, developers cut back on every stage of their supply pipeline, including planned dwellings, dwellings under construction, and dwellings actually delivered to the marketplace. This has allowed them to clear inventory and significantly improve the supply-demand balance in many areas.

“In the most recent two quarters, developers have displayed more confidence. New home starts, completions, and planned supply have all increased at double-digit rates of growth.

“In the first half of 2023, we expect real estate prices to remain stable, with potential price increases to begin in the second half.

“There is a wide range of results at projects on the market today. Some projects are selling out quickly, but less well located or designed projects are languishing. Buyers still have abundant choice, so success depends on the ability to build product buyers can get excited about. Location, size, and fixtures are all key elements of product-fit equation.”

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