Reference Resources: The Daily News, October 3, 2016

Lately, the issue of affordable home ownership gets public attention. What's more, the government budget season to be announced on October 21 is getting closer.

Various suggestions and research papers are already mentioned. However, this problem is still in the hands of our people and the solution is likely to take a long time, in addition to the need for a different perspective.

In fact, there are imbalances in supply and demand that are significant in the property market in this country. Plus home prices are seen increasing every year.

 

Household income

To view these issues, we need to know whether home prices are reasonable based on one's income or household.

The most commonly used budget is three times the annual salary. For example, if a person has a monthly income of RM5,000 per month, then his annual income is RM60,000 per year.

Therefore, three times annual salary means RM180,000 is the price of affordable housing for individuals or households with a monthly income of RM5,000.

If we see a census conducted by the National Statistics Department, the median household income for 2014 is RM4,585 per month. This means that affordable house prices for Malaysians are generally RM165,060.

After knowing the price of affordable housing, we shift to the imbalance in the supply and demand of residential property in our country.

Based on recent statistics from the National Property Information Center or NAPIC, the number of new residential units launched is 10,655 units in the first half of 2016.

Of this total, 21.4 percent is home priced at RM200,000 and below, while the balance is a home priced at RM200,001 and above. This statistics clearly shows an imbalance in affordable housing supply, when more than two-thirds of the total residential property cost more than RM200,000.

The question is, how do we fix this imbalance? Indeed, this question is not easy to answer and the solution also takes time.

 

Market intervention

Therefore, there must be a 'power' form that will alter the dynamics of the property market, especially the ever-increasing home prices. In this regard, the writer considers the use of cash waqf for the purpose of intervention in the property market, especially the residential property in the urban area is the solution to this problem. Cash collected waqf funds can be used to purchase existing or new residential properties.

Later, these purchased residential properties will be rented out to residents in the city with very affordable rental rates such as less than fifty percent of market rental rates. For example, if the house rental rate in the open market is RM1,000 per month, the house bought by the waqf fund will be rented at a rate of RM500 per month.

In that way, the cash waqf fund was successfully converted into a fixed asset form of home and at the same time it was able to generate income through the rental that was received.

Additionally, it provides great savings to residents in the city through extremely affordable rental rates. In addition, it gives households the opportunity to reduce their indebtedness rate.

This can be done when homeowners sell their homes to cash waqf funds and they can rent back homes they live with low rental rates from market prices.

This situation may be suitable for homeowners who purchase a home beyond their capacity. Or for those who have more than one home.

 

Avoid scams

However, there should be a mechanism for valuing real estate from a market price point and surrounding environment to avoid any element of fraud.

Thus, this waqf fund is not run out, it can even survive to reinvest in other assets. Imagine, if this effort can run on a large scale.

Of course, it will have a significant impact on the market price of residential properties in urban areas as there is a high tendency to rent rather than owning a home.

In addition, it is also an effective mechanism for reducing household debt problems.

However, this way does not mean that it does not encourage the people in the city to have no home. It's more about giving space and time to the people in the city for them to make more financially planning. We have to admit that having a home is a form of long-term investment because of its great cost.

Hence, it is important for prospective home buyers to have a good financial position before dealing with long term financial commitments. It is not wrong if we rent a house first and do not need to rush to make a mortgage.

The worst of all is that we are too lustful and deceived by the words of others that ultimately cause us to stumble into the great indebtedness. In terms of policy statistics, this cash waqf instrument has the potential to be the mainstream and complement the existing economic system. It is therefore the responsibility of the government to implement what is best for the country in an effective and efficient way.

 

 

Date of Input: 28/09/2018 | Updated: 06/10/2018 | m.jazmi