KUALA LUMPUR – Developing broader alternatives to home ownership, including a well-functioning rental market, should be pursued as a policy priority, according to Bank Negara Malaysia (BNM) workshop.
The central bank’s economics research workshop with the theme, “The Housing Market: Issues and Policy Options”, said a number of alternatives were discussed.
BNM said there was a broad consensus that policy considerations for housing the nation will need to balance the objectives of providing a minimum quality standard of housing for all Malaysians, while preventing the buildup of imbalances in the housing market.
Several participants cautioned that the 2007 global financial crisis that had its origins in sub-prime mortgage lending should serve as an important lesson on factors that can increase risks in housing markets, with far reaching consequences for financial and macroeconomic stability.
“While households require access to credit to own a home, it is not in their own interest to incur an unsustainable level of debt to do so.
“Policy measures to ensure access to credit must therefore be pursued with concern for the protection of homebuyers from financial hardship leading to foreclosure and poorer welfare,” it said.
There were also suggestions that developing broader alternatives to home ownership, including a well-functioning rental market, should be pursued as a policy priority.
BNM said the suggested need for alternatives highlights the adverse consequences that poorly designed incentives to increase home ownership can have on housing affordability over the longer term.
“It also provides a viable route to help low income and early career individuals onto a path towards eventual home ownership. Better enforcement is also critical to prevent the abuse of schemes intended to assist specific household segments to own or rent homes,” it said.
The workshop said factors that influenced the efficiency with which house prices were adjusted were also examined.
It was also pointed out that incentives for increasing home ownership should be carefully considered so as not to blunt the effectiveness of market mechanisms which work to correct housing imbalances.
“The need to ensure that price thresholds adopted for affordable houses are appropriate was also highlighted, noting that house prices remain out of the affordable reach for many low- and middle-income households,” according to the discussions at the workshop.