THE NATION Policies, Issues and Prospects
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HOUSING THE NATION Policies, Issues and Prospects HOUSING THE NATION Policies, Issues and Prospects Published in 2013 by CAGAMAS HOLDINGS BERHAD Levels 31 & 32, The Gardens North Tower Mid Valley City, Lingkaran Syed Putra 59200 Kuala Lumpur, Malaysia Copyright © 2013 by Cagamas Holdings Berhad. All rights reserved. No part of this publication can be reproduced, stored in a retrieval system or transmitted in any form, or by any means, electronic, mechanical, photocopying, recording or otherwise without the prior written permission of the publisher. The responsibility for facts and opinions in this publication rests exclusively with the authors and the contributors, and their interpretations do not necessarily reflect the views or the policy of the publisher. Perpustakaan Negara Malaysia Cataloguing-in-Publication Data HOUSING THE NATION: Policies, Issues and Prospects Includes index ISBN 978-983-99318-3-9 1. Housing – Malaysia. 2. Housing development – Malaysia. 3. Housing – Finance – Malaysia. 4. Housing policy – Malaysia. 363.509595 PROJECT MANAGEMENT Institute of Strategic and International Studies (ISIS) Malaysia PRINTER Akitiara Corporation Sdn Bhd Contents v List of Figures xi Foreword xiii Acknowledgements xv Introduction PART 1: THE CONTRIBUTIONS OF CAGAMAS BERHAD Chapter 1 3 Meeting the Needs of Homeownership – Tan Wai Kuen Chapter 2 23 Promoting a Secondary Mortgage Market and Debt Capital Market – Chung Tin Fah Chapter 3 Driving Islamic Finance 45 – Shabnam Mokhtar and Abdulkader Thomas PART 2: THE STATE OF HOUSING Chapter 4 Housing Needs and Aspirations 79 I. Challenges and Changes in the Industry – Michael Yam 95 II. The Housing Affordability Question – Chang Kim Loong Chapter 5 Housing Policies and Institutions 107 I. The National Housing Policy – The Ministry of Urban Wellbeing, Housing and Local Government 117 II. From Past to Present – The Developers’ Perspective – David K.T. Chua 127 III. The Views of the House-Buying Public – Goh Seng Toh Chapter 6 Housing Finance 137 I. The Role of the Banking System – Rajan Paramesran 149 II. Key Issues for Housebuyers – Elvin Fernandez Chapter 7 Housing Law 163 I. The Evolution of Housing Laws and Regulations – Salleh Buang 175 II. Stratified Property Management and Housing Administration – Viola Lettice de Cruz PART 3: TRENDS, ISSUES AND CHALLENGES Chapter 8 187 Land Laws and Their Impact on Housing – Ho Chin Siong Chapter 9 Luxury and Affordable Housing Policies, Issues and Prospects 205 I. Luxury Housing in the Klang Valley – Nur Adila Lim Lay Ying Abdullah 211 II. PR1MA: Catalyst in Affordable Housing – Abdul Mutalib Alias Housing the Nation ii Chapter 10 Case Studies in Public Housing 225 I. Kuala Lumpur – Syafiee Shuid 239 II. Penang – Goh Ban Lee 249 III. Selangor – Wan Nor Azriyati Wan Abd Aziz 261 IV. Sabah – Dullah Mulok and Siti Hajar Samsu 271 V. Sarawak – Abdul Mutalip Abdullah 281 VI. Kelantan – Kamarul Rashdan Salleh Chapter 11 289 Revisiting the Build-Then-Sell vs Sell-Then-Build Debate – Nor’Aini Yusof Chapter 12 Safe and Sustainable Housing 303 I. Pros and Cons of Gated and Guarded Communities – Grace Xavier 311 II. Developing Cohesive and Participatory Communities – Khairiah Talha PART 4: FUTURE DIRECTIONS AND INNOVATIONS Chapter 13 323 Connecting Transportation Networks and Housing – Nor Fanim Mohd Amin Chapter 14 Housing Construction 343 I. Implementing the Industrialised Building System – Zuhairi Abdul Hamid and Kamarul Anuar Mohamad Kamar 357 II. Improving the Productivity and Skills of Construction Workers – Mahyuddin Ramli and Ruhizal Roosli 367 III. Environmental Sustainability Through Green Design – Ken Yeang Contents iii Chapter 15 New Ways to Facilitate Housing Development and Ownership 377 I. Private Mortgage Insurance – Rosemarie A. Sabatino 387 II. Public-Private Partnerships – H.K. Yong 399 III. The Shared Ownership Model – Stuart MacDonald 411 Editorial Postscript 413 The Contributors 425 Index Policies, Issues and Prospects Housing the Nation iv Figures Chapter 1 Meeting the Needs of Homeownership Figure 1: Size of mortgage markets in Asia (2012) 5 Figure 2: Originators of housing loans/financing in Malaysia’s banking system 6 Figure 3: Malaysian house price index by house type 7 Figure 4: Mean and median monthly household incomes in Malaysia (1995–2012) 8 Figure 5: Deriving the affordability of homes (selected years) 9 Figure 6: Growth of housing loans (annual growth in %) (1997–2012) 11 Figure 7: The three business models of Cagamas 14 Figure 8: Cagamas as a provider of liquidity to the primary housing market 15 Figure 9: Cagamas’ purchases of housing loans in the secondary market 17 Chapter 2 Promoting a Secondary Mortgage Market and Debt Capital Market Figure 1: Corporate bond issuance (sukuk and conventional) in Malaysia 27 Figure 2: Cagamas’ balance sheet (RM million) 28 Figure 3: The Cagamas business model 30 Figure 4: A summary of Cagamas’ products from 1987 to date 31 Figure 5: The structure of Purchase Without Recourse 32 Figure 6: Transaction structure of securitisation 33 Figure 7: Summary of RMBS issued by CMBS 33 Figure 8: Transaction structure of a credit default swap 35 Figure 9: Comparison of regulatory treatments for Cagamas debt securities 37 Figure 10: Cagamas bond yield against MGS, GG, AAA, AA1, and A1 PDS (as at 31 July 2013) 38 Figure 11: Issuance of Cagamas debt securities (RM million) (2000–2012) 39 Chapter 3 Driving Islamic Finance Figure 1: Global sukuk market development – annual new issuances 47 Figure 2: Sukuk market share (US$ million) (2009–2012) 48 Figure 3: Islamic PDS (or corporate sukuk) approved as % of total PDS approved 48 Figure 4: New corporate sukuk issued compared to total PDS issued (excluding Cagamas) 49 Figure 5: Sovereign MYR new Islamic debt securities issuance compared to total new debt securities issuance (excluding Khazanah) 50 Figure 6: Outstanding Malaysian ringgit sukuk 51 Figure 7: Cagamas annual securities issuance 53 Figure 8: Cagamas sukuk details since 2002 54 Figure 9: Sanadat Mudarabah backed by an Islamic Hire-Purchase portfolio 55 Figure 10: Bai’ Bi Thaman Ajil Islamic Securities (BAIS) – simplified 57 Figure 11: First Cagamas IRMBS transaction summary 58 Figure 12: Second Cagamas IRMBS transaction summary 58 Figure 13: Cagamas IRMBS Sukuk Musharakah structure 59 Figure 14: Conventional and Islamic IMTN issued in August 2008 61 Figure 15: Cagamas’ Sukuk Commodity Murabahah 61 Figure 16: Variable-rate sukuk structure at each profit payment before maturity 63 Figure 17: Sukuk ALIm structure 64 Figure 18: Sukuk Wakalah Bil Istithmar at inception 66 Figure 19: Sukuk Wakalah Bil Istithmar at maturity or in the event of default (EOD) 67 Figure 20: Market liquidity ratio for conventional and Islamic securities 69 Figure 21: Market liquidity ratio: details and drivers 70 Figure 22: Market liquidity ratio for “other” issuers 71 Figure 23: Trading activity comparison (% of total trading for the period 2005–2013) 72 Figure 24: Trading activity during the Global Financial Crisis 72 Figure 25: Cagamas’ purchase of home financing from the market 74 Chapter 4 I. Challenges and Changes in the Industry Figure 1: Housing completion in Malaysia (2006–2012) 81 Annex: Low-cost housing policy 90 II. The Housing Affordability Question Figure 1: Housing affordability as a ratio of price to annual income 97 Figure 2: Maximum prices affordable to average-income households (Kuala Lumpur and Selangor) 97 Figure 3: Prices of selected properties in selected suburban areas 98 Figure 4: “Sandwich generation” savings comparison 99 Figure 5: Changes in the RPGT 103 Figure 6: Proposed changes to stamp duty 103 Chapter 5 I. The National Housing Policy Figure 1: The Government’s institutional framework 108 Figure 2: Private sector investment 109 Figure 3: PPR houses for rent and sale (2001–2012) 112 Policies, Issues and Prospects Figure 4: Resettlement of squatters into PPR (2001–2012) 113 Chapter 6 I. The Role of the Banking System Figure 1: Malaysian House Price Index (MHPI) 138 Housing the Nation Figure 2: Loans to the housing sector 139 vi Figure 3: Real property gains tax applicable on disposal of properties 140 Figure 4: Average commercial bank lending rates 141 Figure 5: Liquidity in the banking system 142 Figure 6: Household debt growth 144 Figure 7: EPF housing withdrawals 147 Figure 8: Provision of housing loans in Malaysia 148 II. Key Issues for Housebuyers Figure 1: Monthly repayment schedules 153 Figure 2: Housing withdrawals allowed under EPF Account II 154 Figure 3: Analysis of house prices and household incomes by state (1995–2012) 158 Figure 4: The existing stock of residential units in Malaysia (Q2 2013) 160 Chapter 7 I. The Evolution of Housing Laws and Regulations Figure 1: Key statutes affecting the housing industry (besides the HDA) 164 Chapter 8 Land Laws and Their Impact on Housing Figure 1: The institutional framework for land-use planning in Malaysia 189 Figure 2: The role of planning in the housing supply process 190 Figure 3: A typical subdivision 195 Figure 4: A typical partition 195 Figure 5: A typical amalgamation 195 Figure 6: Total area of Malay Reserve Land in 2005 and 2009 197 Figure 7: Highland and hillside housing development guidelines 200 Chapter 9 II. PR1MA: Catalyst in Affordable Housing Figure 1: Proportion of urban and rural populations in Malaysia (%) (1950–2050) 212 Figure 2: Distribution of Malaysian households by income class (RM/month) (1990 and 2009) 214 Figure 3: PR1MA’s scope of powers and functions 217 Figure 4: Proposed governance structure 218 Figure