KUALA LUMPUR: For now, Datuk Charon Wardini Mokhzani is just glad that Khazanah Research Institute’s (KRI) study of Malaysian homes has corroborated many people’s convictions that home prices have escalated beyond affordability, to the point that the government has even come out to raise its concerns.

“One of the things we want to do is to promote informed debate about the issues in the country. It’s fine if you disagree on what the answer is, but at least let’s agree on what the problem is,” he said.

Now an executive director of Khazanah Nasional Bhd’s managing director office, the silver-haired banker is also the managing director of KRI, a think tank founded in 2014 that focuses on Malaysia’s socio-economic issues.

Earlier this month, Deputy Finance Minister Datuk Othman Aziz came out to express his concerns over a serious mismatch given the lack of supply of houses deemed affordable by most Malaysians.

“Only 21% of new housing launches in Malaysia were priced below RM250,000 in 2014, while developers are attracted to build higher-end properties priced above half a million,” Othman was quoted as saying.

Last October, KRI published its “Making Housing Affordable” report, which Charon Wardini said is the think tank’s most detailed document with regard to policy recommendations.

KRI was one of the first to employ the “median-multiple” ratio developed by the United Nations Centre for Human Settlements and the World Bank to gauge the affordability of Malaysian homes.

The ratio set for home prices falling under the affordable category is capped at three times a household’s annual income. Malaysia’s median home price in 2014 was already 4.4 times the median income.

Although many would think that home prices started to spike in the early 2010s — which the investing community would call “the golden age of property developers” — KRI’s study found that the median price had shot above four times the median household income from as early as 2002.

“We’re really glad to see that affordable housing now is a big topic of conversation. The more people discuss it, the more likely we are to solve the problem,” Charon Wardini said.

Charon Wardini contended lowering home prices is possible without forcing developers to sacrifice profitability — but the country’s property development industry will have to undergo a structural change.

“The way Malaysia’s construction industry is organised hasn’t changed much from the days of the British,” he said. Having every duty broken up into various entities creates inefficiencies and eventually slows things down, he explained.

In “Making Housing Affordable”, the think tank propagates the use of Industrialised Building System (IBS) among homebuilders. Instead of constructing homes on-site, brick by brick, the IBS method fabricates components at a manufacturing facility and has been touted as speeding up the construction process while minimising costs.

A faster turnaround helps property developers increase the supply of homes at a faster pace, said Charon Wardini. After that, simple economic dynamics — which is when supply outpaces demand — will take care of the pricing issue, he argued.

KRI did not stop after publishing “Making Housing Affordable”. Charon Wardini said the institute has had “healthy debates” with the Real Estate and Housing Developers’ Association Malaysia since the publication.

The consensus was that property developers too, are worried about high home prices, said Charon Wardini, simply because, even from a commercial perspective, companies want to sell things that are marketable.

While the solution sounds simple enough, Charon Wardini acknowledged that during the adjustment period, when local developers switch their construction method, home prices may become more expensive temporarily before the supply of homes built using the new method reaches a critical mass to bring home prices down.

This is where the government can step in with the right policies to steer things along, and Charon Wardini is hopeful that something on affordable homes would come out of the government’s budget this year.

On KRI’s side, Charon Wardini said the institute will continue to study many other issues affecting Malaysians. Low income, in particular, is one area that KRI is focusing on.

“It’s good to improve the economy but the objective is not just for the sake of improving the economy. The objective must be to improve the welfare of the people as well.”

Today, KRI will unveil the update to its inaugural report, “The State of Households”, which Charon Wardini described as a continuation of KRI’s “attempt to set out the facts because one of the things we want to do is to promote informed debate about the issues in the country”.

Some of the findings in the updated report, named simply “The State of Households II”, include indications that income of the bottom 40% of the population has risen — albeit due more to a bigger share of the Bantuan Rakyat 1Malaysia cash transfer programme than anything else.

It also looks at food inflation, which has outpaced the headline rate and can be a problem. “One of the other themes we explored is population ageing. The good thing about Malaysia is that life expectancy has increased. Unfortunately, it also means that if you retire at 60, you would need a lot of money to keep you going,” Charon Wardini said.

After this, the institute will publish a report on the drivers of the economy, and another on social mobility. As there is a lot more to be done, Charon Wardini pledged KRI will continue with its work.