When Local Government Development minister Nga Kor Ming announced he wanted to learn from the Housing and Development Board (HDB) of Singapore in an effort to tackle the growing problem of affordable housing, Malaysians were divided.
Some felt it was a good move as Singapore’s public housing authority is an example of success, whilst others felt Malaysia ought not to risk exposing its ‘housing development secrets1’.
But are houses even affordable in Malaysia? For many millennials and young families today, the answer would be a resounding no. And the statistics show.
Houses today are ‘seriously unaffordable’
The hard truth is that housing in Malaysia has been increasingly unaffordable.
A proven indicator that is supported by the United Nations and World Bank is the Multiple Median Approach (dividing median house prices by median annual household income) – if a house costs more than three times the annual household income, it is considered an unaffordable home.
This has been the case in Malaysia for thirty years2. In 2020, the median house price was RM295,000 while the median annual household income was RM62,508.
That year, the house-price-to-income ratio was 4.72 times. According to the Multiple Median Approach, anything between 4.1 and 5.0 is considered seriously unaffordable.
Affordable housing located in the middle of no-where
A number of factors have been cited as reasons for increasing house prices and decreasing affordability.
These include over-supply in unattractive areas, slow income growth (in fact, Bank Negara’s 2018 Annual Report stated that salaries for fresh graduates are lower than in 20107) and rising construction costs.
While the government has always placed importance on making homes accessible and affordable to the masses, industry experts continue to raise their concerns.
Malaysian Institute of Estate Agents (MIEA) president, Chan Ai Cheng said the latest data from the National Property Information Centre (NAPIC) showed that in the third quarter of 2022, there was an overhang of 29,534 units.
Overhang: residential units that have received certificates of completion and compliance but remain unsold nine months after launch (NAPIC)
Of the 29,534 units, 53.3% were priced below RM500,000. “Probably a study needs to be done as to why there is such a high overhang in this price segment,” Chan said4.
A possible reason for the poor uptake is that many of these overhang affordable properties are located in far-flung areas that are hard to reach and without easy access to amenities.
“If the amenities for everyday living are far away, how on earth can we expect the already struggling families to call these their homes?” asked Au Foong Yee, editor emeritus at The Edge5.
A surprising statistic is that while many expect the Klang Valley to have the most overhang properties, Johor and Penang actually top the list. Chan recommended that these states consider decreasing the supply of new properties in the future to combat this issue.
Tighten your belt, stay farther out or rent
The issue of affordability is complex and requires a systemic revamp. But it is a growing concern as more young Malaysians are becoming increasingly burdened by debt.
Malaysians (those without financial backing from family or well-paying jobs) are now largely left with three options:
- Buy a home (if they qualify for a loan) in a preferred location and live on a tight budget
- Buy a home in suburban areas or farther out and endure the lengthy commute
- Rent a home until purchasing a property that is within reach
Many who bite the bullet and purchase a home in this financial climate have the burden of paying hefty loans for the next 30-35 years. A 2017 report by Bank Negara revealed that 52% of household debt was made up of housing loans3; this figure is staggering and alarming.
Lisa* and her husband purchased a landed property in the Klang Valley for RM700,000 last year after qualifying for a 35-year loan. Their monthly loan repayment is close to RM2,000, a significant amount for a young family on a single income.
“Taking on home ownership has definitely impacted our savings every month, but we are happy that our children get to be closer to family and finally have our own home after renting for several years,” she said.
Felix*, 32, and his wife have decided not to make any home purchases for the foreseeable future and just rent an apartment in Petaling Jaya.
“Although we are a two-income household, the properties we could afford are simply too far away from my workplace and public transport is not easily accessible. So the commute by car would be over an hour each way, and we’re currently sharing one car. It’s just not practical,” he said.
“It is about liveability.”
Au, who has been covering the Malaysian property market for more than two decades, said the public housing model in Malaysia is “totally outdated and no longer feasible5”. She is pushing for a complete revamp.
“Public housing is more than just putting a roof over the heads of the B40 group and even the M40. It is not about building blocks. It is about building inclusive communities. It is about liveability,” she said5.
The newly-minted government seems to be tackling the issue from every angle. On 28 January, Minister Nga stated that the government plans to study every sick or abandoned housing project in the country6.
According to the minister, there are 550 such housing projects the agency has found at the moment. “We will take steps to ensure that sick projects can be revived so that the welfare and rights of buyers are protected… we are in the midst of identifying the problems with developers and contractors,” Nga said.
The ministry also aims to complete 5,000 units in these properties within the first 100 days of office6 as part of efforts to address the issue.
How can we help make houses more affordable for all?
There are various factors at play when it comes to affordable housing, and much of it is too macro for ordinary citizens like most of us to get involved. However, awareness, advocacy and prayer can go a long way.
- Awareness: no matter how old you are, take steps to understand how the property market works. Read up on Malaysian real estate, housing affordability and why so many Malaysians simply cannot afford their own homes today.
- Advocacy: as the government pushes for on-ground initiatives and makes affordable housing attractive, The Centre has identified potential for better policies and processes including public-private partnership2.
“For example, a number of cities around the world have applied inclusionary zoning laws that mandate residential developments to set aside a share of the development to include affordable homes, particularly around public transit hubs.
The quid pro quo of inclusionary zoning laws is that developers are offered cost-saving incentives, whether it is low-cost land, tax breaks, or low-interest financing. In this way, inclusionary zoning allows the government to facilitate the increased provision of low-cost housing through the private market2.”
- Prayer: The housing affordability issue has boxed many families, especially B40 and M40 communities, into having to choose between buying a home in areas often lacking basic amenities or paying high rental rates in more liveable areas.
Let’s pray for our leaders and for a levelling of opportunities, that every Malaysian family will be able to afford (either via buying or renting) a home where they can enjoy a good quality of life, have space to breathe and enjoy basic amenities (such as schools, hospitals, grocers, etc) nearby.
- ‘Malaysia at risk of exposing its housing development secrets to HDB’, January 2023, Focus Malaysia
- The Affordable Housing Issue in Malaysia, September 2021, The Centre
- Housing loans make up half of household debt, reflects affordability issues, March 2018, EdgeProp
- Napic shows high overhang for affordable homes – study needed, says MIEA, December 2022, EdgeProp
- The REAL Deal: What’s wrong with learning from Singapore’s affordable housing?, January 2023, The Edge Markets
- Govt to scrutinise every sick, abandoned housing project, says Nga, January 2023, The Edge Markets
- Four reasons why Malaysian homes are too expensive, February 2020, The Daily Express
- Cover Image: New Straits Times