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Is Malaysian Housing Affordable? - Ammar Atan

Is Malaysian Housing Affordable?

House is one of the indispensable needs In life, as a human, we need a proper shelter that will be able to secure us from any danger and threat. House is also pertinent to help our society grow in the modest and civilised way. We do not want our society to live without a proper roof over the head or with life-long debt from an action of buying a house.

Thus is Malaysian housing affordable?

Realistically, our housing market is out of affordability for the vast majority of Malaysians. According to Khazanah Research Institute (KRI), the housing market in Malaysia has shown that most Malaysians cannot afford to own or buy a house, KRI has also indicated that housing market in Malaysia is out of affordability at 4.4 times higher than the median household income of Malaysians. Terengganu, Penang, Kuala Lumpur and Sabah are the states that are in the critical condition of affordability.

Table 1: Comparison of housing affordability based on annual household median income and median all-house price across states in Malaysia, 2014
Source: DoS (2015b), NAPIC (2015), KRI calculations

In addition, an organization which is pro-developers, Real Estate and Housing Developers (REHDA) has also pondered the same indication where for the first half of 2016, the housing market has indicated a small percentage of affordable houses at below RM200, 000 which is about 14 percent from overall units on the supply side of the market. However, there is a large domination of housing price at RM300, 000 and above which is more than 50 percent from the overall supply side of the market.

Table 2: Residential Selling Price Nationwide

Source: Committee property Industry Survey 1h 2016 & Market Outlook For 2h 2016

The housing inflation which has grown exponentially since the global financial crisis in 2008 is still unable to be curbed effectively since the implementation of Real Property Gains Tax (RPGT), moratorium, stamp duty and other initiatives that are taken. In fact, in the budget speech of the prime minister, Najib Razak has failed to address the housing problem in two aspects. First is the strengthening strategy of supplying more affordable housing in Malaysia for a long term. Secondly, Najib has also failed to address on how to curb the housing price inflation that has gone to severely unaffordable.

Apart from that, the government has also introduced an end-financing scheme that will help middle and low-income families to own a house. However, after carefully examining the scheme, my team and I have found out that this scheme will give bad implication to the buyers, especially to low-income earners. Through the scheme, PRIMA buyers have to face a higher mean rate of interest at 4.75% compared to the average rate in the normal market at 4.45%, thus buyers have to pay more to own a house from the government-linked company, PR1MA.

In fact, the PRIMA buyers can also use the account 2 of Employee's Provident Fund (EPF) to pay monthly payment from a housing loan. If the buyers chose this method, then 30% from the account 2 of EPF will be transferred to the bank for the monthly payment, if they not able to pay. Unfortunately, the scheme is contradicting with two major Malaysian institutions which are Central Bank of Malaysia (BNM) and EPF itself. BNM has stated that Malaysians household debt compared to disposable income is at 140% and is the highest in the world. Furthermore, KWSP has also stated in 2015 that 68 percent of EPF's members which are aged at 54 years old have less than RM50,000 in their EPF account. 

By such implication, AMANAH youth wing has come up a statement that critically opposed the end-financing scheme from being implemented under neither the national housing developers nor the private developers.

In conclusion, the shortage of affordable houses, the high cost of land and material, the high cost of living and low expansion of wages, has trapped people within the unfortunate cycle and this eventually creates a homeless generation in the future. 

AMMAR ATAN
AMANAH YouthIs Malaysian Housing Affordable? - Ammar Atan
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