Affordability of homes getting worse or better, now and future.

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Is it easy to buy a place that has what we want at the price we could afford here in Malaysia? Perhaps within the KL property market? This was a recent ‘debate.’ Rehda (Real Estate Housing Developers Association) patron and Rehda Institute Tan Sri Eddy Chen said that there is now already an overbuilding of affordable housing. The reason is because many developers are now building in that segment because they want to counter high loan rejection rates. This oversupply is made worse by a lack of accurate and timely property market data.This is the article in TheEdge Markets.  Well, our Bank Negara Malaysia (BNM) said that Rehda’s definition of affordable houses with the price range of RM300,000 to RM500,000 is inaccurate. In a posting in factwatch.my, it said, “Houses in the price range of RM300,000 to RM500,000 are beyond what is affordable to the households earning the median income in Malaysia.”  Factwatch.my is a website by BNM with the aim of #letthefactsspeakforthemselves. There’s also another website by BNM too for the property market; housingwatch.my

Source: https://www.macrobusiness.com.au/2017/01/2017-demographia-housing-affordability-survey/

BNM explained that it is using international standards; Housing Cost Burden approach to estimate the affordable home price. Based on a median household income of RM5,228 in 2016 as per Department of Statistics’ “Household Income and Expensditure Survey”, the maximum price of an affordable home is estimated to be only RM282,000. In brief, calculation comes from RM5,228 x 12 (months) x 4.5 (years) = RM282,312. Anything higher than this number would be categorised as ‘severely unaffordable.’ Take a look at some of the other countries’ median affordable home price vs household income in the image. BNM also said that there remains a mismatch between what was built versus what was demanded by the households. Using numbers, BNM explained, “”According to the fourth-quarter 2017 data by National Property Information Centre (Napic), only 39% of new housing launches were priced up to RM300,000 over the years 2016-2017. This is insufficient to cater to the demand by 50% of households in Malaysia earning up to the median income.”

BNM also shared, “Napic data also suggests that the issue of unsold affordable homes priced below RM300,000 is the least severe compared to other price ranges. As at fourth quarter of 2017, unsold residential units priced below RM300,000 constitute the lowest share (20%) of total unsold residential properties under construction in Malaysia (RM300k-500k: 35%; above RM500k: 45%).” More importantly, BNM added, “Beyond prices of new launches, equally important are other aspects of what constitutes an affordable home such as connectivity from centres of employment, sufficient living space.” it added. Here’s that article in EdgeMarkets again. 

Personally, there are three important things that I would say, as a working professional for the past 20 years. First, it is not just the responsibility of Rehda or even the BNM alone but also us, the working people too. Remember, whether it’s affordable or not is not just about the price but also how much one could save / earn / invest. Higher savings simply meant making some better choices every time we need to spend. Earning more simply meant that we keep improving with what we do and climb ever higher (corporate ladder and promotions) because only that would give us a higher monthly income in order to save more. Investing is meanwhile just having sufficient financial knowledge so that our money works harder for us and suddenly we start noticing that we are ahead of our peers, financially. They talk about upcoming movies, we discuss about potential returns. The bad thing is that most people would prefer not to think, plan and do and well, this issue of affordability would never go away. This is why whether in Malaysia or in some advanced markets, the question of property affordability has never subsided. While the policy makers and the private sector does their best, we better also be doing our best. Happy learning.

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written on 6 May 2018

Next suggested article:  About the unsold units? We still need more units, actually

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