Understanding Housing Affordability: The Emotional Impact on Prices

Solving housing crisis through conversion of standalone homes

Home crisis? Yes, when prices are just extremely high

How do we know if a certain city has a housing crisis? Note, this is not a term dreamt up by me yeah. This is a term from the media on Australia’s property market. Let’s just look at Melbourne which is one major city. The below are the ‘lowest priced’ and ‘new property’ in Melbourne. Data as at 2nd December 2025. Source: realestate.com.au

Sizes are small and prices are huge

Looking at above, we can see the unit is smaller than even 1,000 sq ft. Prices are very close to AUD700,000 and that’s like RM1.9 million. I know people there earn AUD, so house prices in AUD should be reasonable. Referring to the units, there are just 1 room and 1 bath and there were no car parking spots which come with. In other words, every day, every week and every month, the owner of these units would still have to pay parking fees if they own a car.

Can we solve this? The answer is yes. Follow the model by New Zealand. Go for “gentle density.”

Read on at theedgemalaysia.com Easing zoning rules to allow more duplexes, townhouses and low-rise apartments in established suburbs would unlock well-located land, reduce pressure on fringe development, and expand access to jobs and transport.

“Gentle density can deliver more housing in middle-ring neighbourhoods where people want to live, while making better use of existing infrastructure and transport networks,” said CEDA Senior Economist Danika Adams. She highlighted New Zealand’s largest city as showing “what’s possible when you implement planning reform at scale.”

Auckland’s overhaul began in 2016 and allowed medium and some higher density housing across around three-quarters of the city, resulting in a 50% increase in building consents. Since then, Auckland has dropped to 16th in a global ranking of housing affordability from seventh in 2018, while Sydney remains second and Melbourne is ninth. Read on at theedgemalaysia.com

Using supply to reduce the price increase pressure

When it comes to property prices, it is not just the demand versus the supply but also the supply at the right places. Even if we build more units but the units are not all at the places people want to buy, then that does not change the dynamic of price increase at all. Prices in those areas favored by all will still rise while the units built at those less popular areas will just drive prices down or maybe hold up the price increase. This is why it has to be a comprehensive plan to tackle the demand versus supply and cannot be an ad-hoc kind of measure.

Prices do not wise based on numbers, they rise based on emotion and affordability

When someone likes a place, they are willing to pay extra for that place. That usually meant quite a lot when it comes to housing price. You see, even in Australia, if someone is willing to pay an extra AUD100 every month to buy into somewhere they love, this AUD100 translates into an extra AUD25,000. Take a look at the below two images.

First one shows a property of AUD700,000 and the monthly repayment is AUD3,247. The next one shows AUD725,000 and the monthly repayment rises to AUD3,363. This is a difference of AUD116 per month. So, if anyone likes the home and is willing to pay just an extra AUD100 per month, they could afford a home which is AUD25,000 more expensive. This is why home prices are not controlled by merely demand and supply because not all homes are created equal and everyone has their own emotional attachment to some area, property or circumstances.

It is similar to Malaysia too. Anyone who’s willing to pay just an extra RM100 per month will…

RM600,000 property will have a repayment of around RM2,656 per month for 30 years. Meanwhile someone willing to pay an extra RM100 every month can afford a property of RM623,000. In other words, just paying an extra RM100 per month meant that this person can buy a property which is RM23,000 more expensive. Crazy but true and this is why any property investment decision will come down to both emotion and affordability. Of course, if the person could not afford the extra RM100 per month, then everything stays the same. Property price will remain RM600,000.

My wish? Of course I hope every Australian is able to afford a home.

Definitely still wishing that when Australia does what New Zealand did, they can slow down the price increase tremendously. My wish for Malaysians is the same too. Everyone must seek to own a place or the government must make sure they do not spend too much out of their salary just to rent a place to stay. That’s crazy. The money they saved from not paying a high rental will be spent on the economy. So, it’s win-win. Government helps and they spend more and it will multiply.

Happy understanding this new method called ‘gentle density.’

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