Housing Crisis in Malaysia

The challenges of buying and owning property

/ April 8, 2021
Cover image via Abdul Razak Latif /123RF
  • Bank Negara Malaysia (BNM) stated that housing in Malaysia is “severely unaffordable” compared to international standards.
  • Lower-income Malaysians have difficulty purchasing and owning a home due to the high prices of new properties, which causes an excess supply of properties in the market.
  • The demand for property is highly affected by the buyers’ concerns about job security, overall affordability, and availability of housing loans because of the economic shock from Covid-19.
  • Experts are optimistic that the Malaysian property market will improve as government initiatives such as HOC have created a supportive environment for homebuyers and the economy recovers as the Covid-19 vaccines are given to the public.

The inability to own a house has always been an issue in Malaysia, especially amongst the lower-income group of people. Although most of us see owning a dream home as one of our goals in life, purchasing one is deemed less achievable as time goes on.

 

Unaffordable Property

The rule of thumb to determine a house’s affordability is if the price is not more than three times the annual household income. Based on that, Bank Negara Malaysia (BNM) has determined that housing in Malaysia is “severely unaffordable” compared to international standards. They also stated that the maximum affordable house price is only RM 282,000 based on the country’s ratio and median national incomes.

Hence, there is an excess supply of properties in the market as most new property prices are barely within the limit or above the range of affordability.

Image via Nirian / gettyimages

According to a report by the National Property Information Center (NAPIC) done on the end of 2020, the severity of the situation can be summarised as such:

  • There were a total of 55,193 overhang units (new and completed properties unsold after 6 months)
  • 2% of overhang units are condominiums and apartments
  • 6% of the overhang units cost above RM300,000, which is higher than the maximum affordable house price stated by BNM

 

Economic Shock from Covid-19

Other than the affordability of houses, most people still have concerns over long term investments such as property due to economic shocks resulting from Covid-19.

Image via InsideHook

The managing director of Nawawi Tie Leung Sdn Bhd, Eddy Wong stated that the demand for property is highly affected by the buyers’ concerns about job security and the overall affordability and availability of housing loans.

Wong also shared that the ratio of loan approvals to loan applications for the purchase of residential property declined from 44.1% in January 2020 to 24.6% in June 2020. Hence, buyers aren’t the only ones affected by the economic shocks of Covid-19, financial institutions are also reluctant to give out loans during these times.

 

Light at the End of the Tunnel?

Despite all that, experts are optimistic that the Malaysian property market will improve, especially as the economy recovers as the Covid-19 vaccines are given to the public.

Image via RealestateMY

The research director of Rahim & Co International Sdn Bhd, Sulaiman Saheh stated that market sentiment has improved during the Recovery Movement Control Order (RMCO) in the second half of 2020. Their latest report found that the third quarter of 2020 began to record an increase in volume and value of transactions following the RMCO phase.

Saheh also emphasises that the market’s current priority is to increase homeownership, especially for first-time homebuyers and the more vulnerable groups. He believes that interest in the residential segment will increase as government initiatives have created a supportive environment for homebuyers.

 

Image via Malaysian Institute of Estate Agents

For example,  the government announced stamp duty exemption for the purchase of properties between RM300,000 and RM2.5 million under the Home Ownership Campaign (HOC) and RPGT exemption for the disposal of residential properties. Interest rates for housing loans are also at a record low.

Therefore, we believe that the housing crisis in Malaysia can slowly improve due to the multiple initiatives taken by the government and property developers. As vaccines roll out to the masses, more economic activities will resume which will improve the country’s economy and the property market as well.

All in all, you should always consider your long term affordability and only buy what you can afford down the road, despite all the benefits of buying a home right now.

What do you think about the housing crisis in Malaysia? Share your thoughts with us in the comments below.

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