File picture shows houses under construction in Kuala Lumpur. Malaysia has a ‘severely unaffordable’ residential homes market, according to researcher Demographia.— AFP
KUALA LUMPUR, Oct 13 — Malaysia has a “severely unaffordable” residential homes market, with housing even more out of reach for its residents than in Singapore, Japan and the United States, according to US-based urban development researcher Demographia.
Demographia’s report was cited today in a report in Singapore’s Straits Times newspaper to highlight how many Malaysians continue to be locked out of the residential housing market despite the federal government’s attempt at helping first-time house buyers.
According to the ST report, Demographia rates housing as severely unaffordable if it is 5.1 times median annual income. Malaysia clocks in at 5.5x, higher than Singapore’s 5.1x, while housing in the United States and Japan is “moderately unaffordable”.
Government data cited by the ST report shows that since 2012 median monthly household income has risen eight per cent annually to RM4,258, slower than the average housing price increase of 10 per cent to RM280,886.
The country’s consumer price index has risen by an average of 3.3 per cent this year and Putrajaya had warned it may spike by 5 per cent next year, tripling the 2013 average.
In presenting Budget 2015 last Friday, Prime Minister Datuk Seri Najib Razak introduced a Youth Housing Scheme that will waive down-payments and subsidise ownership by up to RM10,000 for 20,000 married couples under 40.
Najib also said the government would provide another 80,000 new homes priced at RM100,000 to RM400,000 under the 1Malaysia People’s Housing Programme (PR1MA).
Both schemes, including the existing My First Home (MFH) scheme are only for households with a combined monthly income of less than RM10,000.
According to Bank Negara only a third of My First Home applicants received loans in the first year, as banks refused to take risks.
And PR1MA has seen just 761 buyers for the 160,000 units launched since 2013.
“We earn just over that but it’s not enough for savings. We can convert rent into loan repayments but we can’t pay the 10 per cent deposit,” lawyer Puteri Mohamad told the Straits Times in commenting on the Budget proposal to help households earning less than RM10,000 monthly to buy homes.
Office administrator Mimie Azriene Mohd Zin, 32, has no children but she and her technician husband have applied for a PR1MA home.
But she told the Straits Times they have not figured out how to afford the down payment on their combined income of under RM4,000 a month that leaves them with little savings living in expensive Kuala Lumpur.
“We might not even be able to afford the repayment but we have to try before prices go up further,” she told the daily.
Malaysia's budget aid brings little joy to house hunters
Despite being a partner in a law firm just outside Kuala Lumpur, Ms. Puteri Mohamad, and her fiance, can only watch as apartments in the area where she lives spiral above 500,000 ringgit (US$153,334).
When the government proposed measures in its 2015 Budget — released on Friday — to help households earning less than 10,000 ringgit (US$3,067) monthly to buy homes, she was not at all elated.
“We earn just over that but it's not enough for savings. We can convert rent into loan repayments but we can't pay the 10 percent deposit,” said Puteri, 33, who lives in a rented flat in Petaling Jaya.
Many Malaysians like her find themselves locked out by a combination of what U.S.-based urban development researcher Demographia rates as a “severely unaffordable” residential market and accelerating inflation.
Malaysia's consumer price index — which includes many subsidized goods — has risen by an average of 3.3 percent so far this year and the government warns it may spike by 5 percent next year, nearly triple the 2013 average.
Government data shows that since 2012 median monthly household income has risen 8 percent annually to 4,258 ringgit, slower than the average housing price increase of 10 percent to 280,886 ringgit.
Demographia rates housing as severely unaffordable if it is 5.1 times median annual income.
Malaysia clocks in at 5.5x, higher than Singapore's 5.1x, while housing in the United States and Japan is “moderately unaffordable.”
Prime minister Najib Razak said in his budget speech the government would provide another 80,000 affordable homes (priced at 100,000 ringgit to 400,000 ringgit) under the 1Malaysia People's Housing Programme (PR1MA) and introduce the Youth Housing Scheme that will waive downpayments and subsidize ownership by up to 10,000 ringgit for 20,000 married couples under the age of 40.
Both schemes, as well as the existing downpayment waiver under the My First Home scheme, are only for households with a combined monthly income of less than 10,000 ringgit.
The National Housebuyers Association lauded the moves to help aspiring homeowners in financing but criticized the lack of new measures to cool rising prices that are the root of the problem.
Its secretary-general, Chang Kim Loong, said speculators have taken advantage of the low entry cost of buying a property at the expense of genuine buyers.
Office administrator Mimie Azriene Mohd Zin, 32, has no children but she and her technician husband have been unable to even think of home ownership until these schemes came along.
They applied for a PR1MA home, which the government says is priced 20 percent lower than comparable units, worth about 200,000 ringgit three months ago.
But they have not figured out how to afford the downpayment on their combined income of under 4,000 ringgit a month that leaves them with little savings living in expensive Kuala Lumpur.
“We might not even be able to afford the repayment but we have to try before prices go up further,” she said.
That is, if she can get a loan in the first place. The central bank reported that only a third of My First Home applicants in the first year received loans as banks refused to take the risk.
Tellingly, even PR1MA saw just 761 buyers for the 160,000 units launched since 2013.
BY By Shannon Teoh, The Straits Times/Asia News Network
Annual DhiDemographia International Housing Affordability Affordability Survey: 2014
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