Purchasing a house these days in urban areas especially by the middle income group is growing to be a huge task.
As prices of residential properties have been on the steady rise – faster than the growth of income over the years – their ability to afford a “dream house” is financially beyond their reach.
According to Khazanah Research Institute (KRI), Malaysia’s housing market has gone beyond the level of affordability by most Malaysians.
KRI revealed in August that Malaysia’s average house prices are more than four times the median income of its population.
In the report, KRI pointed out that at the national level, average house prices were 4.4 times the average annual household income in 2014.
It said an ‘affordable market’ should have a ‘median multiple’ (average house prices as a multiple of average annual household income) of three times.
The three times median multiple, it said, signalled that the property market provides a distribution of housing and house prices that are subject to minimal distortions – housing supply is responsive and able to meet effective demand.
It outlined unaffordable housing markets are the ones in which supply either falls far below demand, or is too inelastic to changes in demand.
“It is a measure of how affordable the housing market as a whole is performing. It is not a measure of what any particular household can afford as that would depend on that particular household’s circumstances,” it said.
KRI observed the middle-income households are often ineligible for public low-cost housing programmes and yet unable to afford housing supplied by private property developers.
As a result, the higher than average house prices are putting off those in the middle income group the desire to buy a residential property what more to think of the ability to service the mortgage loans.
KRI believed the answer to making housing more affordable lies in improving the elasticity of housing supply.
In other words, it means making the supply of housing more responsive to the needs of all sections of population.
Therefore, it suggested that the country needs to reform the supply-side for housing and strengthen market efficiency in the property sector by developing measures to plan for a steady supply of housing at affordable prices.
As for property transaction volume, MIDF Research noted the number has declined by 3.5 per cent y-o-y to 186,618 in 1H15.
It observed the same trend occurred for volume in which in 2Q15, the volume of property transaction slipped by 7.6 per cent y-o-y as compared to 1Q15 which showed 0.9 per cent y-o-y growth.
Thus, with the data shown by NAPIC, MIDF Research opined 2015 sales by property developers is likely to experience a decline y-o-y.
MIDF Research explained that consumer is likely to defer the purchase of big item in the near term due to the weak consumer sentiment arising from the implementation of the Goods and Services Tax (GST) and the weakening ringgit.
As a result, it believed the trend of lower new property sales y-o-y by property developers is likely to continue in 4Q15 and going into 1Q16.
Moreover, MIDF Research said applications for property financing also did not paint a rosy picture.
The research firm noted the latest BNM statistics showed that application for purchase of property for the first eight months of 2015 had declined by seven per cent y-o-y to RM203.13 billion.
Chief Minister Datuk Patinggi Tan Sri Adenan Satem said the property industry is an important component in the overall development of Sarawak and its growth should be in tandem with other developments happening throughout the state.
Thus, he said the state government will address concerns Sarawakians over the lack of infrastructure, the need to open up more land for various commercial activities and the impact rural-urban migration on development plans and housing prices throughout Sarawak.