Housing (Un)affordability
Based on the Medium Multiple approach, as recommended by the World Bank as well as the United Nations.
House price-to-income ratio
Severely unaffordable 5.1 & above
Seriously unaffordable 4.1 - 5.0
Moderately unaffordable 3.1 - 4.0
Affordable 3.0 & below
House prices in Malaysia are seriously unaffordable across most states
a. Median house price (2020) RM 295,000
b. Annual median income (2020) RM 62,508
Malaysia's house price-to-income ratio = a / b = 4.7 (In 2019: 4.1)
Reasons for housing unaffordability
Housing is unaffordable because many do not earn enough and are already highly indebted.
House prices (+4.1%) grew faster than income (+2.1%).
Households have low savings buffer: 76% (3/4) of households have savings that can only cover less than 3 months living expenses.
Prospective borrowers are already highly indebted: 65% (2/3) of borrowers already have either car or personal loans, which may constrain their capacity to take on a housing loan.
There are also not enough affordable homes
1 in 3 newly launched are priced < RM 300,000
3 in 4 households earn < RM 100,000/year
- To afford a house priced up to RM 300,000*, a household needs to earn RM 100,000/year# or RM 8,333/month.
- 76% (or 3/4) of households in Malaysian earn < or = RM 8,333, but only 36% (or 1/3) of newly-launched units are priced < or = RM 300,000.
Reference:
*Based on the National Affordable Housing Policy 2019, the maximum price of affordable housing in Malaysia is RM 300,000.
#Estimated using Median Multiple approach, in which a house is deemed affordable if the house price is not more than 3 times the annual income.
Source: Bank Negara Malaysia. Household income estimates and incidence of poverty report (2020)by the Department of Statistics, Malaysia (DOSM).
Buying a house to stay in is better than renting one, no question.
The math remains strongly in favour of home ownership versus renting.
In the long run, the comparative value of owning a home far exceeds that of renting.
This is the case even when the rental yield (rental as a percentage of house value) is lower than the mortgage rate, primarily because both the rental and house prices will rise in tandem with inflation, at least.
This means that the cost of renting (an expense) will keep rising while home ownership is an asset whose value will appreciate with time.
