KUALA LUMPUR — Feb. 14, 2018: Malaysia faces a shortage of affordable houses for the masses, Bank Negara Malaysia (BNM) has warned in a report that also discloses data showing houses were seriously unaffordable in 2016 by international standards.
The central bank also outlines five strategies to overcome the problem, including centralising affordable housing initiatives and setting up an integrated housing database and an applicant registry for planning and allocating affordable housing.
It further suggests reducing the cost barrier to affordable housing, rehabilitating household balance sheets by enhancing financial literacy and improving the rental market by strengthening the legal framework.
“The housing affordability issue is largely due to the supply-demand mismatch and slower income growth,” said BNM, which estimates the maximum affordable house price to be RM282,000, based on the housing cost burden approach.
“However, actual median house price was RM313,000 (in 2016), beyond the means of many households, where the median national household income was only RM5,228,” the bank said in its quarterly bulletin released today.
The bank reiterates that undersupply of affordable houses remains an issue.
It gives three factors contributing to housing unaffordability in Malaysia: mismatch between supply and demand for housing, new launches skewed towards the unaffordable range and growth in house prices outpacing that of household income.
Since 2012, new housing supply has consistently fallen short of the increase in demand by households.
During the year up to the first quarter of 2017, only 24 per cent of new launches were priced RM250,000 or less, a range that only 35 per cent of Malaysian households could afford.
The bulletin also reveals that from 2007 to 2016, prices grew 9.8 per cent while household income only increased 8.3 per cent.
The mismatch was most acute from 2012 to 2014, when the growth in prices (26.5 per cent) was more than double the growth in income levels (12.4 per cent).
As a result of the supply-demand mismatch, BNM said, the level of total unsold residential properties in Malaysia stood at a decade-high of 146,497 units as at the second quarter (2Q) of 2017, an increase from 130,690 units in the preceding quarter.
In 2Q 2017, almost 82 per cent of unsold units were priced above RM250,000.
The bank notes that financing continued to be available for purchases of houses for eligible borrowers, with more than 70 per cent of loans accorded to first-time buyers and close to two-thirds of new loans channelled to the purchase of houses costing below RM500,000.
On the supply side, structural and cyclical factors in the housing market have resulted in a failure of the market to provide an adequate supply of affordable housing for the masses while on the demand side, growth in household income has not kept up with the rise in house prices.
Together with a low state of financial literacy among the majority of Malaysian households and a cultural preference towards home ownership instead of renting, these have contributed to the high demand for house purchases. — Bernama