2016 was a slow year for the property market in Malaysia, where property prices mainly affected the Gen Y and those of the middle income bracket. Of the many issues that plague property buyers, affordability, loan eligibility and insufficient income are the main concerns.
Property Affordability is the Main Issue
Property affordability remains as one of the largest issues when it comes to purchasing a property in Malaysia, as 40% of the population are still of the lower income bracket. The lower income bracket is defined as households that have a monthly income of RM3,855 and below, while the middle income bracket (M40) are households that earn between RM3,860 and RM8,319 per month.
In addressing this issue, the government came up with a new affordable housing loan scheme where the main qualifying criteria is that the household must be earning RM3,900 and below monthly. RM200 million is being allocated to his project, where the initial stage will feature a total of 5,000 units that cost between RM40,000 to RM50,000 per unit.
Insufficient Income
Due to the rising cost of living, income levels cannot keep up with times as consumers struggle to make ends meet. Within the year 2016 itself, petrol prices increased 3 times; and just after the 2017 budget announcement, it was announced that the price of cooking oil would increase.
Causing a domino effect, prices of consumer goods have also increased, which has in turn increased the cost of living.
Tight Mortgage Loan Requirements
In lieu of the increasing cost of living, property buyers have also found that they are unable to afford a property, as they cannot even afford the booking fees or downpayment. Adding on Bank Negara’s strict “Responsible Lending” policies, approximately 60% of the loan applications were rejected.
In an attempt to increase consumer affordability, industry experts are proposing that the authorities revert to looking at the applicant’s gross income instead of nett income.
Due to the stringent restrictions, the total number of transactions for housing volume has decreased from 119,446 properties in H1 2015 to 102,906 properties in H1 2016.
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