Affordable home prices in Malaysia will soon be based on factors like locality and the average household income of the area, revealed the Housing and Local Government Ministry.
This comes after the National Affordable Homes Policy (DRMM) has been drawn up by the government earlier this year to ensure that affordable houses are reasonably priced.
A continuation of the National Housing Policy 2018-2025, the DRMM “aims to ensure that the prices of affordable homes are no more than three times the median of the particular area. The ministry will gauge this based on three times the average household income of the area,” explained Housing and Local Government Minister Zuraida Kamaruddin.
“The DRMM will control the prices of affordable homes by way of locality and the conditions of the local community. For example, the prices of houses in Kuala Lumpur will definitely be different from Kuala Terengganu’s. As it is, house prices also vary from district to district.”
She noted that international standards which categorised Malaysian houses as seriously unaffordable had considered the average prices of existing houses developed since the 1980s and 1990s, reported New Straits Times.
“But as we are all aware, there was a glut of construction of expensive houses in the 80s and 90s,” said Zuraida. “This led to the average prices of homes being categorised as being seriously unaffordable.”
She revealed that Malaysia currently has over 200 units of affordable houses priced below RM300,000 that have been completed but remain unsold. Another 14,000 affordable houses are under construction, she added.
Aside from the perceived high home prices, another factor affecting consumers is the difficulty in obtaining loans.
To help potential home owners secure bank loans, the government introduced a new home ownership scheme, known as the ‘rent to own” or (RTO) scheme.
“We have found that many people are unable to secure financing. That is why the 2020 Budget saw the government approving a RM10 billion allocation, which will be provided by financial institutions with government backing, via a loan guarantee of 30 percent of RM3 billion via the RTO programme,” said Zuraida.
“This will make it easier for those who have steady income but do not have payslips to buy houses. The scheme will enable those with good financial records over the last five years to take out housing loans.”
Last week, Bank Negara Malaysia revealed that houses within Malaysia were considered ‘seriously unaffordable’ by international standards.
Based on Demographia International’s median multiple methodology, which was recommended by the United Nations, Harvard University and World Bank, a house is considered affordable if it is priced not more than three times of the annual household income.
BNM’s Financial Surveillance Department director Qaiser Iskandar Anwarudin said the affordability in the country has deteriorated as the median multiple affordability or the ratio of house price to households’ annual income had climbed to 4.8 times in 2016 from 2012’s 3.9 times.
According to him, most Malaysians could not afford to purchase newly-launched housing units which carry an average price of RM417,262.
In fact, 73 percent of unsold properties were unaffordable, with Johor posting the highest number of unsold homes, he said. Selangor came in second followed by Kuala Lumpur, Perak and Pulau Pinang.
Nonetheless, Qaiser Iskandar believed that the situation of Malaysia’s property market had improved with home prices falling at a moderate pace.