With the rapidly increasing property prices, more Malaysians are unable to afford homes given that the household median income has not doubled in the past year, reported Bernama citing MyProperty Data Sdn Bhd.
The company’s analysis showed that homes priced at RM300,000 and below accounted for 86.14% of total transactions in 2000, 65.31% in 2009 but only stood at just 32.37% in 2019. Median age of buyers was between 32 to 35 years.
This shows that Malaysia is fundamentally facing affordability issues, and not affordable houses, as inflation appears to have accelerated since the market peak in 2011, said Thor Joe Hock, Chief Executive Officer of MyProperty Data.
“As a data provider analyst, where we use big data technology studying over 5,000 development launches past and present, we found that property developers were just merely reacting to the situation, and dropping prices straight away may not be the best answer today because if we correct the prices across the board, we will probably see a further contraction in our economy due to the correlation,” he told Bernama.
“To elaborate, when people’s homes go up in value, they can start to unlock equity from their home, because as price value increases, they can go back to the bank and refinance, and are possibly able to purchase something else, perhaps renovating their home, buying a new car etc.”
An analysis of more than 5,000 past and present development launches also showed that 45% of the projects were ‘overpriced’ by more than 10% and some by up to 80%, he said.
Out of those figures, which were taken from the Housing and Local Government Ministry records, around 160 developments are set for completion next year.
Thor explained that overpricing leads to further inflation since developers start benchmarking their prices to that of other nearby projects.
This could result in spiralling inflation if left unchecked, aggravating an already severe affordability issue.
He noted that overpricing also depends on banks extending a larger amount of loan than the value of the property, which is similar to taking future equity growth today instead of in three to six years.
“Fundamentally, there is a serious need to value these houses better to control property prices from overpricing,” he said.
“In particular, we think the ones that need the most help are the middle-income group, as we found out that those properties ranging between RM500,000 to RM1.2 million tend to be overpriced, especially those located in city areas within the Klang Valley, Penang and Johor Bahru.”
Currently, new developments need not be valued since Bank Negara Malaysia does not require it.
A property valuer, however, is needed in sub-sale of property.
“Simply put, a combination of right market pricing plus innovative financing such as the Cagamas My First Home Scheme (SRP) will provide longer-term viability,” said Thor.
“This will allow for sustainable price and equity growth over the medium to long term.”
First unveiled in the 2011 Budget, the Cagamas SRP scheme aims to help young adults who have just joined the workforce acquire their first home by allowing them to obtain 100% financing from financial institutions without the need to fork out a 10% down payment.