In the past, buying a home was among a set of milestones that an individual should achieve in adulthood. However, in the recent decade, the reality of homeownership is slowly becoming a far fetched dream.
Some stay with their parents to save up for a deposit. But most hold on to the dream that one day they will be able to settle in a house with their own small family.
A predicament Noor Yasmin Hamzah, a young working adult in Kuala Lumpur is familiar with as she laments over the pricey aspirations to buy a house.
Most people my age can’t even dream of having a house but I hope that looking forward, as we change for the better, I hope the housing market will also change to allow age groups like mine to have our own homes. – Noor Yasmin Hamzah
But, it appears that Yasmin isn’t alone in her belief.
What permeates the fear of almost half of the youths is rooted in several factors that have only been amplified over the years. These include the increasing property prices, the stagnant starting salary for many fresh graduates and the difficulty securing bank loans.
Renting Is Not Sustainable In The Long Run
Even though there are no recorded numbers of Malaysians renting rooms or homes, it is more significant amongst the younger generations starting in the cities or small families building a new life. However, the rental price in Malaysia for a room or house takes up a large portion of the low-income household’s monthly expenses.
Based on a Better Malaysia Foundation survey, a B40 individual is paying an average rent of RM900 per month for housing in the Klang Valley. The rent may differ according to location, however, the amount being forked out for monthly rent would jeopardise the chances of saving up for a home.
Yanny Lim has been renting for years. She wished she could own a house. But it is unlikely that she could afford one in the future. She has been paying RM 850 a month for a room.
In the duration of paying for a rented room, I have easily spent the amount of money needed to put down a downpayment for a house, but the problem is, it isn’t like you can snap your fingers and then RM40,000 appears immediately. – Yanny Lim 
For households that have been saving up for a house, the increasing price in the housing market is only met with hopelessness by a mother of two, Jenni Khalid.
As you wait longer to save more, the prices of houses keep soaring higher, so there is no end to this and we will never be able to save enough to finally get a house of our own. – Jenni Khalid
The Rise In Property Prices
According to the Malaysian House Price Index from the National Property Information Centre, the average property price in Malaysia has nearly doubled since 2010, increasing by 99.3%.
Affordable housing is categorised as units priced between RM150,000 and RM300,000 with a built-up area of at least 900sqft (excluding balcony) with a minimum of 3 bedrooms. The units should also be situated in strategic locations with access to public transportation and areas with adequate public amenities.
In 2020, only 14,094 units (equivalent to 12%) out of 117,766 new housing units are low cost. This falls short of the National Affordable Housing Council’s annual target of 100,000 low-cost housing .
The remaining units are priced over RM 400,000. The unaffordability of houses is more severe in states such as Sabah, Penang, and Johor Bahru where there is an imbalance between the demand for affordable homes and the supply.
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. – Thor Joe Hock, Chief Executive Officer of MyProperty Data
The disparity of demands and supply contributed to property overhang in recent years.
Coincidentally, the states with the highest unaffordable price points also recorded more unsold units.
Johor has the highest number of unsold units in Malaysia at 24% followed by 20% in Kuala Lumpur and 18% in Selangor .
Housing developers, however, justified the increase in land scarcity and additional costs. As developers bid on the same pieces of real estate, the costs of building properties hike. At the same time, developers are tasked to build affordable units with a cap on their sale price, consequently losing profits.
On top of that, there are additional costs levied by local and state governments. Developers would have to obtain profits from raising the prices of units under their control.
When the government adds costs to builders, they are actually passing them on to buyers. Property developers are profit-driven businesses. The more it costs for them to produce, the more they have to charge to protect their margins. – Anthony Cho, Melaka-based developer
Some had also cited the rising labour costs for unskilled workers to also play a role.
Furthermore, labour costs have also risen. In my day, it was RM8 to RM10 a day, now it’s RM80 to RM100, and that’s only for unskilled workers. – Yeow Thit Sang, property expert
The Stagnant Starting Salary
Even so, the rise in property prices has not been in line with the growth in salaries in Malaysia.
Property in Malaysia is generally regarded by Malaysians as unaffordable, mainly because of the disproportionate growth in house prices against income. The yearly increase in house prices has outpaced that in income. Between 2010 and 2019, the average year on year increase in house prices of 7.9% surpassed income’s 5.6%. – Foo Gee Jen, WTW managing director
According to the World Bank’s 2019 Malaysia Economic Monitor, the median monthly income for those between 20-29 years old with post-secondary education has remained flat hovering between RM2,000 and RM2,500.
Graduates’ salaries have not increased. Adjusting for inflation, real starting monthly salaries for most fresh graduates have declined since 2010. – Muhammed Abdul Khalid, a research fellow at Universiti Kebangsaan Malaysia’s (UKM) Institute of Malaysian and International Studies (IKMAS)
In 2021, a survey by the Economic Planning Unit found that 76% of Malaysians still earn below RM5,000 a month. Within the said salary bracket, many are unable to afford a house in urban centres where most of them work as the cost of these properties exceed RM300,000.
Tied Down To A Long Term Investment
With the constant pressure to purchase a house, the younger generation may be strapped to a life riddled with debt and little left for savings. As houses in the market come with hefty price tags, many homeowners would have financed their purchases through longer payment periods of housing loans.
The payment periods for property loans have increased from about 10 years in the 1970s to 30 or 40 years. Also, the borrower would have to hold a stable job for tens of years to be able to pay the loan.
A tough call seeing how the pandemic has pushed many into unemployment and income cuts.
The majority of financial experts have also recommended that no more than one-third of your total monthly income be set aside when applying for a housing loan, known as the Housing Cost Burden (HCB).
Take, for example, a B40 family median household income in 2019 was RM3,166 with a mean of RM3,152 per month.
Following the HCB rule, if one-third of their income is distributed to pay the loan, the household would be left with RM2,101 to cover their monthly expenses. However, in reality, many of the B40s do not earn more than RM3,000 per month and their monthly expenses may take up a larger chunk of their income.
Prices are too high. Even if I were to earn a gross salary of RM10,000 a month, after my expenses such as car loan, study loan and helping out my family, it is quite difficult for me to buy a property and still be able to save some money for the future. Also, I want to live somewhere convenient and strategic like Petaling Jaya. – Adam, a prospective homeowner
If Adam who is potentially a middle-income earner expresses that housing loan on top of his already numerous commitments, what does this spell for the B40 families whose top priority is bread and butter?
In addition to monthly commitments, potential homeowners would have to save up to 10% of the down payment. They would be required to consider other fees, legal charges and also an amount that would have to be stored for any possible repairs and renovations.
Nurul, a 30-year-old administrative assistant in Kuala Lumpur laments that she and her husband cannot afford the 10% deposit for a house.
Nurul and her husband remained focused on settling in the Klang Valley due to the accessibility to their jobs. Her small family is at a crux, they have considered Employee Provident Fund (EPF) withdrawal however it means paying the 10% down payment upfront before being able to withdraw their savings.
We have to pay the 10% first, and then withdraw the money from our EPF account later. – Nurul, a prospective homeowner
The Challenges Of Securing A Housing Loan
The approval of a housing loan also depends on your current income, 42% of respondents in CUEPACS admitted that the bank would only release a housing loan of RM200,000 followed by 21.6% will be allowed to take RM 270,000 in housing loan depending on their salary .
Mohd Shaffieq Abdullah, a 30-year-old marketing executive, was denied bank loans several times when he tried to purchase a low-cost apartment as a fresh graduate.
Instead of blaming the government, developers and the housing market, I realised I had to work hard towards a healthy financial position. – Mohd Shaffieq Abdullah, a 30-year-old marketing executive
The pandemic had brought upon an uncertain economic outlook and had added another obstacle on the path of Dalvinder, who previously had hoped to get a 100% loan at a low interest. But, her employer has implemented split salary payments to keep the company afloat.
Now, I have to put those plans on hold. It’s difficult when your employer pays only half of your salary early in the month and the balance at the end of the month. – Dalvinder
At the same time, the job market has massively changed compared to our predecessors. Many are part of the gig economy as freelancers due to the lack of suitable employment opportunities in light of the pandemic.
However, securing a bank loan requires a payslip to be produced. Traditional banks have been sceptical about allowing loans for those in the gig economy due to the fluctuating income sources.
The decision to purchase a property is a serious financial commitment that is not to be taken lightly. It will tie you to regular monthly payments for the next 30 years or more, hence banks would much prefer borrowers with a steady income. Banks hate bad debts as they would hit their profits. – Calvin Chai Kuen Keong, real estate consultant and property management professional
More Affordable Housing For Lower-Income Households
The demand for affordable housing has been reportedly high, and the recent finding of AOD has only amplified this as 90% of youth (within the age range of 25-30 years old) want more affordable homes in the market .
One of the reasons behind this is that private housing is unaffordable for households in the higher threshold of the B40 income group and lower threshold of the M40 income group.
I understand that in the Klang Valley, for every 1,000 affordable houses launched, there are between 10,000 and 60,000 applicants vying to purchase them. Tan Sri Vincent Tan, Chairman of Better Malaysia Foundation 
Over the years, there have been more government-supplied housing such as People’s Housing Project (PPR) flats and PR1MA homes catered to the lower end of the B40 household. With the demand for affordable housing exceeding its supply, few government-run initiatives are in place.
One of the initiatives includes the Youth Transit Housing under the Ministry of Housing and Local Government (KPKT). Even though the available properties are only for rent, the rates are promised to be 30% lower than the market rate at RM 400 for a 400 sq ft studio unit and RM 500 for a 550 sq ft 2-bedroom unit.
There is also a ‘forced savings’ element in this initiative as a percentage of monthly rental set aside. Once the tenant reaches their maximum stay, a lump sum of the savings will be given. A smaller monthly rental rate also allows tenants to save up for the necessary 10% downpayment.
Rent-to-Own-Scheme (RTO) caters to homeowners who struggle to come up with a 10% down payment. Eligible applicants can rent for up to 5 years at an affordable price and will be provided with the option to purchase the house in the sixth year.
In early 2022, during The National Affordable Housing Council seating, the government set a target to provide 500,000 affordable homes in Malaysia with consideration of the geographic locations.
Being affordable in Kuala Lumpur is not necessarily affordable in Kinabatangan. The same goes for Ipoh and Gerik. There is a difference in ability and this will be emphasised by the government. – Datuk Seri Reezal Merican Naina Merican, The Housing and Local Government Minister
Despite the increasing attempt by the government to provide affordable housing and schemes to ensure more Malaysians own a house, there are existing issues that are yet to be tackled.
Experts have said that the attempts have often been cosmetic from the authorities’ end rather than tackling the real issue of affordability, the monthly income of Malaysians has not been in tandem with the hike in property prices.
If the system isn’t fixed, people will be unable to afford homes and will become perennial renters. – Noor Rosly Hanif, dean of the faculty of the built environment, surveying and real estate at Geomatika University
Furthermore, the government-supplied houses are often governed by a quota, leaving many from lower-income households having to turn to privately-developed housing. Prospective homeowners can consider seeking more affordable housing outside of the city where the price tags are less hefty.
Individuals should also consider second-hand homes with lesser renovations and repairs to reduce additional costs.
However, if you are more comfortable with new developments, consider withdrawing from your EPF to assist with the 10% downpayment. Alternatively, read on about the Malaysian Housing Financing Initiative (i-Biaya) . A recent initiative to increase homeownership among the B40 and M40 income groups. Through the i-Biaya, there are three schemes that may best fit your needs:
- The Skim Jaminan Kredit Perumahan (SJKP) helps gig workers, self-employed and traders purchase their homes.
- The Skim Rumah Pertamaku (SRP) is designed to assist first-time homebuyers from the B40 and M40 groups to own a house without paying a downpayment.
- The PR1MA Rent-To-Own scheme is open to M40 groups to own a house through an affordable ownership scheme for all existing PR1MA units nationwide.
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