Is it your imagination or are we not able to afford homes like our parents could?

Buying a house is an important goal for Malaysians. But that hasn’t been easy. They are expensive and unaffordable for many Malaysians. The big question now is have our salaries been able to keep up with house prices?

Has it become more unaffordable in the past 10 years? What is the government doing? What can we do?

This article will attempt to answer all these questions and provide you with a comprehensive view of the situation in Malaysia. It will also try to suggest different ways that you can take advantage of to make housing more affordable to you.

Our Data

We will be utilising median household income as reported by the Department of Statistics Malaysia here and median house prices from the National Property Information Centre here. Both departments have data from 2012 to 2022.

We will be using these data to compute the median multiple (introduced by Demographia) of housing for Malaysia by dividing median house prices by median annual household income. The higher this multiple is, the more unaffordable housing is.

Here is the scale by Demographic in describing the varying degrees of housing affordability.

#1: Salaries in Malaysia Have Not Kept Up With House Prices

In 2012, a Malaysian household earns RM3,626 per month or RM43,512 per year. By 2022, this annual salary has grown by 5.7% each year to RM76,506.

Meanwhile, median house prices were at RM170,000 in 2012 and has risen by a yearly rate of 7.5% to RM350,000 in 2022.

House price increases have certainly outpaced Malaysian salary growth in the past 10 years. From 2012 to 2016, house prices increased by a whopping 15.3% every year compared to household income average growth of 9,6%.

Surprisingly, salaries could grow by almost 10% every year, and Malaysians find houses more unaffordable during this period.

#2: Houses Are Unaffordable in Malaysia

According to Demographia, a median multiple ranging from 4.1 times to 5.0 times indicates that houses are ‘seriously unaffordable’.

Houses in Malaysia are ‘seriously unaffordable’. Malaysia has a median multiple of 4.60 times (RM350,000 / RM76,506) where you need 4.6 years of income to pay for a house. And it has gotten worse. The median multiple in 2012 was 3.9 times and rose to a peak of 4.8 times in 2016. It declined to 4.2 times in 2019 but got back up to 4.6 times currently.

With the cost of living in Malaysia getting higher, Malaysians are finding it harder to manage their spending on daily necessities. Buying a house could just get more complicated moving forward.

#3: Sabah and Sarawak – the Most Unaffordable

Bad news for East Malaysians. Sabah and Sarawak boast the highest median multiple in Malaysia at 7.0 times and 6.5 times respectively in 2022.

Both states have a high median house price (estimated internally from the average house price) of about RM386,000 despite their households only earning about RM55,000 to RM60,000 a year.

Meanwhile, Kuala Lumpur unsurprisingly was also unaffordable at 4.7 times even though KL households earn the highest income in Malaysia at RM122,808 per year.

This is followed by Kelantan (4.6 times), Penang (4.6 times), and Kedah (4.0 times). Houses are the most affordable in Malacca at only 2.3 times).

#4: Consider Affordable Housing Under Government Programs

With our salaries not keeping up with house prices, the government has prioritised the affordable housing agenda in recent years.

And they are trying to address this problem by building more homes. They are planning to build about 500,000 affordable housing by 2025 under various government agencies and schemes

Look out for agencies such as PR1MA, PPR, Residensi Wilayah, Rumah Ikram Keluarga Malaysia, and SPNB. They offer price ranges that are deemed affordable ranging from RM100,000 to RM400,000 depending on location and state.

If you are having trouble finding them, you can find them here.

#5: Take Advantage of Rent-To-Own Schemes

A big roadblock for many to own a home is due to the inability to secure financing since banks judge your ability to pay for the house based on your current salary. Most of the time, our salary is low at the beginning of our career. But as we work longer, our salary will increase. Banks only look at whether you can afford the house through your current salary and not your future ones.

However, you can take advantage of rent-to-own schemes in Malaysia. The scheme allows you to get a roof above your head for up to five years while you slowly build up your finances. At the end of the tenure, you can use your higher salary to get the appropriate funding to purchase the house at the ORIGINAL price (five years ago). If you don’t think the house is suitable, you can just give it up and look for another one. No questions asked.

Conclusion

Salaries in Malaysia are not keeping up with house prices. But that doesn’t have to be the end. There are other ways that you can use to buy a house at an affordable price. Getting to know the various affordable housing schemes in Malaysia is a good first step. You could even consider a rent-to-own scheme to build your finances for the future.

 

Let us know in the comments below about what you think about your salary and house prices in Malaysia!

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