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BNM Explains Why You Can’t Afford a House

October 12th, 2017 Leave a comment

Malaysia’s central bank has a response to those saying it needs to do more to spur home loans: houses simply aren’t affordable.

Bank Negara Malaysia has created a website packed with data aimed at debunking the “myth” that access to financing was deterring home ownership, showing that loan approvals for key cities are near 70 percent or higher. The central bank has resisted calls to loosen mortgage lending, instead saying the property industry should boost efforts to cut costs and accelerate supply.

unaffordable-malaysia

 

Rising home prices have added to the grievances of Malaysians grappling with the cost of living since a goods and services tax started two years ago, and as the government removes subsidies on daily items including petrol and sugar. That’s made affordable housing a key voter issue for Prime Minister Najib Razak ahead of a general election that must be held by mid-2018.

“It’s a tricky situation,” said Wan Saiful Wan Jan, chief executive officer of the Institute for Democracy and Economic Affairs in Kuala Lumpur. “I don’t think it’s right to say that there’s no problem with financing. But lending rules have to be both strict and balanced at the same time, otherwise we’ll have more non-performing loans and that is not good for anyone in the country.”

The median house price in Malaysia was 4.4 times the median annual household income in latest available data, making the housing market “seriously unaffordable” compared to global standards, according to a 2015 report by state-run Khazanah Research Institute. The report classed an affordable market as one with a median multiple of 3 times.

That still makes Malaysia cheaper than many other markets, with affordable housing in key cities something of a rarity in the 21st century. In the latest Demographia study, Kuala Lumpur had the eighth best housing affordability out of 18 metropolitan regions around the globe, with Hong Kong homes costing 19 times income and Beijing 14.5 times.

Take a closer look at the forces shaping Malaysia’s economy, politics and markets

Malaysia’s central bank is seeking to strike a balance: its housing website aims to show transparency in the market while the lender also stands firm on stricter financing rules introduced since 2010 to curb speculation, as well as measures to promote responsible lending amid elevated consumer debt.

low-salary-malaysia

 

Household debt as a proportion of gross domestic product fell to 88.4 percent last year from 89.1 percent. It’s still one of the region’s highest and the nation needs to be careful of such levels, central bank Governor Muhammad Ibrahim said in July. The central bank has left borrowing costs unchanged at 3 percent since July last year.

Just 20 percent of new Malaysian housing launches in the first quarter were priced below 250,000 ringgit ($59,000), down from 33 percent between 2010 and 2014, according to the central bank’s “Housing Watch” website. The bulk of new homes cost between 250,000 ringgit and 500,000 ringgit. The median annual household income is estimated at around 63,000 ringgit.

“It is an issue of not having enough income and houses being too expensive,” Muhammad told a conference in August, reiterating that “the problem is not about access to credit” and the lender “must have the courage to say it loudly and clearly to the public.”

Only about half of people living in Kuala Lumpur own a home, while nationwide the number was 72.5 percent at the last census in 2010. Demand is set to rise: the median age of Malaysia’s 31.7 million people is 28 years and the nation’s urban population is growing at an average 4 percent a year, among the fastest pace in East Asia, according to the World Bank.

Najib has pledged to focus on boosting living standards when he tables next year’s spending plan in parliament this month. He may announce an increase in the number of affordable homes built by state-linked companies, tax relief for private developers and subsidies for affordable home buyers, RHB Research Institute Sdn. said last month.

Filling the Gap

Banks are being “prudent and responsible” in providing finance to buyers, an association of Malaysia commercial lenders said in a statement this week. It was seeking to refute claims by developers that house buyers are finding it harder to obtain a housing loan and that approval times are increasing.

Developers should instead be looking at their own industry, said Paul Selvaraj, secretary general of the Federation of Malaysian Consumers Associations.

“The focus should be on building houses which people can afford, not building expensive houses and then trying to push them, and then complaining that the banks are not giving loans,” he said. “The reason people are having problems getting loans is because the houses are not affordable. It’s beyond their repayment” ability, he said.

Some developers are slowly starting to fill the demand. Mah Sing Group Bhd., the nation’s third largest, is selling apartments within 5 kilometers from Kuala Lumpur’s center with prices starting from 328,000 ringgit for a 650 square foot unit. That’s within the maximum price a family on the city’s median income could afford.

The problem is set to become a bigger one over time. There is currently a shortage of 960,000 units of affordable housing in Malaysia, with the number projected to reach 1 million units by 2020, according to the central bank’s estimates.

Source: Bloomberg

 

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  1. Anton Bond
    October 12th, 2017 at 21:04 | #1

    Penang = high median house price and low median salary. WTF!!

  2. gooner
    October 12th, 2017 at 21:30 | #2

    FINALLY. Someone speaking the truth. People on the ground have been saying this all along but the media only published what developers say.

    Stop blaming the banks, Bank Negara or the government. Developers should lower their profit margins, stop giving artificial rebates, and start building affordable homes!

  3. BBB
    October 12th, 2017 at 22:22 | #3

    Anton Bond :
    Penang = high median house price and low median salary. WTF!!

    That’s why you see a lot penang youngsters left and go kl / spore…

  4. Lim
    October 13th, 2017 at 06:32 | #4

    They shouldn’t see the housing price itself. Must see the psf price. then only can compare lol.

  5. ==
    October 13th, 2017 at 08:45 | #5

    Set property gain tax 80% for 20 years sure no more property investor, price auto will decrease

  6. behck
    October 13th, 2017 at 08:54 | #6

    All big cities around the world got similar problem, Malaisiya still not so bad lo

  7. Concern
    October 13th, 2017 at 09:17 | #7

    Salary range for malaysia should increase, its too low if compare to other countries. Its doesn’t cope with the buying power now. The salary for the white collar worker should increase.

  8. min
    October 13th, 2017 at 10:20 | #8

    No worry, minimum wages going to increase soon, we’ll become high income country when the min wages move to RM2k.

  9. ==
    October 13th, 2017 at 11:15 | #9

    min :
    No worry, minimum wages going to increase soon, we’ll become high income country when the min wages move to RM2k.

    Ah jib gor already announce TN2050 due to failed high income country 2020

  10. ray
    October 13th, 2017 at 11:16 | #10

    That is why Income tax always check Penang Lang. Due to the statistic of the mid household income vs unaffordable range. LHDN queries why penang lang still can purchase this property. They don’t know the behind story of penang lang. We are really save eat and use.

  11. Jeff
    October 13th, 2017 at 12:13 | #11

    Actually, our gov. should also consider a tax rebate scheme for the young people.

  12. SSS
    October 13th, 2017 at 13:03 | #12

    @==
    Increase minimum salary will only help but won’t cure the issue but improve currency exchange rate. Typical question, what is the point of salary RM2k with IPhone RM5k? & SGD2k with IPhone 1.6k… May be one day we will have RM20k of minimum salary but IPhone RM100k, during that time are we consider as a high income nation, typical example Indonesia?? We have too many issue dragging our economy & it’s getting worsen without looking at the root.

  13. hulkhogan
    October 13th, 2017 at 13:57 | #13

    @SSS

    The main reason for the minimum wage increase is actually partly due to our undervalued currency that is resulting in manufacturing exporters doing a roaring business with record profits. So increasing minimum wage is one way to “distribute” wealth from manufacturing bosses to those working people in the factory floors. So…it’s in a way, good.

  14. Sam
    October 15th, 2017 at 15:11 | #14

    Before going to question on currency issue, we should concern how come household average income for Penangites is much lower than KL while unaffordable housing price is higher than KL city.

  15. ==
    October 15th, 2017 at 17:18 | #15

    Because penangites ply money games all so rich can own property easily but after jjptr gone all so poor wanna sell, thats y alot sell below market price

  16. jerkykok
    October 16th, 2017 at 08:00 | #16

    @Sam

    That’s because penang people water fish mah. The chart shown above is for year 2014, and that’s the peak waterfish year, that’s when people say..”property price will never come down one, always go up no matter what, worst case just stay flat”. Nah! Hahaha. Go and check out the number of defaults now, especially for the recently completed “Tropicana Bay Residences” that were sold with DIBS.

    Just to let you get a feel of what’s coming, owners who defaulted on housing loans in other projects whom have been blacklisted by BNM collectively own about 100 units in Bay Residences. Yes, that’s coming.

  17. NgSoonHeng
    November 18th, 2017 at 15:59 | #17

    @jerkykok
    Got lelong yet, yu say until so bombastic? I want go bid la hor.. sure earn want I will buy with cash luit ya.

  18. Oxley Towers
    August 9th, 2018 at 09:57 | #18

    yes, they always blame the banks. Thanks, BMM for sharing this article. At Oxley Towers KLCC delivers lots of benefits that would provide everyone their ideal lifestyle and environment. This prestigious development will offer you and your loved ones the perfect home you’ve always desired to have.

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