Affordable housing needs more push.

Clean water, steady electricity supply, property sanitation and a solid roof over one’s head. These are necessities, basic human rights that every person must be entitled to even if they are within the low-income bracket. Under the 12th Malaysia Plan (12MP), the Malaysian government aimed to construct 500,000 affordable housing units. A total of 69.3% of its goal was achieved by September 29, 2024. The 2024 Budget further saw the completion of 19 new People’s Housing Programme (PPR) projects that provided 6,006 units benefiting 24,000 low-income households.

Real Estate and Housing Developers' Association Malaysia (Rehda) Institute defines affordable housing as units priced between RM200,000 and RM500,000, catering to specific target markets and locations. As for affordability itself, Bank Negara Malaysia (BNM) considers a house affordable if its cost does not exceed 30% of an individual’s gross monthly income. Price-to-income ratios are not to be higher than 3.0, but in recent years spiked to more than 4.3 in 2022. Additionally, households today report being over 85% in debt.

House prices grew faster than most Malaysians' salaries between 2012 and 2022, according to statistics based on average house prices from the National Property Information Centre (Napic) and median household income from the Department of Statistics Malaysia (DOSM).

While the median house price increased by 7.5% to RM350,000 by 2022, annual salaries increased by 5.75% year over year to reach RM76,506 during this period. As a result, the median house price-to-salary ratio, or median multiple, was 4.6 (RM350,000/RM76,506), considerably higher than BNM’s suggested affordable price-to-income ratio of 3.0.

Still in the recovery phase

Khazanah Research Institute (KRI) released their Households and the Pandemic 2019-2022: The State of Households 2024 Report and it found that household income growth across Malaysia has been moderate, particularly slowed by the COVID-19 pandemic. Selangor has outpaced other states in terms of income growth, while urban areas like Putrajaya and Kuala Lumpur have seen declines. Despite the slowdown, Selangor's strong performance has been crucial in supporting the national average.

The report highlights a substantial gap between pre-pandemic income growth trends and current levels. Many districts, particularly in rural areas, have experienced negative household income growth or fallen into the bottom quintile of income distribution. It further identifies a stark disparity in poverty rates across the country. While districts in Selangor, Kuala Lumpur and Putrajaya exhibited significantly lower poverty rates, many other regions, particularly in Kelantan and Terengganu, faced significantly higher levels of poverty.

Yet Malaysia has experienced a significant shift towards urbanisation, with nearly 78% of households residing in urban areas in 2022, up from 67% in 2002. However, this urbanisation has not been accompanied by a uniform distribution of economic prosperity.

Experts weigh in

Prime Minister Datuk Seri Anwar Ibrahim stated that the upcoming Budget 2025 aims to improve living standards and advance national development. To discuss further, Star Media Group’s StarProperty held a roundtable to comprehensively assess concerns, challenges and recommendations. Representatives from REHDA, Sabah Housing and Real Estate Developers Association (Shareda), Sarawak Housing And Real Estate Developers' Association (Sheda) and other prominent property developers gathered to provide their insights and wishes regarding property considerations to be drafted in Budget 2025.

Government initiatives rank among the top wishes, specifically the reintroduction of the Home Ownership Campaign (HOC). DOSM and BNM noted that the unemployment rate and private sector nominal wage growth are still not on par with pre-pandemic levels. Yet rising household spending between 2019 and 2022 clearly signifies increasing costs of living. The government thus allowed early access to employee provident fund (EPF) withdrawals as well as cash handouts so many Malaysians could stay afloat in the midst of record-high unemployment rates.

Shareda president Datuk Chua Soon Ping says Sarawak needs infrastructure and connectivity.

“I have discussed with Rehda and as recalled, the HOC gave stamp duty exemptions for houses priced up to RM2.5 million. I think RM300,000 to RM1 million is more appropriate. To the developers, HOC reactivated the housing market. It cost the Treasury a few hundred million, but the incentives are not for developers to save money. It is for the buyers,” said Shareda president Datuk Chua Soon Ping.

“For Sarawak, it is the challenge of people not earning enough to afford housing. What we really need is again infrastructure and connectivity, bringing in tourists and investors so that more manufacturing businesses can be established, to give better employment and income to the locals, so that we can retain the talents or bring back those who have gone to the Peninsular and overseas. Federal has allocated us funds, but because the state is too big, the funds are not enough. The only way is through activities that generate better incomes and attract foreign investments and tourists, but infrastructures and facilities have to be linked up,” continued Chua.

Managing director at Land and General Bhd Low Gay Teck brought up the possibility of dipping into EPF funds to supplement house loan payments. “With rising costs and increase in property prices, why not allow the HOC for buyers, on a permanent basis? Allow buyers to have direct withdrawals together with their monthly EPF contribution towards repayment of the housing loan. This will reduce the burden on property buyers. Over the last 50 years, your savings in EPF have not grown as much as the rising property prices. By the time you reach 55 or 60 when you can finally withdraw it for the purchase of a house, the prices would have increased too much again. Looking back, if you were able to use your monthly EPF deduction together to pay for your mortgage 20 years ago, you probably would have owned the property you want. That is something I think we should advocate for,” said Low.

Another possible initiative discussed is for the state government to purchase housing from the open market and rent it to those who cannot afford it, especially in strategic areas such as urban or developed areas, where housing prices tend to be higher.

Rehda president Datuk Ho Hon Sang suggested setting up a national affordable housing trust.

On the developer’s end, Rehda’s president Datuk Ho Hon Sang once again brought up the suggestion of setting up a national affordable housing trust for developers to contribute a certain percentage of their gross development value (GDV) for affordable housing construction. The tradeoff, however, would be that the responsibility of building affordable housing will solely rest on the government’s shoulders.

To facilitate the purchase of affordable housing, banks could implement several measures. One such measure would be to offer 100% margin loans to purchasers, eliminating the need for a down payment. Additionally, banks could absorb interest payments during the construction stages, reducing the financial burden on buyers. Furthermore, allocating 30% of their loan portfolios to affordable housing initiatives would demonstrate a commitment to providing accessible homeownership opportunities.

Another potential strategy to support affordable housing involves providing financing of up to 110% of the property value. This would enable buyers to cover additional costs, such as renovation or furnishings. To prevent speculative buying and ensure that the property remains affordable for first-time homebuyers, a resale moratorium of ten years could be imposed.

To further assist homebuyers, banks could consider offering step-up financing schemes similar to Maybank HouzKey. This type of financing allows for lower initial monthly payments, which can be gradually increased over time as the borrower's income grows. This approach can make homeownership more attainable for individuals with limited upfront financial resources.

Malaysia's housing market has long been a vital economic sector. The nation must have a sufficient supply of reasonably priced housing as its population rises. In particular, Malaysia must continuously record positive economic growth in order to qualify as a developed nation. To do this, everyone must have equal access to affordable housing, which requires the creation of a unique government plan or mechanism backed by the private sector.

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