KUALA LUMPUR: Sabah has the most expensive homes in Malaysia, said PKR-powered think tank Institut Rakyat, with the average home in the country’s easternmost state costing 11 times more than a family’s median annual income of RM34,320. Citing official data from the fourth quarter of 2012, Institut Rakyat executive director Yin Shao Loong said homes in Sabah were twice as unaffordable as the national average of RM251,731. He added that Sarawak and Kuala Lumpur followed on the list. In Sarawak, the average housing price is RM330,594, but median annual household income is only RM36,564.
“Sabah and Sarawak suffer from a combination of weak household incomes and house prices that are far higher than the national average, with average prices comparable to Selangor,” he said in a statement yesterday.
In Kuala Lumpur, the average house price is RM576,991, but median annual household income in the capital city is only RM70,164 or RM5,847 a month. This puts housing in the three states as “severely unaffordable” in the think tank’s “Housing Affordability Index”, which it reached after gathering data from official sources and compared median household income by state to the average house price by state in late 2012. Trailing Kuala Lumpur are the Pakatan Rakyat-led states of Selangor, Penang and Kelantan.
“The Pakatan Rakyat-run states of Selangor, Penang and Kelantan rank as the fourth, fifth and sixth most unaffordable states in Malaysia respectively. They have the opportunity to distinguish themselves from the national government by making home ownership genuinely accessible to both the lower- and middle-income groups,” said Yin. Terengganu, Pahang, Perak, Kedah, Perlis, and Johor are ranked as “seriously unaffordable”. Only two states — Negri Sembilan and Malacca — are categorised as “moderately unaffordable”.
“However, average house prices for these states still exceeded three times the annual income of each state’s median household,” he said. Housing that costs more than three times the annual income of the median household is considered unaffordable. In 2012, the annual income of the median household was RM43,512.
Yin said by the end of 2012, the average house price was 5.79 times the annual income of the median household. By the first half of this year, the national housing affordability index improved slightly to 5.52. But, he said, by international standards this makes local housing severely unaffordable.
The middle income blues
Using the same data, Yin said the median household income in the first half of this year was RM4,258 monthly. He said an affordable house for a middle-income household should be priced at RM153,000 and below.
The house should be at least 800 sq ft with three bedrooms, but he added that such homes are in short supply. He said the average house price had more than doubled from 2000 to early this year, and while this is good news for homeowners who can enjoy higher values for their properties, 27.2% of households do not own homes.
“The government has established several schemes to make affordable housing more available to low income groups. However, the options established for the squeezed middle class remain sub-optimal,” Yin said. He also compared Putrajaya’s 1Malaysia People’s Housing Project (PR1MA) with Selangor’s Rumah Selangorku scheme and found the latter to be “affordably priced”.
Applying its housing affordability criteria of being within three times the annual income to PR1MA homes, Institut Rakyat found that a household earning RM2,500 a month should be paying RM90,000 and under for an affordable home, while those earning RM10,000 a month should be paying RM360,000. “Thus we find that PR1MA homes are overpriced by at least 11%,” Yin said.
PR1MA was set up in 2012 to provide housing for middle income households earning between RM2,500 and RM10,000 a month. The price of its properties range from RM100,000 to RM400,000. But Putrajaya increased the qualifying criteria from RM7,500 to RM10,000 as announced in Budget 2015. Yin said the Rumah Selangorku scheme under Selangor State Development Corp is affordably priced, with the upper range of RM250,000 homes for those earning RM8,000 a month at only 2.6 times annual household income.
“While national and state governments should ... apply downward pressure on house prices, the federal government needs to generate upward pressure on wages ... to close the gap between market conditions and the desire of families to own a home,” Yin said. — The Malaysian Insider
This article first appeared in The Edge Financial Daily, on December 4, 2014.