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Despite the dominance of residential properties, challenges continue to persist in Malaysia’s real estate market.

The real estate market in Malaysia has seen residential properties dominating the scene in the third quarter of 2023. However, despite the high demand for houses, economists have pointed out that most properties remain out of reach for potential buyers due to affordability issues.

According to Bank Muamalat Malaysia Berhad chief economist Dr Mohd Afzanizam Abdul Rashid, the average house price in the third quarter of last year was RM458,751, with the monthly mortgage repayment averaging RM1,971. Residential properties made up 62.9% of the total real estate market share, with transactions valued at RM28.4 billion, contributing to a 22.6% increase in property transactions, reaching RM57.1 billion.

While the number of unsold properties has decreased, indicating a relatively stable residential property market with steady house prices and reduced inventory, the ‚median multiple approach‘ used to establish affordable housing prices at three times the median annual salary shows that most houses in the country are still unaffordable.

Dr. Mohd Afzanizam highlighted that as of 2022, the median household income in Malaysia stood at RM6,338 per month, meaning the average homebuyer could technically only afford a house costing around RM228,168. This is significantly lower than the average house prices in key areas such as Kuala Lumpur, Selangor, and Sarawak, making homeownership a distant dream for many Malaysians.

The disparity between average income levels and house prices has created challenges for potential buyers, particularly in urban locations like the Klang Valley, Penang, and Johor Bahru. The increased rural-to-urban migration has further intensified the demand for housing in cities, exacerbating affordability issues.

Moreover, policy changes such as subsidy rationalization, sales tax increases, and the new Low-Value Goods tax have weakened the buying power of potential house owners, making it even more difficult to afford a home. Dr. Mohamad Idham Md Razak, a senior economics lecturer at Universiti Teknologi Mara, pointed out that banks assess various factors like credit scores, debt-to-income ratios, employment stability, and housing expenses before approving a mortgage.

With Bank Negara Malaysia mandating a maximum debt-to-income ratio of 60%, many deserving individuals and families find it challenging to qualify for a mortgage to purchase an affordable house. This has led to an expansion of the rental market, with a growing number of individuals opting to rent for life rather than own a property.

In conclusion, the issue of housing affordability in Malaysia remains a significant challenge, with many Malaysians struggling to purchase a home due to high prices, stringent criteria for mortgage approval, and policy changes that further limit their buying power. Addressing these challenges and fostering an inclusive and sustainable housing market is crucial to ensure that all Malaysians have access to affordable and quality housing options.

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