There is a serious mismatch between income and house prices. According to Khazanah Research Institute and Bank Negara Malaysia, the signal of a well-functioning, affordable home market is when the median price for the whole housing market is three times the gross annual household income.
Bank Negara would add that the monthly payment for the house should not be more than 30% of the income. Payments of more than 30% would be considered as an overburden for the consumer.
Based on the above criteria, Bank Negara would suggest that an affordable home in Malaysia based on the monthly median income of RM4,585 and the annual median income of RM55,020 is between RM165,000 and RM242,000. Yet what is the current price of houses?
Overall in Malaysia, house prices are 4.4 times the median income. Further, zeroing in on the states, house prices in Kuala Lumpur are 5.4 times income, in Pulau Pinang they are 5.2 times, in Johor they are 4.2 times, and in Selangor they are 4.0 times.
The average price of houses in Kuala Lumpur was RM773,000, while in Selangor it was RM497,000 in the third quarter of 2018. Very different from Bank Negara’s affordable home price of RM242,000. Houses in Malaysia are simply not affordable to consumers.
The efforts, through policy and programmes then, should be to reduce the price of houses to the affordable range of about RM250,000 to RM300,000. Yet, in 2016 only 25% of new housing launches were priced below RM250,000. There was a gross oversupply of houses above RM500,000 and under-supply of houses below RM250,000. No wonder the mismatch between demand and supply.
It clearly appears that housing developers are building expensive houses to make huge profits not from Malaysians but from foreigners who can easily afford the high prices. They appear very confident that the government would support their interests instead of forcing them to bring prices down to what Malaysian consumers can afford.
That is why the Federation of Malaysian Consumers Association (Fomca) strongly opposes the sale of property costing RM600,000 upwards to foreigners. This is a price that is easily affordable to some foreign nations.
For Singaporeans, for example this is about S$200,000, cheaper even than their own social houses built by their Housing Development Board. Hong Kong investors, flush with cash and facing internal turmoil, are also looking for investments in Malaysia. The winners are the property developers; the losers are the rakyat.
With the ability to sell to foreigners supported by the government, the housing developers can now neglect local consumers and build for and market to wealthy foreigners. They get to boost their excessive profits through unaffordable housing.
It is really sad that the government has chosen to enable housing developers to make excessive profits while Malaysian consumers cannot afford to purchase their own homes.
If we are sincerely concerned about enabling Malaysians to own their own homes, Fomca urges the government to cancel the policy that property of RM600,000 and above can be sold to foreigners. This is the government’s responsibility to the rakyat.
DATUK DR PAUL SELVA RAJ
Chief executive officer,
Federation of Malaysian
Consumers Association (Fomca)
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