An urgent issue of housing affordability


An urgent issue of housing affordability

If you’ve spent any time in the last few months in pursuit of a home chances are you’ll find it almost impossible to own one without perhaps emptying your bank account. Rumours and speculations have been making their rounds in the media lately and while some have been crying about the oversupply of affordable properties and vice versa, one fact that can’t be denied is that the current prices are, in a word, unprecedented.

“Property has become so unaffordable because our wages have only increased by 5-10% as compared to property prices which have increased by 10 – 20% in the past years,” shares Alan Poon. “It does not make sense since affordable houses are built for the unaffordable.”

The uptick in affordable home prices threatens the livability of four income groups: extremely low-income seniors/the disabled, minimum wage workers, low-income families and middle-income families. A report by Bank Negara Malaysia shows that currently there is a shortage of affordable housing, and yet there is an oversupply of commercial property in the market. Thus, it wasn’t at all surprising when they also reported that only 5% of Malaysians can afford properties that cost RM500, 000 and above. “If we allow this to go on, we will have a “homeless” future generation,” warns Alan.



According to him, it is not permissible for developers to build on a land without the state government’s approval. So the time lag between supply responding to demand accounts for what goes on at the policy level and whether or not the authorities are responsive in giving consent to build.

Alan explains that the existing infrastructure of a location could affect land acquisition, therefore, town planners should put thoughts into acquisition factors such as the adequacy of land for urban expansion, migration factor and possible bottlenecks. On the flip side, town planning, be it by the federal or state government, should give emphasis to creating a Transit Oriented Development (TOD) in order to increase the desirability of the location.

“There are so many instances where an affordable and excellent quality product fail to receive a good response due to its location. At the end of the day, it also boils down to its distance to the workplace, connectivity as well as mobility,” says Alan.


While the true definition of affordability is still widely debated and differs from one country to another, the rule of thumb is that the house must not cost more than three times of your annual income. Alan further explains that this means a person with an annual income of RM60, 000 would only be able to afford a home that costs below RM180, 000. A common mistake made by investors is to look at the absolute price instead of the price of unit per sq ft. “A RM300, 000 price tag in Klang Valley means you’re buying a shoebox studio unit—but the further north you go (towards Ipoh and Kedah), the bigger the unit gets,” points out Alan.

According to the 12th Annual Demographia International Housing Affordability Survey 2016, with the exception of Malacca, houses in Malaysia fall under the “seriously unaffordable” category in all states across the board. Surprisingly, 46% of Malaysian consider properties that fall between the RM200, 000 and RM400, 000 price tag as affordable housing. Therefore, it is pertinent to be clear on your objective in buying a house. If you’re buying for investment purpose, you have to calculate the return and yield, as well as consider which state you’re purchasing in.

Furthermore, age, lifestyle and cost of living also determine affordability. A RM300, 000 property may be affordable to a 25-year-old, but a middle-aged man of the same pay scale or higher may not be able to afford the price tag due to personal commitments.

Other financial considerations

He also advises investors to take into consideration other factors such as your lending capability (CRIS, CTOS and DSR), your income qualifications (monthly nett cash flow) and to make sure that you have enough cash reserve for down payment, legal fees and other miscellaneous charges.


One straightforward fix to solve our housing issue would be to create more affordable housing to meet the demand. “Prima targeted to build 500, 000 units when they first started, but that number has now been increased to 1 million units,” informs Alan. “That’s why there are roadshows such as the Integrated House Ownership Expo Roadshow being organised in an effort to promote affordable homes to the public.”

Since there aren’t enough houses at the right price points to go around, the government has introduced several affordable housing schemes (such as PRIMA and My First Home Scheme) to meet the need of buyers of every income bracket. Also, not too long ago the Budget was recalibrated to only allow first-time home buyers to purchase new projects that cost below RM 300, 000; while schemes such as PPR (Projek Perumahan Rakyat) allow them to purchase homes that are priced at RM35, 000.

These solutions seem efficient and simple but not without challenges. He further explains how different projects bear different qualification guidelines, thus, there are instances where applicants qualify for a project yet fail to obtain a bank loan. To make matters more complicated, certain banks wouldn’t grant a loan if the developer involved is unfamiliar to them.

The public’s perception of affordable housing needs to be changed. “Some people still shy away from the idea of purchasing affordable housing due to negative perceptions, such as small living space, lack of infrastructure and amenities as well as security issues.”

Alan Poon also urges the government to look into the communication between the federal and state government to ensure all approval processes will be done efficiently in order to deliver affordable houses at a faster rate.


Currently, there are many measures taken such as the establishment of a Housing Board by Bank Negara to examine the ‘mismatch’ in supply and demand and its possible impact on the economy and the 11th Malaysia Plan that aims to tackle and address many housing related issues.

While waiting for all these things to happen, Alan urges investors to do their homework and familiarise themselves with other more creative buying methods such as obtaining information via portals that offer free pre-launch insights, bulk purchase, crowd funding or property auctions.

That being said, investors should also explore the secondary market and take advantage of the affordability of auction properties.

“As an investor, the choice is in our hands—affordability is an option. If you can sort out your cash flow within the next six months, I can guarantee you even at the most challenging time in Malaysia today, you will still be able to afford a property,” assures Alan.

DISCLAIMER: The opinion stated in the article above is solely of Alan Poon and are not in any form an endorsement or recommendation by Readers are encouraged to seek independent advice prior to making any investments.

This article was first published in the Malaysia July 2016 Magazine. Get your copy from selected news stands or view the magazine online for free at  Better yet, order a discounted subscription by putting in your details in the form below!

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