7-6-2023 (KUALA LUMPUR) In urban areas across Malaysia, approximately one out of every four households (23%) relies on renting rather than owning a home, a significantly higher proportion compared to the 7% in rural regions. In the capital city of Kuala Lumpur, the figure reaches a staggering 40% of households that do not own a home, highlighting the pressing issue of housing affordability.
Ownership Rates: M40: 74% B40: 73% The homeownership rates for the M40 and B40 income groups in Malaysia are 74% and 73%, respectively. However, disparities in homeownership are more pronounced in major states. For example, in Selangor, the rates stand at M40: 75% and B40: 55%. In Kuala Lumpur, the figures are M40: 68% and B40: 43%.
Challenges Faced by Younger Generation in Affording Homes
Dato’ Wan Hashimi, the CEO of 1Malaysia People’s Housing Program (PR1MA), revealed that in Malaysia, approximately 47% of young working families between the ages of 25 and 30 are unable to afford homeownership. This represents a dire situation where nearly half (50%) of the younger population lacks the financial means to purchase a home.
The United Nations’ “2030 Agenda for Sustainable Development” emphasizes the importance of safe, resilient, and sustainable urban living areas that cater to all socioeconomic levels. It underscores the significance of affordable housing, well-developed public transportation systems, adequate infrastructure, essential services, and ample green spaces.
Current Challenges and Efforts to Increase Affordability
The Malaysian housing market currently faces imbalances between supply and demand, resulting in unsold properties and difficulties for prospective buyers in obtaining loans. Developers are confronted with rising development costs, such as increased land prices, compliance expenses, and construction costs. Moreover, unfavorable location factors and low indigenous demand contribute to the limited effectiveness of initiatives aimed at increasing affordable housing supply.
To address these challenges, the government has established mechanisms for affordable housing and encouraged private sector participation and support. These efforts aim to expand the availability of affordable housing options for Malaysians.
Cities with Highest and Lowest Housing Affordability
In terms of affordability, the cities with the highest price-to-income ratios in Malaysia are Kuala Lumpur (7.3 times), Putrajaya (8.6 times), Penang (6.2 times), Sabah (6.6 times), and Selangor (5.2 times). The affordability ratio measures the proportion of annual income required to purchase a property.
More Than 4 Times Price-to-Income Ratio Considered Unaffordable
Housing affordability is considered challenging when the price-to-income ratio exceeds 4 times, and severely unaffordable when it surpasses 5 times. In Malaysia, states like Terengganu (2.2 times) and Kelantan (3.1 times) have relatively lower price-to-income ratios. However, Malacca (3.4 times), Perak (3.9 times), Kedah (4.1 times), Negeri Sembilan (4.5 times), Pahang (4.6 times), Sarawak (4.7 times), and Johor (4.8 times) still face significant affordability issues.
Nearly Half of Younger Generation Faces Homeownership Challenges
The statistics indicate that almost half of young Malaysian families lack the financial means to own a home. Among households with an income below RM2,500, categorized as B40 (lower-income), one in every four families does not own a home. For M40 (middle-income) households with an income range of RM4,360 to RM9,619, one in every five families faces the same situation. In contrast, among T20 (higher-income) households with an income exceeding RM9,620, only one out of every ten families does not own a home. The income thresholds vary across different states, with Kuala Lumpur classifying households earning RM7,640 as B40, while the same income level in Sabah qualifies as M40. Additionally, states like Perak, Penang, Kedah, Kelantan, and Pahang consider households with a monthly income of RM7,640 as T20.
COVID-19 Impact on Household Incomes
In this era of rising living costs, owning a home has become increasingly unattainable for many Malaysians. The Department of Statistics Malaysia’s Household Income and Poverty Report highlighted the severe impact of the COVID-19 pandemic on household incomes. The report revealed a significant increase in the number of households with a monthly income of less than RM2,500, with a 12.5% year-on-year rise. Within the M40 group, 20% of families experienced income declines that pushed them into the B40 category. Even the T20 group was not spared, as 12.8% of households dropped back to the M40 category.
Most Affected: B40 and M40 Income Groups
The report indicated that the B40 (lower-income) and M40 (middle-income) groups experienced the most substantial income reductions. The income share for these groups declined to 15.9% (from 16% in 2019) and 36.9% (from 37.2% in 2019), respectively.
Government Efforts to Facilitate Affordable Housing
The Malaysian government has introduced various affordable housing programs, such as the Skim Rumah Mampu Milik (Affordable Home Ownership Scheme), to assist the B40 and M40 income groups in realizing their dream of homeownership. Besides federal initiatives, state governments have also implemented affordable housing programs targeting their respective populations.
