No Malaysian dream to home ownership

When I joined the workforce in 2000, my salary as a fresh graduate was slightly above RM2,000 a month when I worked as a journalist at The Sun. I found it a fair wage since I had zero work experience, and back then, low starting salaries wasn’t a big issue.

Of course, it is today because if you ask around in most industries in the country, the starting salary for fresh graduates has not changed. Ask a new journalist and they will most probably tell you that their salary is around RM2,000 too.

The only difference is that this is 2017 - almost 20 years after I started working. So it would seem quite unbelievable that the starting salary has not changed after almost two decades when the cost of living has been steadily rising.

Within five years of working and saving up, I managed to buy a car, one low-cost apartment and one medium-cost apartment. An average medium-cost 1,200-square-foot apartment in Kuala Lumpur at that time was selling for around RM250,000.

Today, the situation is very much different. Costs have escalated and there is a genuine concern that it is becoming more difficult for average citizens who have average jobs to be able to be homeowners and there are many reasons for this.

Bank Negara Malaysia recently launched a website, Housingwatch,my, to educate people on why homeownership appears unattainable today. Housing Watch is full of articles, graphics and pictures that are filled with information.

Apparently, one of the most popular misconceptions is that loans are not being approved for those who want to buy houses, and there have been calls for financial institutions to loosen their criteria to encourage more borrowing.

This is a misconception as according to Bank Negara, the number of approved loans has actually increased by 70% in the major cities around Malaysia. That means that people who are buying are actually getting the mortgages.

And when there is a drop in home purchases, it just means that many people aren’t initiating the buying at all, so there are no loan applications, hence no loan rejections. What this also tells you is that people have no financial capabilities to purchase homes, and they have given up on home ownership.

The same type of medium-cost 1,200-square-foot apartment that I had bought in Kuala Lumpur 15 years ago at the price of RM250,000 would now cost around RM600,000 per unit. That is an increment of more than 100% and do remember, starting salaries have not increased.

So even if the financial institutions relaxed their loan approvals for those who plan to buy homes, it would just mean that these mortgages could not be serviced and this could lead to more non-performing loans.

So basically, people do not have money to buy homes. Not only do they not have the income to buy houses, the prices of the houses are exorbitantly high today.

Priced out of the market

According to a Khazanah Research Institute report, the median house price in Malaysia is 4.4 times more than the median annual household income. A healthy situation is when the median multiple is only 3 times.

The government needs to something to ensure that Malaysians are able to afford to purchase homes. They need to ensure that there is a reduction in costs when it comes to property development as well as an increase in supply.

Another important step that the government can do is to curb real estate speculation. The increase in price is not just because of rising costs, it is also due to property developers and agents speculating on property prices.

According to Bank Negara’s website, Housingwatch,my, only 25 percent of houses built are priced at RM250,000 or below, which is a reduction of 33 percent since 2010. Most new homes today are priced between RM250,000 and RM600,000.

To put things into perspective, the data also shows that the median annual household income is around RM63,000. That is such a significant difference and it further illustrates how Malaysians do not have enough income and even if they get loans, they won’t be able to repay them.

Also, according to data on the website, there is a shortage of 960,000 affordable homes and this number is going to increase to 1 million come 2020. The demand for homes will only rise because the current population is at 31 million and it is steadily growing at an average rate of 4%.

So this means that property developers need to play a more responsible and ethical role. What is more worrying is that the government just might not be able to do anything because they themselves do not have the financial capabilities to do so.

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ZAN AZLEE is a writer, documentary filmmaker, journalist and academic. As much as he feels there needs to be a curb in property speculation, like many Malaysians, he still looks at real estate as a very sound investment. Visit FATBIDIN.COM to view his work.- Mkini