Housing Affordability
Highlights

New data based on the latest Household Income and Expenditure Survey 2016 indicates that housing affordability is still an issue in Malaysia.

In 2016, given the Malaysian monthly median household income of RM5,228, the actual median house price of RM313k was considered unaffordable compared to the estimated maximum price of an affordable home (RM282k).

Among the selected states, houses in KL, Penang and Sabah were the most unaffordable as reflected by the gaps between the actual median house price and the estimated maximum price of an affordable home, which is computed based on the monthly median household income in the respective states.

The prevailing market prices in key urban employment centres were also beyond the means of households, with varying degrees of severity across locations. Among the key city centres, houses were most unaffordable in Georgetown. Georgetown’s actual median house price of RM600k is much higher than the estimated maximum price of an affordable home at RM294k, based on its monthly median household income of RM5,477.

 

Source: National Property Information Centre (NAPIC), Department of Statistics, Malaysia (DOSM) and BNM estimates Note: Maximum affordable house prices are estimated using the Housing Cost Burden (HCB) approach, which states that a house is deemed affordable as long as housing costs do not exceed 30% of net monthly income. Estimates were based on the latest available official data on household income. Other factors considered include prevailing interest rates and loan tenure of 35 years. Calculations consider the disposable income of households (gross minus EPF, SOCSO and income tax).

*The city centres in each state refer to the major urban centres of employment in the state. It is based on the delineation of (i) District: Petaling (Shah Alam, Subang Jaya and Petaling Jaya) in Selangor and Johor Bahru in Johor; (ii) Mukim: Kuala Lumpur Town Centre in KL and Georgetown in Penang. Data for city centres in Sabah and Sarawak is currently unavailable.

 

Maximum affordable house price by household income

Household Income Brackets1, RM

Percentage of Households by Income Brackets1, %

 Maximum Affordable House Price2,3, RM

≤ 1,999

8.8

 112,200 - 124,700

2,000-3,999

26.1

 222,150 - 247,200

4,000-5,999

22.6

 318,600 - 354,100

6,000-7,999

14.6

 408,300 - 453,600

8,000-9,999

9.3

 493,500 - 556,100

10,000-14,999

11.3

699,560 - 777,600

Source: Department of Statistics, Malaysia and Bank Negara Malaysia estimates

Based on the Household Income and Basic Amenities Survey Report 2016. Households earning RM15,000 and above account for 7.1% of total Malaysian households.

Estimates of maximum affordable house price are derived based on the upper bound of each income bracket.

The lower house price in the range is calculated based on the Housing Cost Burden approach, in which a house is deemed affordable if the monthly housing loan installment does not exceed 30% of household net monthly income (after statutory deductions). Estimates are based on interest rate of 4.5% and 35-year loan tenure.

The upper house price in the range is calculated based on the Residual Income approach, which takes into account statutory deductions, basic expenditures and other debt obligations, and with the assumptions of loan-to-value ratio of 90%, interest rate of 4.5% and 35-year loan tenure.

Note:
For further information on the housing affordability methodology, please refer to the Bank Negara Malaysia Annual Report 2016, Chapter 4, Box Article “Demystifying the Affordable Housing Issue in Malaysia”, page 90.