Malaysian House Price Index (MHPI):

• In 2Q 2021, growth of the preliminary Malaysian House Price Index (MHPI) dipped into the negative territory, recording a small contraction of 1.2% (1Q 2021: 0.7%).
  • In the first half of 2021, MHPI growth moderated to -0.3% (2H 2020: 0.7%; 1H 2020: 1.7%).
• This was driven by the decline in prices across all types of properties during the quarter, except for terraced house, which recorded a small positive growth of 0.9%.
• By state, the annual decline in MHPI was observed across major states, in particular Kuala Lumpur (-5.2%), Selangor (-1.6%) and Penang (-1.5%).

Note:

1. Based on historical trends, the final MHPI estimates may be revised upwards to reflect additional data submissions for the quarter.

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• Outstanding housing loans by the banking system expanded by 7.1% as at end-December 2020 to RM646.8 billion.
• In 2020, housing loan applications received by banks amounted to RM194.4 billion.
  • In the same period, banks approved RM137.7 billion of house financing or about 307,800 accounts. 43% of these newly approved housing loans were granted to first-time home buyers (2013-2019 average: 41%).
• The overall housing loan approval rate stood at 72.0%^[1] as at end-December 2020 (2013-2019 average: 74.5%).
  • The moderation in approval rate reflects prevailing issues surrounding housing affordability arising from the mismatch between supply and demand of houses.
  • 60% of newly approved housing loan accounts were for the purchase of houses priced below RM500,000 (<RM300,000: 29%; RM300,000 – RM500,000: 31%).
  • By location, 75% of the newly approved housing loans were for the purchase of residential properties in Selangor, Kuala Lumpur, Johor and Penang.
• Common reasons for banks rejecting housing loan applications:
  • Borrowers are already highly indebted;
  • Borrowers have very little residual income after taking into account monthly living expenditures and existing financial obligations;
  • Borrowers have poor credit history; and
  • Insufficient documentation to support ability to repay loan obligations.
• Advisory services are available for the general public prior to undertaking home financing, which includes Rumahku Financial Education programme by Agensi Kaunseling & Pengurusan Kredit (AKPK) to help potential borrowers understand the financial commitments associated with purchasing a home.
  • For applicants who have been unsuccessful in securing home financing, Khidmat Nasihat Pembiayaan (MyKNP) by AKPK has been established to help individuals better understand the factors affecting financing applications, as well as help improve eligibility for future financing
• Available financing assistance packages for home buyers include:
  • Skim Rumah Pertamaku
  • Skim Perumahan Belia
  • PR1MA Special End Financing Scheme
  • Skim Jaminan Kredit Perumahan
• More details can be found here: https://www.housingwatch.my/housing-loan/malaysia-home-financing-assistance-programmes/ 

[1] The approval rate is the ratio of the number of housing loan applications approved to the number of housing loan applications received by the banks. The ratio is derived using the 12-month moving average method, based on monthly data submissions from banks to Bank Negara Malaysia.

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• 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

1. 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.
2. Estimates of maximum affordable house price are derived based on the upper bound of each income bracket.
3. 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.
4. 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.

Others: Malaysia House Price Index 2021

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