When earning RM7,000 can’t buy you a home

jalan_ipoh_klGEORGETOWN: Despite being a basic necessity, house prices in Malaysia have soared to a point bordering on ludicrousness.

The sharp jump in house prices over the last two years even created a generation who simply cannot afford to buy a home.

A three-bedroom two-bathroom apartment of not more than 1,000 square feet (92.9 sqm) in the outskirts of town today costs over RM245,000.

Even if the bank approves a 90 per cent of 100 per cent loan to finance the house, the monthly loan could cost the borrower his entire month’s salary.

“The situation is even more severe in places like the Klang Valley, Johor Baharu and Penang.

“I say ‘severe’ because 40 per cent of city-dwellers are middle-income earners”, said Nor Malena, who conducted the research with Dr Azrina Husin, a senior lecturer from Universiti Sains Malaysia.

Why they can’t afford it

Aside from exorbitantly priced houses, “spending indiscriminately” is one of the issues raised when discussing obstacles to home ownership.

However, Nor Malina said many did not approach the subject from the “disposable income” aspect.

A RM7,000 monthly income may seem like a big figure but when the costs of living are factored in, owning a home seem less like a viable option.

Their monthly salary also makes them ineligible to buy low cost houses.

In her 2010 research, Nor Malina explained that the Urban Well-being, Housing and Local Government Ministry’s requisite to purchase a low cost house was a monthly household income of not more than RM1,500 a month.

To buy a medium cost house, the monthly household income cannot exceed RM2,600.

She said the government had previously focused on helping the lower income group by coming up with low cost housing projects.

“The middle-income group is rather neglected. A RM7,000 salary may seem grand, but how much is left after the monthly expenses have been deducted?”

For example, childcare costs in the city is at least RM250 a month.

If one has three kids, and then has to pay transportation fees of RM90 per child, how much would that be? There are also school expenses, car loans, study loans, EPF (Employee Provident Fund) contributions and daily expenses.

“After all those costs have been deducted, the net disposable income may be far less. How could they save for a house? Whether they like it or not, they have to rent – perhaps for the rest of their lives,” said Nor Malina.

An unmet need

Nor Malina’s research shows 85.1 per cent of the respondents could only afford houses within the range of RM50,000 to RM200,000.

It is nearly impossible to find a house with that price tag in big cities, while those that do exist may be small in size or located in a less than desirable neighbourhood.

This clearly shows that the need for low and medium cost houses in the cities was still high.

Real Estate and Housing Developers (Rehda) estimates the average demand for homes in Malaysia is 150,000 units a year. This is based on population growth and household formation.

The research involved 400 respondents from four states namely Selangor, Kuala Lumpur, Penang and Johor.

Too far

Nor Malina said the spike in housing prices was inevitable given the rise in real estate value and building material prices.

This is also due to the rapid urbanisation rate, which is expected to increase to 75 per cent by 2020, following the mass migration from rural areas to the cities.

To address the issue, the government has launched several projects such as the 1Malaysia Housing Programme(PR1MA), the Public Housing Programme and the Private Affordable Ownership Housing (MyHome) scheme.

However, many of the housing projects are located far from the city or work places of the target groups.

This is despite the fact that research shows location is the second most important factor in home ownership, after pricing.

Some 27.5 per cent of respondents favoured the location of a house rather than the physical and social aspects of it.

“They would rather rent than face the stress of a lengthy commute and high fuel costs”, she said.

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Nor Malina said at between RM100,000 and RM400,000, the cost of the PR1MA homes were not that affordable to middle-income earners.

“Even a RM200,000 home would be out of their reach. Research shows that only 15.1 percent of middle income earners can afford homes priced above RM200,000,” she said.

She added that the housing issue placed a huge emotional burden on city dwellers and has to be addressed promptly.

“There needs to be thorough research that looks into a household’s disposable income and financial capacity.

“If the need for affordable housing cannot be met, people will become resentful and frustrated because of the inability to access a basic need and to maintain their family’s wellbeing”. – Bernama