Housing market “severely unaffordable”

Malaysia’s housing market is viewed as “severely unaffordable” with a median house price is 4.4 times median annual household income, Khazanah Research Institute (KRI) said.

An “affordable market” is one where the median house price is three times median annual household income.

KRI managing director Datuk Charon Mokhzani said: “It is generally perceived that high housing prices are a direct result of high land and construction costs but this is not the case.

“It is because developers are willing to pay for increased land prices as the market price for housing increases, that ultimately causes housing prices to increase.”

He was speaking at a press conference at the launch of its latest publication, “Making Housing Affordable” report.

Even constructions costs were not the problem, he said, as Malaysian construction cost had been falling with no consequent drop in house prices.

Charon added that in Malaysia, policy initiatives relating to housing affordability had been through transferring physical or financial resources to low-income households. Middle-income households, however, were neither eligible for social housing nor able to afford private sector-supplied houses.

“Policy should therefore be geared to improving the elasticity of housing supply, to make it more responsive to the needs of all sections of the population,” he said, point to the strong need to reform the supply-side and enhance its capacity to develop a sustainable and responsive housing sector.

“The provision of social housing for the majority of population will exert financial pressures on government spending. As Malaysia becomes more urbanised, the demand for affordable housing will increase. If the trend is not addressed, the bottom 40% and middle 40% of income earners will likely require social housing in the future,” he said.

He added KRI was in talks with the government to address these issues. - By The Star

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