Hey investors! Today, let’s discuss a big issue: housing affordability in major cities in Malaysia. This is not just news; it’s changing how the property market works.
Are people buying fewer homes? Are more property seekers renting instead? And what’s up with rent prices? Today, we are going to find out what this does to the property market.
Table of contents
Factors of Housing Affordability
If you’re looking at the global market, two significant factors contribute to housing affordability. These factors are urbanization, which is happening so fast that the cities can’t keep up, and income growth in major cities through the big job opportunities in cities.
According to Kathy B. (2023), there are also three major issues in Malaysia. These include a mismatch between the number of homes available and the number of people who want them, new construction that tends to be too expensive for most people, and house prices rising faster than people’s incomes.
Segment of Housing Affordability
Housing affordability problems are not present in the whole real estate market. This is mainly in the lower-income segment because not enough houses are built there.
According to AmInvestment Bank Research, the issue is most concerning for lower-priced residences below RM500,000. where wage growth remains flat. (Star Online, 2023)
However, whether a house is affordable according to the needs of property seekers also depends on the location and the property type. A home priced at RM400,000 might be a steal near the city centre, but on the outskirts of town, it could be seen as on the high side. (Kathy B., 2023)
Housing Affordability In The Buying Market
In the affordable housing market. There aren’t enough cheap homes for everyone wanting to buy, so buyers compete for the few options. This drives prices up even more, making it harder for people who need affordable housing.
Looking ahead, the concern about housing affordability is growing. High prices and interest rates make buying homes challenging, which means fewer people are looking for properties.
According to the Malaysia Property Market Outlook 2024 from PropertyGuru, more people are turning to renting instead of buying because 65% of the property seekers don’t have enough money saved up.
This means that in the upcoming years, there is a chance that the pressure on the housing market will decrease, and prices will decrease or stagnate. It will take a short time before houses go up again.
Housing Affordability In The Rental Market
On the other side of the market, it is a little bit different. Instead of people leaving the market, there are more people coming to it. As said before, more people are turning to renting instead of buying.
According to the Malaysia Property Market Outlook 2024 from PropertyGuru, Things are engaging in the rental market. Since Q3 2023, a growing number of people are looking to rent. Because most seekers don’t have enough money saved up, as said before.
Through the rising demand, rental prices in Malaysia rose by 24% from the fourth quarter of 2021 to the third quarter of 2023, according to data from the Malaysia Property Rental Market Index reported by Propcoach datasense.
Rent is getting more expensive, and renters feel it, so 77% want the government to step in and control prices. Unfortunately, fixing things might take some time.
Building special rental properties called Built-To-Rent isn’t as attractive to builders because it takes longer to get their money back. Plus, high-interest rates make it harder to borrow money for these projects.
Read more!
Government Policies
Okay, but now what does the government do with housing affordability, and what does that have to do with you as an investor?
According to Chee (2023), the Malaysian government offers several housing programs to increase affordability. These programs include the Malaysia People’s Housing Programme (PR1MA), the People’s Housing Programme (PPR), and the National Affordable Housing Policy (DRMM).
These programs affect investors in several ways:
More mid-range buyers:
With government help, more people can afford mid-range properties. This news could be good if you invest in those places.
Rental market changes:
There have been talks about stricter rules on rental prices. This could affect your returns if you invest in rental properties.
More competition for developers:
The government wants more affordable housing built. This might mean more competition for developers, which could affect how they price their properties.
The government’s efforts can affect the housing market. As an investor, should you stay informed and look closely at the news about the market?
Impact On Investment Landscape
Increased Demand for Mid-Range Properties
With less affordable housing options for sale and a government that helps the property seekers, more buyers might turn to mid-range properties. This could boost demand and prices of properties in this category, making it attractive for investors.
Potential Rental Market Shift:
Rising home prices could push more people into renting, initially increasing rental income for investors. But there are risks:
- The government might be involved in rent prices, affecting long-term rental income.
- Too many rental properties could lead to oversupply and lower rents.
Developer Strategies and Risks:
Government focus on affordable housing could mean more competition for developers in lower and mid-range markets. This might lower their profits and push them towards higher-end properties.
Financing Challenges:
Higher interest rates could make it harder for buyers and developers to get loans, slowing down the housing market and affecting investors and developers.
Long-Term Concerns:
If housing affordability isn’t addressed, it could cause social problems and instability in the economy, making investing riskier for everyone.
Conclusion
So, take a quick look at what housing affordability means to the market. Housing affordability issues create a complicated investment scene in Malaysia.
While there are chances in mid-range properties for sale and rentals, investors must watch out for competition, rules from the government, and loan difficulties.
References
Kathy B. (2023, July 4). Affordable housing: Issues and potential solutions. NST Online.
PropertyGuru. (2024). Malaysia Property Market Outlook 2024.
Star Online. (2023, December 26). Property to improve but affordability still a concern. The Star.
Tamezi, A. (n.d.). Malaysia Property Market Outlook 2024. PropertyGuru Malaysia.
Housing affordability challenges are shaking things up for investors in the Malaysian property market. Don’t miss out! Get in touch with our real estate agents to stay informed and adapt your strategy to profit in this changing market.
