Homes just aren’t that affordable, says Bank Negara
KUALA LUMPUR: Bank Negara has a response to those saying it needs to do more to spur home loans: houses simply aren’t affordable.
The central bank has created a website packed with data aimed at debunking the “myth” that access to financing was deterring home ownership, showing that loan approvals for key cities are near 70% or higher. The central bank has resisted calls to loosen mortgage lending, instead saying the property industry should boost efforts to cut costs and accelerate supply.
Rising home prices have added to the grievances of Malaysians grappling with the cost of living since a goods and services tax started two years ago, and as the government removes subsidies on daily items including petrol and sugar. That’s made affordable housing a key voter issue for Prime Minister Datuk Seri Najib Tun Razak ahead of a general election that must be held by mid-2018.
“It’s a tricky situation,” said Wan Saiful Wan Jan, chief executive officer of the Institute for Democracy and Economic Affairs here.
“I don’t think it’s right to say that there’s no problem with financing. But lending rules have to be both strict and balanced at the same time, otherwise we’ll have more non-performing loans and that is not good for anyone in the country.”
The median house price in Malaysia was 4.4 times the median annual household income in latest available data, making the housing market “seriously unaffordable” compared to global standards, according to a 2015 report by state-run Khazanah Research Institute. The report classed an affordable market as one with a median multiple of 3 times.
That still makes Malaysia cheaper than many other markets, with affordable housing in key cities something of a rarity in the 21st century.
In the latest Demographia study, Kuala Lumpur had the eighth best housing affordability out of 18 metropolitan regions around the globe, with Hong Kong homes costing 19 times income and Beijing 14.5 times.
The central bank is seeking to strike a balance: its housing website aims to show transparency in the market while the lender also stands firm on stricter financing rules introduced since 2010 to curb speculation, as well as measures to promote responsible lending amid elevated consumer debt.
Household debt as a proportion of gross domestic product fell to 88.4% last year from 89.1%. It’s still one of the region’s highest and the nation needs to be careful of such levels, central bank Governor Tan Sri Muhammad Ibrahim said in July. The central bank has left borrowing costs unchanged at 3% since July last year.
Just 20% of new Malaysian housing launches in the first quarter were priced below RM250,000, down from 33% between 2010 and 2014, according to the central bank’s “Housing Watch” website.
The bulk of new homes cost between RM250,000 and RM500,000. The median annual household income is estimated at around RM63,000.
“It is an issue of not having enough income and houses being too expensive,” Muhammad told a conference in August, reiterating that “the problem is not about access to credit” and the lender “must have the courage to say it loudly and clearly to the public.”
Only about half of people living in Kuala Lumpur own a home, while nationwide the number was 72.5% at the last census in 2010. Demand is set to rise: the median age of Malaysia’s 31.7 million people is 28 years and the nation’s urban population is growing at an average 4 percent a year, among the fastest pace in East Asia, according to the World Bank.
Najib has pledged to focus on boosting living standards when he tables next year’s spending plan in parliament this month. He may announce an increase in the number of affordable homes built by state-linked companies, tax relief for private developers and subsidies for affordable home buyers, RHB Research Institute Sdn said last month. — Bloomberg
Rising prices: A view of houses at Damansara Heights and its surrounding areas. The latest available data reveal that the median house price in Malaysia is 4.4 times the median annual household income.