Scary for many? Current house prices still too high for Malaysians.

Property prices look scary? Just today, I was discussing with a property magazine writer on the younger generation (including her) and how they are all finding it hard to buy a property. She fully agreed and says that the house prices seem very high. I said, while this is true but the current generation has also changed tremendously. Savings is no longer something urgent, vacations are.

Inconvenience is no longer something to tolerate and everyone wants a property in a place where all the amenities they want including their offices are located. When all the criteria are met, guess what happens to the price then? So, yes, when it comes to numbers, our Bank Negara Malaysia has also released their Financial Stability Review and it shows that relative to income, Malaysian house prices remain seriously unaffordable. We will see what ‘seriously unaffordable’ meant later on in the article.

Article in . Bank Negara Malaysia (BNM) said that Malaysian house prices are still under the serious unaffordable category when compared to the income. This is because of a pronounced (means very apparent) and prolonged (means has been some years…) mismatch in demand and supply of residential property. This is despite lower average transacted house prices in 2019.

This is what BNM said with regards to potential risks. “Nevertheless, risks of a sharp correction in house prices will continue to be mitigated by firm demand for housing, particularly for properties priced below RM500,000. For the first nine months of 2019, these properties accounted for 83% of total transactions.” BNM also said this about the risk exposure. “Debt-at-risk or the property sector remained at a manageable level of 5.5%, with banks’ excess capital buffers sufficient to cover three times the estimated potential losses.” to read that comprehensive article do read it here: Article in

Actually, what do BNM meant by ‘seriously unaffordable?’ Please do refer below. If your income is currently RM100,000 per year, then the home which you should buy is RM300,000 if you like to buy an ‘affordable’ home based on your salary. So, if you intend to buy a RM500,000 property but still want it to be affordable to you, please try and earn an income of RM167,000 per year.

So, you see the home price is not just a function of the home price but also depend on the yearly income we are earning today. So, are our salaries too low or property prices too high then? Now, before we start to go crazy as to why property prices are so high and if Malaysia is the only place in the whole world which is facing such a situation please do refer to the next image right after. House Price-to-Income Ratio as below.


I guess the numbers at the end should already tell you that the central banks in all these other countries are also saying something similar and is also trying to do something about it too. No idea if their government is forcing developers to build affordable units though. So, we have two choices. One is to reduce our expectations and to buy something much more affordable. It does not take a lot of research to realise that there are certainly more affordable choices in some further away areas too. Or, we could choose to work very hard and earn a higher income. Else, work two jobs… Hoping for property prices to drop to the level we want is actually not an option. Happy understanding.

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Next suggested article: House prices under pressure and bargains?


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