The opportunities and amenities of urban life are a tempting combination for many people. Popping out on the MRT to the cinema, grabbing a bite to eat at a food court, and picking up your shopping on the way home is a powerful argument for the joys of urban living.
These attractions are driving a shift in Malaysia’s population. Cities continue to grow, largely driven by rural populations choosing big city potential as an opportunity for the future. That creates some interesting challenges for the nation’s housing market.
Urbanisation in Malaysia grew from just 26.8% in 1970, to 71% by 2010. The urban share of the population is expected to grow further, projected to reach 88% by 2050.
The World Bank estimates that Malaysia’s urban population increased by 10 million in just the 10 years from 2000 to 2010! That’s like copy pasting KL five times over!
So what does urban actually mean? In the Malaysian census, the term 'urban' is defined with the zingy description below:
“Gazetted areas with their adjoining built-up areas, which had a combined population of 10,000 or more at the time of the Census 2010/2020 or the special development area that can be identified, which at least had a population of 10,000 with at least 60 per cent of population (aged 15 years and above) were involved in non-agricultural activities."
Wow. So, there you have it. Now, what does that mean for housing?
Balancing Urbanisation And Affordable Housing
The growing pressure on major cities also creates increasing demand for affordable housing. This is particularly true when considering that economic conditions are often a major driver of urban migration, as rural citizens look for new (and more lucrative) working opportunities in the city.
The good news is that Malaysia has also done a rather excellent job of cutting down poverty during this period of urban growth.
There are now just 0.4% of the population living in poverty under current national measurements, and just 2.7% relative to Malaysia’s middle income status as of 2015. That just shows Malaysia really boleh!
While real poverty levels have fallen, that doesn’t mean everyone can suddenly afford a home. Lower income B40 and even M40 groups still often struggle to save for a down payment, and earn the levels necessary for home loans on housing.
The link between wages and affordability is unmistakable for affordable housing. The good news is that Malaysia’s average monthly salary increased by 4.4% to RM3,224 in 2019, from RM3,087 in 2018. Median household income stood at RM5,873 in that year.
Affordability is basically a balance of how much you earn, against how much a house costs. There are a number of ways this can be analysed, based on varying models of affordability.
The influential Khazanah Research Institute suggests that a 3x total median annual household income is a good measure of affordability for housing.
In simple terms however, it’s down to how much people earn within a particular region, balanced against the local house prices in the area. Let’s take a look at those figures across Malaysia, and what that can buy you:
Median household income
Median house price
Affordable housing limit
Property for sale within limit
WP Kuala Lumpur
*sources NAPIC and DOSM
You can see that urban influence already! States with a larger urban area tend to have higher incomes, but also higher median house prices.
Kuala Lumpur and Selangor are clear examples, where higher incomes mean higher average affordable house prices.
That also means competing pressure for homes however, with the average median house price still above the affordability measure in these regions.
Luckily, the house price search shows that many houses can be found on the market below that price.
Putrajaya is something of an outlier, although it’s worth nothing that median house prices in the state fell by 20% between 2018 and 2019!
The state’s special economic status as a Government hub is also likely to have an impact on median incomes.
Kedah, Perak, Sabah, and Kelantan — all states with large rural populations — demonstrate the other side of this coin.
Average incomes mean lower average affordable housing limits in these states. Even with that in mind, median house prices in these states are above what might be suggested by the affordable homes criteria.
Aside from Putrajaya, Melaka is the only state by this measure where median house prices are below the affordability ceiling.
Affordable Home Schemes
Of course affordable housing is a big national priority. People want places to live, and they tend to be happier in a society where these things exist. That’s why there’s often a big push for affordable housing in key financial decisions such as budgets.
During the tabling of Budget 2021, the Government had allocated RM1.2 billion to build affordable housing.
That is aimed at developing 14,000 homes under the Public Housing Programme, and 3,000 units developed by the National Housing Development Company (SPNB), alongside other housing support and upgrade initiatives.
The most high profile affordable homes project in Malaysia is the PR1MA initiative. This is a valuable pathway to acquiring affordable housing for those who meet the eligibility criteria of:
Being a Malaysian citizen
Having an individual or combined household income of RM2,500 – RM15,000
Being over the age of 21
Owning no more than one property between you and your spouse
The Skim Rumah Pertamaku/My First Home Scheme is also another important scheme if you’re a first time buyer. It enables you to access 100% financing for your home, overcoming that often difficult hurdle of gathering your down payment.
These kinds of affordable housing initiatives are designed to reflect changing areas of need. With financial measures like down payment support, that responsive approach is more reflected in the loan value needed to afford a home in a particular area.
When it comes to building homes themselves however, schemes should be developed in a way to add supply where it is most needed.
In the modern Malaysian context, that means recognising growing demand in urban areas, and the overall trend for urbanisation.
Big city lights and urban opportunities will continue to attract Malaysians in coming years. That means the housing market will need to keep working hard to deliver suitable homes for citizens.
Want to find out more about Malaysia’s property landscape? Explore our article, Wait A Minute, How Many Properties Are There In Malaysia?