Housing affordability worsened in 2014

Properties in the primary market will still be in demand

Affordability remains on stage as more and more developers are currently re-looking into their plans and slowly going back to houses, high-raise or landed, priced within an affordable window of values. During this challenging 2015, we should be seeing offers stabilising between the RM250 psf up to maximum RM700 psf according to different locations all through out Malaysia. For sure the Malaysian property market is going to be reshaped soon with more residential houses (not the past shoe-boxes or pigeon-holes units, offered for the rakyat). Malaysia, from a residential point of view remains quite affordable when compared to our neighbouring countries as showed in the table below which has been recently presented by Dr. Daniele Gambero in his talks and contributions to the local newspapers.

Housing affordability worsened in 2014

Our biggest question is on the 1,000,000 houses by the end of 2016 (24 months from now) that the Government keeps on talking about and how this numbers match the maximum 150,000 new houses that Malaysian developers are delivering every year.

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Housing Affordability Worsened in 2014

Properties in the primary market will still be in demand


KUALA LUMPUR: The Malaysian housing affordability has worsened to 3.6 times in 2014, according to Rahim & Co Chartered Surveyors executive chairman Tan Sri Abdul Rahim Abdul Rahman, in presenting the Rahim & Co Research — Property Market Review 2014/2015 yesterday.

“Housing affordability worsened to 3.6 times in 2014 compared with 3.4 times in 2009. This is based on average terraced house price to average annual household income,” he said. “This essentially means that an average terraced house would cost an average household or family in Malaysia, 3.6 times its annual gross income.

“However, I believe 3.6 times is reasonable and the government should maintain it at this figure. Moreover, the government has a vision to make Malaysia a high-income nation by 2020, and I’m confident we will be able to reach it despite the current economic condition vis-a-vis the lowering of oil prices and lowering of the [value of the] ringgit.”

The data showed that the least affordable terraced house in Malaysia for 2014 was recorded for Sabah at 6.2 times, followed by Pulau Pinang (5.9 times), Kuala Lumpur (5.6 times) and Sarawak (4.4 times).

“I believe that the government is keen on building one million units of affordable homes by 2016 through various agencies such as Perbadanan PR1MA Malaysia (PR1MA), Syarikat Perumahan Negara Berhad (SPNB) and Kuala Lumpur City Hall (DBKL),” said Rahim. “With the government’s efforts to build more affordable homes, we believe the ratio between housing cost and income will decrease.”

Rahim & Co director of research Sulaiman Akhmady Mohd Saheh added: “We expect affordability to improve by either this or next year because we believe when the goods and services tax is implemented in April, people will become more thrifty and discerning in their spending. This will see a bit of a boost in the secondary property market as it is hoped that this section will offer prices that are much lower than the primary market.

“Overall, this will contribute to the lowering of the ratio but properties in the primary market, which are being sought after by many, is one area that will still be in demand. For example, the ratio for Kuala Lumpur was 5.9 times in 2009, which improved to 5.3 times in 2012 but worsened again to 5.6 in 2014,” said Sulaiman Akhmady.

He believes that new talents returning to the country and tightening measures by the government will spur more interest and purchases in the secondary market.

Meanwhile, the report highlighted that property market activities in 2014 rebounded after a slowdown in 2013 with higher transaction numbers in the first half of 2014 (1H14) compared with 1H13.

The total number of transactions in 1H14 was 193,405 and the figure is expected to reach around 390,000 to 400,000 for the whole year. This indicates a 3.3% increase in 1H14 compared with 1H13, showing a flattening of the declining trend observed since early 2013.

Furthermore, total transaction value also showed an increase of 19.3% in 1H14 compared with the same period in 2013 to RM82.03 billion, which indicates rising average prices.

The residential sector recorded that 27.2% of the transactions in 1H14 were for units priced above RM400,000 against 16.8% in the same period a year ago.

The Kuala Lumpur office market supply stood at 84.2 million sq ft in 1H14 with supply growth of 1.7% from 2H13 with 1.37 million sq ft. The market had an overall occupancy rate of 80.1%.

Net absorption of office lettable floor space was 2.02 million sq ft in 1H14, equivalent to a change of 14.7% compared with 2H13, translating to 1.9 million sq ft of average absorption per annum over the past five years.

Office market rental levels have had marginal movement in the past two years with prime Grade A office buildings commanding gross rental rates of RM7.50 to RM8.50 per sq ft (psf) monthly, with some asking for rentals of up to RM11psf per month.

New office developments are expected to add nine million sq ft of office space to the market in the next three to five years, which will fuel greater competition and rental pressure.

Meanwhile, the retail sector has seen considerable activity with the opening of new malls such as Quill City Mall and Putrajaya IOI City Mall in the Klang Valley and the East Coast Mall re-opening in Kuantan.

According to the report, “inflationary pressure is expected to intensify in the second quarter of this year, consumer-spending pattern will likely be restored in the latter half of this year. Private consumption is to be supported by the extended Malaysian Mega Sales frequency and periods as announced under the economic reboot agenda whilst the weaker ringgit could further boost tourist expenditure in the country.”

Housing affordability worsened in 2014
(From left) Rahim & Co managing director Robert Ang, Abdul Rahim, director of valuation Chee Kok Thim and Sulaiman Akhmady at the presentation of the Rahim & Co Research — Property Market Review 2014/2015 yesterday. Photo by Zatil Husna Wan Fauzi

This article first appeared in The Edge Financial Daily, on January 30, 2015.

Source : The Edge Markets

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