Purchasing a property is a significant financial decision, and it’s important to understand the financial requirements involved. In Malaysia, affordability remains a challenge for many, especially when it comes to buying a house worth RM300,000. This article explores the monthly income needed to comfortably afford such a property and discusses the current state of housing affordability in the country.
The Affordability Gap: According to a report by Bank Negara, the central bank of Malaysia, an ordinary household would require a monthly income of RM8,194 or an annual income of RM98,333 to afford a median house priced at approximately RM295,000. This indicates that for many young individuals entering the workforce, buying property on a modest salary is nearly impossible.
Household Income Statistics: A report by Nanyang Siang Pau highlighted that 76% of households in Malaysia have a monthly income below RM8,333. Even a house worth RM300,000 is beyond the means of most households, including those in the middle-income bracket (M40) and not just the low-income group (B40).
Importance of Comprehensive Housing Policy Reforms: Chen Hongbin, the Member of Parliament for Bagiri District, suggested that the Malaysian government should learn from successful affordable housing models in countries like the Netherlands, Austria, Denmark, Sweden, and Australia. He highlighted the achievements of Singapore’s affordable housing policy, which has enabled 80% of Singaporeans to own a home. Chen Hongbin proposed inviting experts from Singapore’s Housing and Development Board (HDB) to share their experiences and help reform Malaysia’s housing policies.
Shortcomings in Achieving Housing Targets: Despite the government’s plans to build affordable housing, there have been challenges in meeting targets. The 11th Malaysia Plan aimed to construct approximately 653,000 affordable houses between 2016 and 2020. However, only 43.2% of this target was achieved, with slightly over 280,000 houses completed. It raises concerns about whether the goal of building 500,000 affordable housing units in the 12th Malaysia Plan from 2020 to 2025 will be met.
Financial Considerations for Buying Property: When purchasing a property, two key financial aspects need to be considered: the down payment and the monthly loan installment.
- Down Payment: Buyers typically need to provide a down payment, which is around 10% of the property’s price. Additionally, there are other costs to consider, such as stamp duty on the Memorandum of Transfer Agreement (MOT), stamp duty on the Sale and Purchase Agreement (SPA), stamp duty on the Loan Agreement, and realtor’s commission.
For example, for a property worth RM300,000, the down payment would be RM30,000.
Alternatively, those who cannot afford a 10% down payment can explore government housing plans that offer loans of up to 100%. These plans, such as 1Malaysia Housing PR1MA and Residensi Wilayah Territory Housing (formerly known as RUMAWIP), come with specific conditions that need to be met.
- Monthly Loan: Apart from the down payment, potential buyers must consider the monthly loan installment. It’s crucial to evaluate whether you can comfortably afford this long-term financial commitment. As a general guideline, financial planners recommend that monthly mortgage payments should not exceed one-third of your monthly salary.
For instance, if your monthly income ranges from RM4,000 to RM5,000, and the mortgage installment is nearly RM2,000 per month, careful consideration is necessary to determine whether you can genuinely afford the property.
Affordability remains a significant challenge for individuals aspiring to own a house worth RM300,000 in Malaysia. The required monthly income far exceeds what many households earn, leading to concerns about the current state of housing affordability. It is crucial for the government to implement comprehensive housing policy reforms, learn from successful models in other countries, and work towards meeting affordable housing targets. Prospective buyers must carefully evaluate their financial situation, including the down payment and monthly loan installment, to determine whether purchasing a property is financially viable.