KUALA LUMPUR: Residential real estate priced at RM400,000 and below has dominated the housing market amidst the pandemic, yet some are opting to rent due to the soaring cost of living.
The expenses associated with home purchases extend beyond mortgage payments to include stamp duty, legal fees, valuation fees, mortgage insurance (MRTA), and property agent fees.
"Your decision to buy hinges on property prices and your financial capacity to purchase a home in your desired area. Challenges such as down payments and loan approvals often arise for prospective buyers," noted Grace Lim, a senior property consultant in Klang Valley.
"Assessing your readiness to buy involves calculating your debt service ratio (DSR), which measures your total debt against your monthly income. It serves as a crucial determinant for mortgage eligibility.
"Even with a monthly household income ranging from RM10,000 to RM12,000, many potential homebuyers find homeownership financially out of reach," she told NST Property.
As per the National Property Information Centre (Napic), the median house price in Malaysia for Q3 2023 stood at RM350,174, marking an uptick from the RM330,000 median price recorded in 2022.
Lim said that it's important to note that median prices are derived from actual transactions and do not rely on advertised selling prices.
"Transactions encompass both primary and sub-sale homes across all construction stages, such as completed, under construction, and planned," she said.
According to PropertyGuru's Consumer Sentiment Study (CSS) for H1 2024, 50 per cent of the respondents who intended to purchase a home after one year or those with no purchasing intent, are planning to rent.
This is especially predominant among younger Malaysians, said Sheldon Fernandez, Country Manager, Malaysia (PropertyGuru.com.my and iProperty.com.my)
The study showed that among those intending to rent, 69 per cent allocated a monthly rental budget of RM1,500 or lower.
Meanwhile, more than 90 per cent of existing renters are paying the same amount, and 35 per cent low-income earners are paying less than RM500 per month.
Fernandez said that it is essential for the government to recognise that even renters or individuals who are not considering purchasing a home face challenges in finding accommodation within their budget.
Extending tenancy agreement
The survey revealed that 29 per cent of current renters are contemplating extending their rental tenure for up to two years before venturing into homeownership.
This inclination is attributed to various factors, including insufficient savings for property acquisition (74 per cent), escalating property prices (33 per cent), and the absence of an immediate need to buy properties (29 per cent).
Furthermore, the study highlighted that among current renters and prospective renters, 48 per cent find the 2+1 deposit requirement burdensome, while 45 per cent struggle to negotiate fair rental rates.
He emphasised the need for policy interventions to address these challenges and foster a more accessible and transparent rental market for potential tenants.
Regarding regulatory expectations concerning the rental market, 53 per cent of respondents endorse the government's inclusion of the Rent-To-Own scheme in the Mid-Term Review of the 12th Malaysia Plan.
Fernandez explained that this scheme enables renters to accumulate equity over time, facilitating property ownership for those unable to cover upfront costs.
Among the reasons for supporting this scheme, 36 per cent cited the inability to save for a downpayment as significant, he said.
"This scheme might help promote affordable rental options that cater to renters' financial needs while allowing them to gradually transition into homeownership in the future," he said.
Fernandez underscores that both the government and developers play crucial roles in meeting the evolving demands of property consumers in Malaysia.
He emphasized the substantial demand for properties valued at RM400,000 or lower, underscoring the necessity for developers to prioritize the creation of more affordable housing options, potentially supplemented by government incentives.
"Additionally, the government should reassess current affordable housing schemes to enhance their effectiveness and ensure they are more appealing and accessible, thereby encouraging more potential homeowners to apply.
"With sustainability becoming a key factor in purchasing decisions, developers are encouraged to incorporate more green features in their projects, possibly incentivised through government tax benefits or other initiatives," he said.
He concluded that these insights should serve as a guide for shaping a more inclusive and sustainable property market in Malaysia.