What does affordable means? There can be a nationwide realistic parameter
for affordability?
When I give presentations on the Malaysian Property Market I always talk
first about the main driver that justifies the balancing between offer and
demand, the economic growth of the Country. Malaysia has been kept
on performing pretty well in the past decade and the outlook for the next
several years remains positive. By looking at a steady growth of the economy
and analyzing the individual States’ economic drivers we can foresee a quite
differentiated population movement and income trend. The table illustrates
very clearly where we are today and how the values will possibly change in
the next few years (see the column with the increase rate). This table shows
how impossible is to have a nationwide parameter of affordability for home
as what is within the affordability for the middle class of Selangor is totally
out of reach for a Pahang citizen. The next step is then to calculate on a
state by state basis the average affordability of homes and define a proper
“making sense” value.
Per Capita Income Statistics
State
GDP per Capita at current prices
2009
2011
2012
RM
Kuala
Lumpur
2010
RM
RM
RM
57,040
62,075
68,072
Average
growth
(%)
73,931
State by state
Population in
2012
8.28
1,768,680
Sarawak
31,286
33,136
39,324
40,414
8.08
2,601,000
Pulau
Pinang
30,098
33,601
35,188
37,006
6.62
1,664,640
5,826,240
Selangor
28,468
31,457
33,727
36,135
7.63
Malacca
25,397
28,328
31,093
33,550
8.85
832,320
Negeri
Sembilan
25,595
28,586
31,295
32,511
7.62
1,040,400
Pahang
20,548
23,008
26,066
26,197
7.64
1,560,600
Johor
18,878
21,329
23,593
24,574
8.36
3,537,360
Terengganu
19,102
20,581
22,220
22,733
5.61
1,144,440
Perak
15,809
17,341
19,362
20,569
8.38
2,496,960
Sabah
15,515
17,118
19,038
19,010
6.43
3,537,360
Perlis
15,186
16,175
16,992
18,119
5.71
208,080
Kedah
12,481
13,744
15,388
15,814
7.52
2,080,800
8,421
9,322
10,366
10,617
7.37
1,664,640
Kelantan
The Real Affordability
The next table shows how different at the end must be the perspective
and mind set of lawmakers, buyers and developers when addressing the
affordability issue and the results are opening the door to a new and
interesting scenario for state rulers, developers and eventually investors.
GDP 2012 per Capita
at current prices
Yearly
Monthly
35% of
monthly
income
= Loan
repayment
RM
State by
state (est)
Population
in 2012
RM
RM
Affordable House value
(30yrs loan @ BLR-2.3
4.4%)
PerCapita
Per
Household
RM
RM
Kuala
Lumpur
1,718,680
73,931
6,161
2,156.23
480,000
720,000
Sarawak
2,501,000
40,414
3,368
1,178.74
260,000
390,000
Pulau
Pinang
1,654,640
37,006
3,084
1,079.34
240,000
360,000
Selangor
5,626,240
36,135
3,011
1,053.94
240,000
360,000
832,320
33,550
2,796
978.54
220,000
330,000
1,040,400
32,511
2,709
948.24
220,000
330,000
Malacca
Negeri
Sembilan
1,560,000
26,197
2,183
764.08
165,000
247,500
Johor
3,337,360
24,574
2,048
716.74
160,000
240,000
Terengganu
1,144,440
22,733
1,894
663.05
145,000
217,500
Perak
2,396,960
20,569
1,714
599.93
135,000
202,500
Sabah
3,437,360
19,010
1,584
554.46
125,000
187,500
208,080
18,119
1,510
528.47
120,000
180,000
Kedah
2,080,800
15,814
1,318
461.24
105,000
157,500
Kelantan
1,654,640
10,617
885
309.66
70,000
105,000
Perlis
Two explanations on how these values have been calculated: the
monthly loan repayment takes into consideration the newly revised,
by Bank Negara, rules on DSR (Debt Servicing Ratio) and some average
commitment that every household normally has while the step from “per
capita” to “per household” uses a 1.5 ratio only considering both couple’s
commitments and normal differences in payout between husband and
wife.
I hope these numbers will help all readers to better understand the
meaning of affordability and how it differs on a National basis.
By looking at these numbers it appears quite clear that every state should