Sunday, May 29, 2011

Housing for average income earner - MUST READ

Housing for average income earner - StarProperty.my

This is very good article, not to be miss.


House prices have gone up many times beyond the average household income.


Yeow says the scenario of low-occupancy and falling prices can be found in KL City Centre and Mont’Kiara.

He says expatriates are the ones who mainly occupy these units. Many who bought into that location are local and foreign investors who expect a certain yield. When they do not get the yield they want, they may decide to sell it instead of holding on. When this happens, there is always the possibility of prices coming down.

The people need medium-range housing priced around RM300,000, says Yeow

However, he notes that it is difficult to find houses with this price in the Klang Valley or Penang and this is worrying. Yeow says that the most pressing issue now is escalating prices and the question of affordability among the ordinary wage earners.


His concerns are very real. House prices have moved far ahead of wages. Yeow says the average monthly household income is about RM7,500 while Fernandez puts it at close to RM6,000. He is quoting a private survey done for the Klang Valley this year.

House prices, as against annual household income, is normally calculated at three to four times. For example, if a household monthly income is about RM6,000, which is what the average Malaysian household earns, at four times, the price of the house should be about RM300,000 (6,000 x 12 = 72,000 x 4 = 288,000).

While housing prices have gone up, rental has not.


A double-storey house in Petaling Jaya was priced at about RM500,000 about two years ago while rental was between RM1,500 and RM1,700.


Today, that same house is priced at about RM800,000 but the rental is only RM1,800 to RM2,000. So although house prices have gone up, rental rates do not reflect that rise.

Says Yeow: “We are in a situation where people are using the property market to gamble.


“It is purely to flip. This is bad because it will only drive prices higher. This deprives the average wage earner of buying his own house.

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