Middle-income trap makes owning homes near impossible

ARCHIVES 2013

By admin-s On Jan 29, 2013

(The Malaysian Insider) – The poor have government-controlled low-cost housing, the rich can have their pick of whichever property they fancy but the middle-income wage earners are left to rent or make do with a remote location when it comes to getting a home of their own.

The latest Property Market Report 2012 has revealed property prices in major cities such as Kuala Lumpur, Penang, Johor Baru and Kota Kinabalu to be well above the affordability of any middle-income wage earner with a take-home pay of less than RM4,000, prompting the federal government to come up with several affordable housing schemes.

In Kuala Lumpur, a single-storey terrace house in Taman Tun Dr Ismail or Lucky Garden is priced above RM730,000 while a similar type of house in the nearby Petaling district is priced above RM378,000.

The solution, according to real estate agent and International Real Estate Federation (Fiabci) committee member Michael Geh, is for potential home buyers to look further away to the outskirts.

“What we have now is a middle-income trap for the average wage earner where they can’t qualify for low-cost housing and yet they can’t afford a comfortable home within city limits,” he said.

Property prices have been strong in recent years with many urban areas experiencing property price increases while newly launched homes are priced above the RM500,000 mark, according to the Property Market Report statistics.

If a house buyer wants to get a home that’s within his means, he will have to either look at locations further from the city centre or get a “partner” as only a combined income will allow for easier approvals of housing loans, said Geh.

“So, either you grab a spouse to apply for a loan based on a joint income or you look further out of the city for cheaper housing and commute to work everyday,” he said.

Geh said there was also a new trend where friends partnered up to jointly purchase properties.

“Many singles prefer to partner up with a friend to jointly buy a house where they stay together as housemates instead of renting,” he said.

But many singles also prefer to rent and live like nomads where they frequently move from one place to another especially when they change jobs, he added.

“This is especially true for fresh graduates who may not have enough income to sustain a housing loan,” he said.

Property auctioneer M. Shanmughananthan echoed Geh’s opinions that it was now very difficult for the middle-income earner to purchase properties, especially newly launched projects in the city.

“There is now a growing phenomenon of investors clubs and they are snapping up these new projects even before they are launched so genuine home buyers will not have a chance to get these properties at the launch price,” he said.