Key Developments in the Second Half of 2021

Developments in the Residential Property Market

The continuation of tighter containment measures from the second quarter of 2021 continued to weigh
down housing market activity in the third quarter of 2021. Consequently, while transaction volume increased
marginally in the third quarter of 2021, it remained below the quarterly average volume of transactions
recorded in recent periods (Chart 1.17). However, market activity is expected to improve in the fourth quarter of
2021 driven by the resumption of economic activities. Correspondingly, higher loan applications were recorded
across all price segments in the second half of 2021 (Chart 1.18). The significant increase in loan applications in
the final two months of 2021 coincided with the Home Ownership Campaign that ended on 31 December 2021.
Improving employment prospects and the low interest rate environment further supported housing demand.
Demand for housing was largely driven by owner-occupiers, with 57.3% (1H 2021: 55.8%) of approved housing
loans in the second half of 2021 granted to owner-occupiers.

Despite some improvements in market activity, the number of unsold houses remained elevated at
180,702 (2Q 2021: 181,463) units.44 Disruptions caused by the pandemic partly contributed to the slower clearance
of unsold housing stock despite ongoing home purchase incentives. More broadly, the elevated number of
unsold houses reflects pre-existing affordability issues in the housing market, which has worsened since the
onset of the pandemic as consumer incomes were affected (Diagram 1.1). In this regard, supply adjustments
have continued with more new housing launches shifting towards lower- and mid-price market segments. The
share of property launches priced at RM500,000 and below increased significantly in the third quarter of 2021
(3Q 2021: 88.1%; 1H 2021: 67.7%; 2015-2019 average: 65.9%). This should help to cap a further significant increase
in unsold housing stock. Nonetheless, the bulk of new launches remain beyond the affordable price segment,
with only 35.6% of new launches since 2015 priced below RM300,000, indicating further room for price and
supply adjustments to improve overall housing affordability.

Chart 1.17: Property Market – Housing Transaction Chart 1.18: Property Market – Volume of Housing Loan
Volume Applications by Price Segment

Unit ('000) '000

300
60 256.3 252.5 250.1 252.8
52.3 52.3 250
50 47.8 200 165.4
42.6 150
39.7
40
100
30 50
0
20
2H '19 1H '20 2H '20 1H '21 2H '21

10 <RM300,000 RM300,000-RM500,000

0 RM500,000-RM1,000,000 >RM1,000,000
1Q-4Q '19 1Q-4Q '20 1Q '21 2Q '21 3Q '21
average average Total

Source: National Property Information Centre (NAPIC) Source: Bank Negara Malaysia

44
Of this, 31.4% are overhang units while the remainder (68.6%) are units under construction. Unsold houses are mainly priced above RM300,000
(75.4% of total unsold houses) and high-rise properties, in particular, serviced apartments (36.5% of total unsold houses).

26 FINANCIAL STABILITY REVIEW - SECOND HALF 2021

 Key Developments in the Second Half of 2021

Diagram 1.1: Housing (Un)affordability in Malaysia

What is affordable housing?

A house is considered affordable1 if: Based on this metric, house prices in Malaysia are
seriously unaffordable

≤ 3 times 4.7
Median House Price (2020):
House Price RM295,000
Annual Income Annual Median Income (2020): = times
RM62,508 (2019: 4.1 times)

Rating House Price-to-Income Ratio Rating by State

Severely Unaffordable 5.1 & Above Johor, Perak, Sarawak, Sabah, Kelantan

MALAYSIA, Selangor, Kuala Lumpur, Pulau Pinang, Pahang,

Seriously Unaffordable 4.1 to 5.0
Terengganu, Kedah, Negeri Sembilan, Perlis

Moderately Unaffordable 3.1 to 4.0 -

Affordable 3.0 & Below Melaka

Why do Malaysians find houses seriously unaffordable?

Demand: For some, housing affordability is limited Supply: Mismatch in supply – Market failure to
by insufficient income and high indebtedness provide enough affordable housing2

1 Low income or saving buffers

Compound Annual Growth Rate of Income
A household earning RM100,000/year3 or
RM8,333/month could only afford a
and House Prices (2014-2020, %) house priced up to RM300,000
Income grew
slower than
house prices +4.1%
+2.1% 76% of households in
Malaysia earn ≤RM8,333...
Income House Prices
Share of Households by … but only 36% of

76%
Monthly Income Group newly-launched units are
cannot sustain living expenses for (2019, %) priced ≤RM300,000
more than 3 months should they
(% of Household Survey lose their jobs
Respondents)
Share of Newly-Launched
Units by Price Segment
≤RM8,333: (Average 2015-3Q 2021, %)
76%
2 Prospective borrowers already highly-indebted >RM8,333: ≤RM300,000:
24% 36%
65%
of borrowers already possess either car or
personal loans, thereby limiting their capacity
to take on new borrowings for housing >RM300,000:
64%
participants that completed Rumahku
(AKPK’s financial education module)

1 in 5 decided not to buy a home after realising

they cannot afford the loan repayment This has worsened overall housing affordability and
and other home ownership expenses increased unsold properties priced >RM300,000 in
(e.g., legal fees, monthly management fees)
Malaysia

1
Based on the Median Multiple approach, as recommended by the World Bank as well as the United Nations (UN). See the box article on ‘Demystifying the Affordable
Housing Issue in Malaysia’ in BNM Annual Report 2016 for more details.
2
Based on the National Affordable Housing Policy 2019, the maximum price of affordable housing in Malaysia is RM300,000.
3
Estimated using Median Multiple approach, in which a house is deemed affordable if the house price is not more than 3 times the annual income.

Source: Bank Negara Malaysia, Household Income Estimates and Incidence of Poverty Report, Malaysia (2020) by the Department of Statistics, Malaysia (DOSM),
Household Income and Expenditure Survey (2014 and 2019) by DOSM, BNM Survey on Households (2018) and National Property Information Centre

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