Why Malaysia's homes have remained 'seriously unaffordable' for a decade

IN FOCUS: Why have Malaysia’s homes remained ‘seriously unaffordable’ for a decade and counting?

In 2024, Malaysia’s median house price was more than four times its median annual household income. To reverse this, the government, developers and financial institutions must all play their part, analysts say.

KUALA LUMPUR: In the past year or so, Nur Syarah Alya Nizamuddin stepped up the hunt for her first home, eager to settle down near her parents who live in Shah Alam, Selangor.

Having grown up there, the 27-year-old felt comfortable in the city and did not want to venture too far from her parents, as her only sibling is based abroad.

But house prices in the Greater Kuala Lumpur area, considered Malaysia’s economic hub with a high concentration of jobs, quickly dampened her spirits.

In 2025, the median house price in Kuala Lumpur and Selangor was RM560,000 (US$142,300) and RM470,000 respectively, a 7 per cent and 4.4 per cent increase from the year before, according to official data. This is a spike from the 1.6 per cent and 0.4 per cent increase in 2024.

The Malaysian federal government has defined affordable homes as having a maximum price of RM300,000.

“Looking at property prices, I wondered to myself, ‘When am I going to own a property? Do I need to be a boss or manager first?’” Syarah, an administrative assistant in the medical industry, told CNA.

Syarah, who earns a basic monthly salary of RM3,900, restricted her search to government schemes that reserved affordable homes for income earners below a cap, as these were the only options that fit her budget.

In December, Syarah bought a new unit in Shah Alam for RM290,000 under the Rumah Selangorku scheme, which is only open to buyers with a maximum household income of RM10,000. She is servicing the home loan by herself and plans to get married soon.

Her new apartment, which is expected to be completed in the fourth quarter of 2028, is a roughly 30-minute drive from downtown Kuala Lumpur without congestion.

“The government’s (affordable housing) initiatives have allowed us to purchase our own property, but it can do more,” she said, calling for a review of whether the housing market in major cities was really targeted at Malaysians or foreigners.

“For me, the price range in Kuala Lumpur is too high; it is not suitable for those of us with normal jobs. That’s why I feel it’s very expensive to purchase a property in Malaysia.”

According to official data, Malaysia’s homes have been “seriously unaffordable” since 2014, when the country’s median house price was almost five times its median annual household income.

This house price-to-income ratio, or median multiple, is a method recommended by the World Bank and United Nations to gauge housing affordability. Home prices are considered affordable when they are three times or below that of household income.

A decade on in 2024, homes in Malaysia have become slightly more affordable, when the median multiple dropped from 4.9 to 4.2, though this score still falls in the “seriously unaffordable” range.

On Feb 26, Senator Michael Mujah Lihan told parliament’s upper house that property prices in major cities across Malaysia had soared to levels that were increasingly unaffordable.

“Although construction costs and property values have risen, average wage growth has not kept pace,” he reportedly said, calling for the government to implement stronger price controls and more targeted tax incentives.

A month earlier, Parit Member of Parliament Muhammad Ismi Mat Taib had asked how the government was tackling high home prices, which he described as a burden on first-time buyers.

Analysts say homes remain unaffordable due to slow income growth, longer loan tenures, and rising costs for developers. These developers in turn price homes higher for larger profit margins.

Despite the marginal improvement in affordability, they warned that the consistently high prices mean homes are beyond the reach of many Malaysians, and contribute to the rising share of residential loans in household debt.

“It is almost impossible for first-timers to buy a property in centralised locations especially in the urban areas,” Olive Tree Property Consultants chief executive Samuel Tan told CNA.

“We tend to opine that some forms of land price (government) subsidy are essential to bring down the development cost and pricing of affordable houses.”

IS THE GOVERNMENT DOING ENOUGH?

Recognising that homes on the open market can be unaffordable for some Malaysians, the federal and state governments have introduced several housing schemes to help the bottom 40 per cent and middle 40 per cent income earners.

These schemes have eligibility criteria that include citizenship and household income, and offer homes capped at around RM300,000 with hybrid financing models, including the possibility of rent-to-own.

The federal government’s schemes include PR1MA, where a government-linked company builds affordable homes across the country either directly or through voluntary joint ventures with private developers. Prices range from RM150,000 to more than RM500,000, depending on location and project.

Residensi Wilayah is another federal government affordable housing scheme that is designed for Malaysians working in the federal territories - Kuala Lumpur, Putrajaya and Labuan. Prices range from RM200,000 to more than RM400,000.

State governments, which have vested power over their land, have their own affordable housing schemes.

But unlike the federal government, states - which have more financial and capacity constraints - do not directly build the affordable homes under these schemes. Instead, they impose a requirement on private developers to include at least 30 per cent of affordable housing for all projects.

One example is Selangor’s Rumah Selangorku - the scheme Syarah opted for - which offers homes priced from RM240,000 to more than RM350,000.

Another is Johor’s Rumah Mampu Milik that offers four tiers of affordable housing, with the highest tie