Housing affordability has declined, says RAM economist

by **Cals** Fri 21 Feb 2014, 07:29

Posted on 21 February 2014 - 05:38am

Eva Yeong
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Adib Rawi/THE SUN

KUALA LUMPUR (Feb 21, 2014): The housing market's overall affordability index has declined and the property market is expected to have a "soft-landing" this year which can deflate property bubbles in certain locations, said RAM Holdings group chief economist Dr Yeah Kim Leng (pix).

"There is still a supply and demand gap, especially in the affordable range. Developers need to take note that 3.8 million people or 55% of the market have monthly household incomes of less than RM4,000 and can only afford properties priced RM360,000 and below," he said at Malaysia Property Inc's Corporate Outlook 2014 seminar yesterday.

Yeah said prices have increased sharply but the increases have been moderating especially over the last two quarters, which is good for the housing market.

"Speculative buying poses a risk to the financial system but it is difficult to differentiate between speculative buying and investments. This is because property has become an investment asset in Malaysia due to the lack of alternative investments. The demand for properties for investment in Malaysia is high, especially if interest rates remain low," he added.

Yeah said Malaysia has favourable demographics for the housing sector, namely the increasing number of working population while unemployment rates remain low at 3.4% with unemployment mainly due to new entrants not being able to find jobs rather than due to retrenchments.

"Despite cooling measures, the fundamental demand such as demand from first time home buyers should still continue and banks still have the liquidity to serve this demand," he added.

Yeah said there has been no major shift in terms of relative proportion of loans with the household sector taking up 56.3% of bank lending last year.

Loans for residential property purchases made up 46.8% of total exposure by purpose of financing at the end of 2012 and it is the largest component of household expenses.