At the same time, rising home prices and profit margins have led to a building boom by property developers. Persistent overbuilding coupled with the increasing unaffordability of homes is creating an untenable rising pile of unsold properties that is also tying up precious resources as unproductive assets.
Owning a home is the aspiration of every Malaysian. But the relentless rise in home prices, which has far outpaced income growth, is increasingly putting home ownership beyond the means of the average person or sending households into unsustainable indebtedness.
In particular, home prices have risen rapidly since 1990, fuelled by historically low interest rates and enabled by the then government’s policies (such as home ownership campaigns, Developer Interest Bearing Scheme and a reduction in the real property gains tax) and banks’ aggressive lending for mortgages. As a result, home affordability has declined by half.
