Measuring Malaysian housing affordability: the lifetime income approach
Purpose: The purpose of this paper is to measure the long-run housing affordability of Malaysia over time for households at various income levels and to demonstrate how short- and long-run affordability measures can reach contradicting conclusions. Design/methodology/approach: In this study, a long-run housing affordability index (HAI) for Malaysia was constructed for the sample period 1995 to 2014, using data from house prices and household incomes. The HAI was also modified to compute a mortgage affordability index (MAI) to account for intergenerational transfers. Findings: The results show that households at the 25th income percentile cannot afford any of the four dwelling types in Malaysia. For households at the 40th income percentile and the median income levels, high-rise and terrace housing are affordable. However, significant downward trends in HAI and MAI are documented beginning 2009, which indicates increasing housing stress for households at or below the median income. The short-run affordability measure represented by the median multiple (MM) indicator showed bleaker conclusion for housing affordability, with all dwelling types considered unaffordable over the entire sample period Practical implications: On the basis of the empirical results, this paper provided several long-term proposals to ameliorate the housing affordability problem in Malaysia. Originality/value: With the MM ratio being the official affordability measure reported for Malaysia, this study introduces the nation’s first long-run housing affordability measure. It is hoped that this long-run measure will achieve widespread adoption in Malaysia. Given the deteriorating long-term affordability, this study offers several possible long-term solutions.
Year of publication: |
2019
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---|---|
Authors: | Rangel, Gary John ; Ng, Jason Wei Jian ; Murugasu, Thangarajah Thiyagarajan ; Poon, Wai Ching |
Published in: |
International Journal of Housing Markets and Analysis. - Emerald, ISSN 1753-8270, ZDB-ID 2423661-5. - Vol. 12.2019, 5 (07.10.), p. 966-984
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Publisher: |
Emerald |
Saved in:
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