Housing Income Index: RM14,500 income to buy house in Klang Valley

February 18th, 2014 by poobalan | View blog reactions Leave a reply »
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The Star frontpaged an interesting article today. How much should a family earn in order to afford a house in Klang Valley? A question that we all wonder about. Well, according to a survey done by Sime Darby Property Bhd in collaboration with the Faculty of Built Environment of Universiti Malaya, its….RM14,580!

The survey covered 1,529 respondents, of whom 1,183 were home owners at 12 locations: Bukit Jelutong, Denai Alam, Bukit Subang, Bandar Bukit Raja, Subang Jaya, USJ, Putra Heights, Ara Damansara, Mont Kiara, Melawati, Kajang and Nilai. I suppose the balance 346 respondents were (i) renting, (ii) not from those areas, or (iii) refused to divulge house ownership info.

Wonder why areas like Puchong, Cheras, Dengkil, Banting, Kapar, Putrajaya, Cyberjaya, Semenyih, Serdang, Klang, Shah Alam, Sg Buloh, Rawang etc not covered. Hope they conduct a second round of survey to cover these areas.

Average household income

Average household income

[image from The Star] [click on image to view larger size]

Some analysis of the respondents: 94% are married. 73% are male. 59% work in private sector; 20% are self-employed, and 14% work in government. No mention if the income is from both spouse or single spouse.

13% have post-grad qualifications, 40% have bachelor degree, and 21% have a diploma. 68% are Malay/bumiputra; 30% Chinese and just 2% Indians.  Looks like not many Indians live in these places. And seems like the affluent Malays/bumiputera are quite alot.

Quite importantly, the age group of respondents is missing. Show this info to any adult below age 30 and see if they fit into this income group. If the respondents are into their late 30s  or more, then the young adults can’t even think about buying houses in these places. 10-15 years down the lane, how would it be? As it is, our parents could afford to buy house in these locations when they were young. Read another article in the Star where Mr Gill (age 63) bought house in SS12 Subang Jaya way back in 1985 (age 34) for RM200k that took quarter of his combined income with wife. Now at age 34, what can you buy?

It will interesting to also identify the household size of the respondents. Does the average income consider the household size (kids, maid, parents, siblings etc)?

The other part of the survey covered their expenditure information. So, 12% of income goes into savings, translating into RM1749.60 on average.  How many percent can the rest of us save? Transportation is 16% (Rm2,332.80), Food 15% (RM2,187), mortgage 14% (RM2,041.20), another 15% for other loans (RM2,187), 13% for other expenses (Rm1,895.40), childcare/education 7% (RM1,020.60) and insurance 6% (RM874.80). Most likely these houses have two or more cars. How is your expenses like?

Ok, let’s look some other statistics from DOS and EPU which both refer to Household Income Survey (last done in 2012). All stats below refer to Klang Valley and/or urban figures wherever possible:

  • The top 20% of urban dwellers earned a monthly average of RM13,654 while the middle 40% earned average of RM5,294. Don’t bother looking at the bottom 40%, middle 40% already can’t own house in those 12 places (and I suspect many other places) even with double income).
  • 41% of urban dwellers earn RM5,000 or more.
  • The average monthly income for urban dweller is RM5,742. Selangor residents earned RM7,023 while KL residents RM8,586.

Looking at HIS statistics, using average salary earned by those staying in Selangor or KL and double it (both spouse working), then you can buy house in those areas. However taking into account that 41% earn more than RM5,000 and that the top 20% earn average of RM13.6k, then we are looking at a small pool of between 20-40% of people affording to buy houses.

The survey covers affluent areas, and I suspect its to plan for building more affordable homes for the those households who can afford to earn nearly triple the national average income.

BTW, looks like I can’t afford a house in Klang Valley if want to buy now.

Below is the article from the Star:

You must have an average household income of RM14,580 a month to afford a home in the Klang Valley, according to a recent study.

The study – spearheaded by Sime Darby Property Bhd in collaboration with the Faculty of Built Environment of Universiti Malaya – takes into account the current household spending trend, price of homes and mortgage rates.

It found that certain groups of buyers interested in strategic areas can have access to houses that are priced at 56 times their household income.

The study also found that this same group can afford to spend up to 26% of their monthly household income to service a mortgage.

It identified strategic areas in the Klang Valley that are considered not only accessible but have the potential to appreciate in value. They include Nilai, Denai Alam, Bukit Jelutong and Bukit Subang.

A report of the study said that houses in selected areas in the Klang Valley remain accessible to homeowners who may be looking to invest in a second home.

The Housing-Income Index which was launched here yesterday by Urban Wellbeing, Housing and Local Government Minister Datuk Abdul Rahman Dahlan, who said the survey results would be useful for potential house buyers.

“The Index and its key findings had been reviewed by the ministry, and we find that the information is valuable as it can help policy makers and developers work hand-in-hand to build more houses that are not only accessible. but which can appreciate in value,” he said.

Abdul Rahman hoped that other property developers and the academia can carry out similar surveys in the country.

Based on the findings, Sime Darby said that 68% ofplanned housing schemes in the Klang Valley were in the accessible range.

“We intend to utilise the results to develop innovative, high quality products that are accessible and meet market needs,” said Sime darby Property managing director Datuk Seri Abd Wahab Maskan.

Household Expenditure
[image from The Star]

The Housing-Income Index was developed to gain a better understanding of home-owner profiles, specifically household incomes and spending patterns in relation to owning a home.

The study covered 1,529 respondents, of whom 1,183 were home owners at 12 locations: Bukit Jelutong, Denai Alam, Bukit Subang, Bandar Bukit Raja, Subang Jaya, USJ, Putra Heights, Ara Damansara, Mont Kiara, Melawati, Kajang and Nilai.

source: http://www.thestar.com.my/News/Nation/2014/02/18/Klang-Valley-still-affordable-A-household-needs-monthly-income-of-RM14580-to-buy-a-home/

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