PETALING JAYA: Property developers have been advised to conduct feasibility studies before they launch new projects to ensure that they meet purchasers’ requirements.

For instance, many now consider a good location and proximity to conveniences such as public transport a must when they go house-hunting.

Developers must be able to meet these demands while keeping prices at reasonable levels, Khazanah Nasional Institute analyst K Theebalakshmi said.

This has become even more pertinent now given the rising debt level, she told FMT Business.

Impact of debt on purchasing decision

One’s capacity to purchase a house is influenced by his existing debt commitments, Theebalakshmi told FMT Business.

As it is now, Malaysian households already carry substantial debt.

“People would have taken personal loans or borrowed money to buy motor vehicles or to pay for tertiary education,” Theebalakshmi said.

Malaysians are spending more on debt repayments now. According to a Bank Negara Malaysia (BNM) report, the number of loans with debt-service ratio (DSR) that exceed 60% had risen from 22% in 2013 to 34% in 2022.

This is one factor that has kept many from taking the plunge into purchasing a property.

Theebalakshmi said many have also failed to obtain a loan to purchase a property, an indication that they are already over-indebted.

During a question-and-answer session at the recently concluded property market prospect for 2024 forum, estate agency CEO Siva Shanker said that while those in the higher income group can easily get a loan even for the pricier properties, those in the lower income category struggle to get financing even for cheaper homes.

Other costs

In Malaysia, there is more to purchasing a new home than getting a mortgage.

Typically, banks offer loans amounting to only 90% or less of the cost of the property. That means the buyer will have to raise a substantial sum as downpayment.

New homes are not always ready to live in. The buyer will have to spend on door and window grills for security reasons, an alarm and household fixtures such as kitchen cabinets, ceiling fans, air-conditioners and lighting to name a few.

The cost of these items can amount to a substantial sum that may eat into the portion set aside for downpayment.

Over and above that, living expenses have to be accounted for, leaving less for housing loan repayment.

As Irhamy Ahmad of global property agency network Juwai IQI pointed out, household finance plays a crucial role in determining how much people can afford to spend on a property.

“Buyer perception of value and quality are also crucial,” he told FMT Business.

Other concerns

Home ownership is every Malaysian’s dream, but there are many barriers to realising it.

Sheldon Fernandez, country manager of PropertyGuru, told FMT Business that up to 43% of Malaysians have cited the fear of an economic recession as a barrier to them making a purchase.

Overall 42% of them also fear that they are unable to get a loan.

“Stagnant wages have also influenced purchasing decisions of many Malaysians,” he said.

As a result, he said, there was a significant shift towards rental properties among prospective buyers in 2023.

“This is likely driven by rising property prices. Consumers have opted to rent now while they save up for their first home purchase, contributing to an overall dip in demand,” Fernandez added.

For developers, the solution is to make prices more competitive.

Theebalakshmi pointed out that if prices are too high, making it unaffordable for most, there will be an overhang.

“Prices must align with the incomes and demands of the local communities,” she said.

She said developers should ensure that the homes are reasonably priced while meeting building standards, are strategically located and they fall within the affordability threshold of the local populace.

She added that the adoption of innovative construction methods, such as industrialised building systems (IBS), could help reduce construction costs.

This may well give the property market a lift.