Housing loans account for 52 percent of the country's total household debt, reported The Edge, citing a study by Bank Negara Malaysia (BNM) that was published on Wednesday (28 March).

According to the central bank's Financial Stability and Payment Systems Report, the lion's share of housing loans in Malaysia's household debt underscore two critical issues, namely housing affordability and the need to own a dwelling.

"With a growing mismatch between prices of new house launches and households' actual affordability, imbalances in the housing market have worsened in recent years. In certain parts of Malaysia, the median house price is as high as five times the annual median household income, rendering houses in these areas seriously unaffordable.”

"This had led to households needing to borrow more for house purchases with the average size of housing loans approved increasing from RM180,275 to RM420,230 over the past 10 years" said BNM.

In addition, the central bank listed some proposals to help solve the country's housing woes. These include building low-cost residences in places with good access to public transport and creating a central authority to re-balance the supply towards the affordable segment.

Aside from boosting the supply of such house, BNM is also urging the authorities to improve the housing rental market to encourage people to rent instead of taking a large debt to buy a house.

In line with this, the government is legislating the Residential Rental Act to foster a more vibrant rental market and plans to establish a Tenancy Tribunal to protect the rights of landlords and tenants.

Moreover, up to 50 percent of income from renting houses will be exempt from taxes from 2018 to 2020 for properties being leased for up to RM2,000.

Meanwhile, BNM's latest report revealed that individual borrowers who have a take-home pay of RM5,000 per month have a high debt ratio of 60 percent.

The Credit Counselling and Debt Management Agency also noticed a trend that borrowers under the age of 40 are more likely to default on their loans due to poor planning and financial management.

It noted that these borrowers typically earn RM3,000 to RM5,000 RM3,000, but have significant exposure to car loans (22 percent) and personal loans (30 percent).