By Property Hunter
clock 22-06-2022
hit 1,705
Are Houses Really Affordable in Sabah?

Sabah is a major destination for expatriates and investors, and the cost of housing is one of the most talked-about topics in the state. While many find the state’s cost of living to be high, others are critical of the level of affordable housing in the state. As a result, it is often a topic of constant debate. 

How is affordability defined?

When the median(average) house price is equal or three times less than the median annual income of the population. Therefore, if the median gross income of a family in Kota Kinabalu is RM100,000 per annum, houses that cost RM300,000, would be considered as affordable. 

This is determined by a trend adopted in New Zealand, United Kingdom, United States, Ireland, Canada and Australia where housing affordability was ranging from 2.0 to 3.0 threshold until the 1980s and 1990s, respectively in different countries. 

In Malaysia, it hasn’t hit the 3.0 threshold since 1995. In Sabah, In 2020, the median gross income for a household is RM135,000. A drop was seen in 2020, largely contributed by the pandemic due to the loss of jobs and reduced income in most industries. 

Despite the increasing property to income ratio in Sabah, homeownership rate has steadily increased throughout 2014 to 2019, from 69% to 75.9%. It is widely perceived that the overhang properties are the result of supply of highly priced properties. However, as of Q3 of 2021, 30% of the overhang stocks contributed to houses below RM300,000. That is nowhere less than other homes from other price ranges. 

With construction costs steadily increasing over time, there had been recent escalation due to the rise in material costs amid the pandemic. Moreover, Sabah needs to bear higher materials costs than neighbouring states. For example, there’s a 10% difference in steel with a bar price between Kuala Lumpur and Kota Kinabalu. 

Sabah seems to be way below Malaysia’s median salary. While median property prices are on par with Malaysia’s median salary. This proves that the state’s median salary is not catching up with the increasing property price and the overall living costs. 

Will the property prices continue to rise?

As we don’t expect the salary to recover anytime soon, and the property price will continue to climb due to the increasing development costs. The scenario whereby properties are perceived to be overpriced, will continue. However blaming it fully on the price alone, is just over simplifying the matter. When even the affordable homes below RM300,000 are being unaffordable and not being digested by the mass market is just the deeper underlying issue, which is the planning and the integration and the state’s economic performance. 

Focus more on the planning and integration part by creating jobs, growth and helping businesses to grow and transform which is important to spur the state’s economic growth. 

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