KUALA LUMPUR: Affordability remains a major issue in the property market, with the median house price at RM335,000 while average monthly salary at around RM3,000 to RM3,500.

Kenanga Investment Bank Bhd (Kenanga Research) said in its note that this gap challenges many Malaysians, particularly first-time home buyers under 35 years of age.

National Property Information Centre's (Napic) data in the second quarter of this year shows that residential overhang is now at 127,180 and concentrated in Johor, Kuala Lumpur, and Selangor.

This is a 3.0 per cent increase from 125,362 units in the first quarter.

While 63 per cent of new properties are priced below RM500,000, a significant portion of overhang units are priced below RM300,000.

"This suggests that despite the efforts to introduce more affordable housing options, many Malaysians, particularly younger buyers, still face challenges in purchasing homes due to insufficient income levels, difficulty in securing home loans, and rising cost-of-living expenses," Kenanga Research said in a note.

According to the firm, increasing overhang units, particularly those priced below RM300,000, highlights the affordability crisis even in this lower price range.

It added that the concentration of overhang units in Johor, Kuala Lumpur, and Selangor suggests that the imbalance in housing demand and supply is more pronounced in urbanised regions, where land costs and demand pressures are higher.

Therefore, Kenanga Research noted that the gap between available housing and what first-time homebuyers can afford may call for more targeted government interventions.

This includes increasing home ownership subsidies, offering more favourable financing options, or incentivising developers to produce homes within an even lower price range.

The firm said these would provide some assistance but won't fully resolve the overhang issue.

"At the same time, the industrial property sector is gaining traction, driven by the growth of e-commerce and heightened demand for logistics and warehouse facilities. Government initiatives to attract foreign direct investments further support this trend," it added.

Kenanga Research said industry loan approval rates show improvements at 47.2 per cent as of July 2024 with to-date average of 44.3 per cent improving from 43.4 per cent in 2023 and 43.5 per cent in 2022.

"This is in line with the gradual rise in overall applications into affordable home products which are more assessable to the wider market and are more easily approved. "Should this trend persist, we may see approval readings breach recent years' averages of 40 to 45 per cent," it noted.

Additionally, the firm said household debt-to-gross domestic product readings of 84.2 per cent in the second half of 2023, which is still lower than pre-pandemic levels of about 88 per cent, may suggest further appetite for borrowing with the support of stable Overnight Policy Rate of 3.0 per cent.

"That said, we are mindful that inflationary pressures could invite delinquencies should loan approvals become more lenient, particularly on the lower income groups who seek affordable homes at the first place," it added.