Cost of Living: Will Young People be Renting Forever?

Average price of an apartment in urban KL, Source: PropertyGuru

Malaysia has experienced a massive shift in the economic landscape with the expansion of land development and high-rise development. With the rise of smart buildings and green buildings filling the empty spaces in the bustling streets of Kuala Lumpur and Selangor, the construction work done is nearly 34.2% with an average of RM 11.2 billion. That is just on construction alone taken from the reports of Planning Malaysia. To put it simply, based on the Malaysia Property Market Centre (NAPIC), Malaysia has reached almost 7 million properties with 5.8 million being residential properties. So many buildings are being erected on the lands of Malaysia, and this has impacted the rising cost of living, especially among younger generations who are finding it arduous to achieve financial independence and homeownership. The question that comes to mind now is “Will the younger generation be renting forever?”

Inflation, wage stagnation and global economic recession have always been the key factors in Malaysia’s rise in cost of living, The areas mostly affected are housing, food, transportation and healthcare having seen a notable price increase over the years. This has placed a lot of weight on household budgets as the younger generations are struggling the match up with the economic crisis. Housing in particular has become a significant concern with property prices in urban areas such as Kuala Lumpur, Penang and Johor Bahru are skyrocketing in the markets. According to Bank Negara Malaysia, Malaysia’s average house price (2020) reaches around RM 295,000 whereas the annual median income (2020) reaches approximately RM 62,508. This shows that housing is becoming unaffordable as house prices have outpaced income growth. Many do not earn enough to sustain themselves to cover for their basic needs let alone need to cover housing putting most Malaysian citizens highly indebted. 

With the cost of homeownership increasing, renting has become the default for many youths in Malaysia to find a place to stay. However, what is surprising is rental prices in urban areas are also rising despite the development of high-rise buildings constantly growing. Not only that, renting itself carries its challenges with the lack of tenant protection laws and proper management grounds making renting precarious. This leaves many young generation feeling unnerved by the idea of renting forever. 

Besides that, one of the critical factor causing the challenge on homeownership is wage stagnation. The younger generation cannot keep up with the economical development. Entry-level salaries amongst fresh graduates are relatively low making it difficult for them to hold their grounds for down payments for a house. The job  market has become very competitive and scarce with many younger generations facing unemployment. This employment instability further challenges younger generation on financial planning and stability in income to own a house. The current economic reality is a growing sense of frustration and uncertainty about the future. 

The future of homeownership in Malaysia remains uncertain, especially for the younger generation. Significant changes need to happen such as housing affordability, economic stability and wage balancing to ensure that the younger generation can at least attempt to aim for financial independence and homeownership. Based on an interview done with Shally Ham, real estate negotiator attached to PropNex highlights, “Looking at the market now in Malaysia, everybody has to own a house in Malaysia, especially for the younger generation. In future, maybe five to ten years down the road, even the younger generations cannot afford to buy a house. So now is the best time to buy a house”.  If we keep walking down this path, the trend for long-term renting will not be so far-fetched leading to financial crisis amongst the future generations. Renting is the most viable option for many but many people dream of homeownership the economic reality is worrying Malaysian citizens to reassess their achievable goals.