Bread and butter to make ends meet

A FEW months ago, I read an interesting study in a local newspaper on how young Malaysians cope with a minimum wage income of RM900 per month in a city. 

The study involved three young urbanites who were required to spend up to RM900 each within a month. All three failed the test mainly due to expenditures on car loan, transportation, food and entertainment fees. They surmised that the realistic monthly salary to survive in a city would be between RM1,500 and RM2,000 per person.

Other notable findings were – all three participants were single and except for one who spent RM280 on monthly rental, they had no household commitments. Considering these, RM1,500-RM2,000 to survive in the city may still be an underestimated figure.

The study revealed the lifestyle and expenses incurred by young urbanites today which may also be a reflection of our general society. Questions that arise from the study are – “Are young people living beyond their means and can they afford a property in today’s world?”

Affordable housing has been the centre of discussion in my past few articles for this column. Other than the suggestion to build more homes, another key area to look into is the income or the “bread and butter” of our people.

Frances O’ Grady, the general-secretary of UK Trade Union Congress (TUC) that represents 6.2 million working people in UK, commented that “Housing affordability isn’t just about house prices; decent wages are just as important.”

The situation in Malaysia is no different. Insufficient income coupled with high financial commitments such as car and personal loans, are the major reasons why the common people are unable to afford owning a home. 

According to Minister in the Prime Minister Department Datuk Seri Abdul Wahid Omar, about one-third or two million Malaysian households still earn less than RM3,000 a month. This may be a conservative figure as the Government informed that the BR1M was given to 5.2 million or 80% of all Malaysian households earning less than RM3,000 a month in 2012.

Household income refers to the total accumulated income from all the working people in a particular home or place of residence. With more than 5 persons per household in our country now, the RM3,000 household income figure can be alarming when it comes to meeting the housing needs of the rakyat. 

If the study indicated that an individual needs RM1,500-RM2,000 a month to live in a city on his/her own without any household commitments, the chances of a family with household income of less than RM3,000 to own a home is pretty dim. 

Bank Negara’s statistic indicated that Malaysia’s household debt grew close to 13% per annum from 2003 to 2013 but Malaysian’s household income only grew at an average of 5% per annum for the same period. Understanding the huge variance between the debt - income ratio is a topic on its own and best left for another day. The immediate concern is, households will be caught in a vicious cycle of debts if no immediate rectifications are made.

Some of the rectifications have been discussed in my earlier articles, one being the need to have a more comprehensive and efficient public transportation system. 

In 2012, the sales of passenger vehicles reached RM74.85bil. Owning a vehicle comes with daily and periodic expenses such as loan instalments, petrol, maintenance, licence, toll, insurance and parking costs. These can easily take up about RM1,000 or one-third of a household income of RM3,000 with just one vehicle. 

If our public transportation system is more comprehensive, the RM1,000 spent on private vehicles might be reduced to RM100 to RM200 per month. I believe the rakyat is eagerly awaiting the completion of the more comprehensive MRT so that they can relieve themselves of the vehicle expense burden. 

Reducing the expenses on private transportation is not the only answer to house the nation. Using the example of a household earning RM3,000 a month, if we allocate one-third of the income which is RM1,000 to pay for the monthly housing loan, the household can only afford a house of about RM220,000 with a 30-year loan term. 

Such a budget is not sufficient to purchase a new house in the city even under the government’s affordable housing scheme. 

It is crucial for our government to escalate its effort in improving the Malaysian household income and at the same time reduce household debts. Encouraging more economic activities and investment, creating more value-added jobs and equipping people with quality education and skills are among measures to move the rakyat towards a higher income society. 

As we step into a brand new year, it is hoped that the government will empower the rakyat to achieve the dream of getting a roof over the head by working hard on improving household income. 

FIABCI Asia-Pacific regional secretariat chairman Datuk Alan Tong has over 50 years of experience in property development. He is also the group chairman of Bukit Kiara Properties. For feedback, please email feedback@fiabci-asiapacific.com. - The Star