Then and Now: Incomes and House Prices
I actually didn't see this until a week after it was published in the Star. I got the photo off Facebook! hee
Firstly, there's something weird about how they have classified "Upper Middle" as having an income of RM10k a month now in 2012 - reason being, if you see that back in the 80's, the ratio of UM income to Lower income is about 8 times. It can't be that now in 2012, the ratio is only 3.3 times? I believe the ratio should be the same - so Upper Middle class household income now SHOULD be around RM26,000 a month. That makes more sense.
Apart from that, the rest of the numbers make sense and shows that the middle class is being squeezed. Taking the ratio of annual income to house price, back in the 80's a middle class household only needs 4 times annual income for a double storey house.
Now it is 7 times. Actually, the upper middle is also squeezed even if we took 26k as the benchmark, because back then, an upper middle class household also only needs 4 times annual income to purchase a semi-detached house but now, it has gone up to 6 times, almost as bad as 7 times.
Reading some of the more popular books on wealth advice (usually American), they recommend to purchase a home that is within ONE years' annual income. That is almost impossible here in Malaysia.
However, I am currently in the position where my annual income is about 1x the value of the apartment I'm living in (hehe) hence there is that temptation to upgrade! But in the meantime, the loan repayment doesn't take much out of my pay, leaves me with surplus cash - all in all, a good position to be in for now. I'm still in the market for another property though, just need to find a good investment / nice to stay / not too expensive / feng shui must be good! Fussy or what? haha
So how now? The situation is not reversible. Prices are going to be at this level and it can only become bearable if incomes rise enough to be at the same ratios of the 80's.
Don't think this is going to happen, Malaysians are in the lousy situation of earning developing country income but paying first world type prices (by income to prices ratio).
So have to either earn more money, swallow your pride to live in a cheaper place or do both!
Firstly, there's something weird about how they have classified "Upper Middle" as having an income of RM10k a month now in 2012 - reason being, if you see that back in the 80's, the ratio of UM income to Lower income is about 8 times. It can't be that now in 2012, the ratio is only 3.3 times? I believe the ratio should be the same - so Upper Middle class household income now SHOULD be around RM26,000 a month. That makes more sense.
Apart from that, the rest of the numbers make sense and shows that the middle class is being squeezed. Taking the ratio of annual income to house price, back in the 80's a middle class household only needs 4 times annual income for a double storey house.
Now it is 7 times. Actually, the upper middle is also squeezed even if we took 26k as the benchmark, because back then, an upper middle class household also only needs 4 times annual income to purchase a semi-detached house but now, it has gone up to 6 times, almost as bad as 7 times.
Reading some of the more popular books on wealth advice (usually American), they recommend to purchase a home that is within ONE years' annual income. That is almost impossible here in Malaysia.
However, I am currently in the position where my annual income is about 1x the value of the apartment I'm living in (hehe) hence there is that temptation to upgrade! But in the meantime, the loan repayment doesn't take much out of my pay, leaves me with surplus cash - all in all, a good position to be in for now. I'm still in the market for another property though, just need to find a good investment / nice to stay / not too expensive / feng shui must be good! Fussy or what? haha
So how now? The situation is not reversible. Prices are going to be at this level and it can only become bearable if incomes rise enough to be at the same ratios of the 80's.
Don't think this is going to happen, Malaysians are in the lousy situation of earning developing country income but paying first world type prices (by income to prices ratio).
So have to either earn more money, swallow your pride to live in a cheaper place or do both!
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