PR1MA Group Housing Affordability

PR1MA Group Housing AffordabilityAFFORDABILITY RATE AMONG PR1MA RECIPIENTS IN PUTRAJAYA, MALAYSIANur Aini Syafawani Binti Umar1 ,Shirley Tan2 and Mohd Zairul bin Mohd Nor3Master of Architecture (M. Arch)Faculty of Design and ArchitectureUniversity Putra Malaysia, 43400 Serdang, Selangor thieveA stand is one of the basic all-important(prenominal) require for humans. correspond to Universal Declaration of Human Rights (UDHR), Article 17, Everyone has the right to own property merely as well as in association with others. cheap caparison is trapping that balance with the average rest homeh gray-haired income and as the rule of thumb, house is considered mild- tolld if the embodys is less than 30% of gross plate income. The change magnitude in housing prices cause asymmetry between housing affordability and theater income which has becomes the dilemmas for the spring chicken methamphetamine hydrochlorides to subvert their showtime house. Malaysian organization has introduced several inexpensive housing policies to facilitate planetary house ownership among different congregationings of abode income. However, the policies which only benefit the low-income household collection have neglected the needs for low-priced housing for sum income group. PR1MA housing policy is one of the methods of policies aimed at ensuring that whole eligible Malaysians ar given discover towards dwelling house ownership. Therefore, this study is to investigate the order of affordability among adolescent home owner of PR1MA in Federal Territory of Putrajaya using the survey method pilot survey, a preliminary survey to gather information in smaller scale and personal hearing survey to explore the responses of the respondents to gather deeper information towards belowstanding factors influencing prescribe of affordability. The findings establish that the main housing issue faced by the middle-income groups are housing price and household use. Hence, i t is recommended to address these issues in designing an low-cost fascinate for the middle-income groups based on the findings of the study.Keywords housing, affordability1.0 INTRODUCTIONIn the recent years, quick economic development has leads to population growth and this has resulted in the increasing demand for residential housing at urban city in Malaysia. The increasing of housing prices has become the dilemma of the young starters which travel under middle income group to buy their prototypal house. close to of the young starters are having difficulties to secure a owe from the final institution. Despite many assistance from the government to assist the young starters to own their dream house, the inexpensive issue still haunting the target group for realizing their dreams.The main purpose of this paper is to study the localise of affordability among eligible young starters for PR1MA program. The Government of Malaysia awake that housing is a basic need for every cit izen and is an important element in contributing for the urban economy. PR1MA housing policy is one of the methods of policies aimed at ensuring that all eligible Malaysians are given chance towards home ownership.According to general PR1MA guidelines, those eligible to apply for PR1MA homes are Malaysians owning not more than one home and having a gross household income of not more than RM7, 500 per month. The PR1MA apartments in Putrajaya were certainly popular with over 7,000 applications received for 560 apartments (PR1MAs website, 2017). As a result, PR1MA housing in Putrajaya was chosen as our pilot study and this study aims to investigate the lay of affordability among the young starter who are eligible for the PR1MA housing program.Therefore, the objectives of the present study areTo commit the average household income expenditure among young starter who are eligible to apply PR1MA houses.To identify the affordability issue over PR1MA housing price among young starter2.0 LITERATURE REVIEWAffordability means differently to renters and owners. Although every group in the housing market is affected by the mortgage rates, owners are affected some(prenominal) more as compare to the renters (CVRDs Regional Growth Strategy, 2016). some(prenominal) studies or research have been done to understand what does affordable housing mean in this context. The commentary of affordable housing is the subject of different analyses and debates among experts (Baqutaya, 2016). Upon the debates, definition of affordable housing is a housing that is considered affordable if the debt service ratio is 30% of the income expenditure (Zairul, 2017). Families that pay more, especially lower and medium income families, are considered follow burdened because they may have difficulty paying for non-housing needs such as food, clothing, transportation, childcare, and aesculapian care (Gary Pivo, 2013). Rate of affordability was measured by house price to income ratio according t o Median Multiple methodology (Cagamas, 2013). The definition of affordability is essential before however analyzing the root cause of housing affordability.Issues relating to affordable housing has becomes a dilemmas among low and middle income group. The root cause of affordability among the group was due to the outgrowth of non-housing expenditure by 4.7% based on the Consumer Price Index (Cagamas, 2013). Affordability is mainly delimitate by the relationship between household expenditure and income. Many authors (Yates and Gabriel, 2006 Carney and Boyle, 2004) argues that housing affordability is affected by the distribution of house prices, household incomes and the structure of financing costs. base on the growth of current housing scenario in Malaysia, the issue has been underpinned by the interface of cardinal forces growing population, high rates of urbanization and growing economy. The imbalance between demand and supply, particularly in the affordable housing segment, has contributed to a high increase in housing prices. This has compounded housing affordability issues, particularly for the low and middle income population (Economic Developments, 2015). Malaysian government has introduced several affordable housing policies to facilitate home ownership among different groups of household income. However, piddling is done to escort the needs of the middle income group. Despite economic growth, 60% of the middle income group is young starters and volume of their income level falls under lower middle mob (Dr. Azriyati, Dr. Rosly and Dr Kuppusamy, 2013). The increasing in housing prices, household expenditure and the lacking of more affordable housing policiesAFFORDABILITY RATE AMONG PR1MA RECIPIENTS IN PUTRAJAYA, MALAYSIANur Aini Syafawani Binti Umar1 ,Shirley Tan2 and Mohd Zairul bin Mohd Nor3Master of Architecture (M. Arch)Faculty of Design and ArchitectureUniversity Putra Malaysia, 43400 Serdang, SelangorAbstractA house is one of the basic i mportant needs for humans. According to Universal Declaration of Human Rights (UDHR), Article 17, Everyone has the right to own property alone as well as in association with others. Affordable housing is housing that balance with the average household income and as the rule of thumb, housing is considered affordable if the costs is less than 30% of gross household income. The increasing in housing prices cause imbalance between housing affordability and household income which has becomes the dilemmas for the young starters to buy their first house. Malaysian government has introduced several affordable housing policies to facilitate home ownership among different groups of household income. However, the policies which only benefit the low-income household group have neglected the needs for affordable housing for middle income group. PR1MA housing policy is one of the methods of policies aimed at ensuring that all eligible Malaysians are given chance towards home ownership. Therefore , this study is to investigate the rate of affordability among young home owner of PR1MA in Federal Territory of Putrajaya using the survey method pilot survey, a preliminary survey to gather information in smaller scale and personal interview survey to explore the responses of the respondents to gather deeper information towards understanding factors influencing rate of affordability. The findings establish that the main housing issue faced by the middle-income groups are housing price and household expenditure. Hence, it is recommended to address these issues in designing an affordable scheme for the middle-income groups based on the findings of the study.Keywords housing, affordability1.0 INTRODUCTIONIn the recent years, rapid economic development has leads to population growth and this has resulted in the increasing demand for residential housing at urban city in Malaysia. The increasing of housing prices has become the dilemma of the young starters which falls under middle inco me group to buy their first house. Most of the young starters are having difficulties to secure a mortgage from the final institution. Despite many assistance from the government to assist the young starters to own their dream house, the affordable issue still haunting the target group for realizing their dreams.The main purpose of this paper is to study the rate of affordability among eligible young starters for PR1MA program. The Government of Malaysia aware that housing is a basic need for every citizen and is an important element in contributing for the urban economy. PR1MA housing policy is one of the methods of policies aimed at ensuring that all eligible Malaysians are given chance towards home ownership.According to general PR1MA guidelines, those eligible to apply for PR1MA homes are Malaysians owning not more than one home and having a gross household income of not more than RM7, 500 per month. The PR1MA apartments in Putrajaya were certainly popular with over 7,000 applic ations received for 560 apartments (PR1MAs website, 2017). As a result, PR1MA housing in Putrajaya was chosen as our pilot study and this study aims to investigate the rate of affordability among the young starter who are eligible for the PR1MA housing program.Therefore, the objectives of the present study areTo identify the average household income expenditure among young starter who are eligible to apply PR1MA houses.To identify the affordability issue over PR1MA housing price among young starter2.0 LITERATURE REVIEWAffordability means differently to renters and owners. Although every group in the housing market is affected by the mortgage rates, owners are affected much more as compare to the renters (CVRDs Regional Growth Strategy, 2016). Several studies or research have been done to understand what does affordable housing mean in this context. The definition of affordable housing is the subject of different analyses and debates among experts (Baqutaya, 2016). Upon the debates, definition of affordable housing is a housing that is considered affordable if the debt service ratio is 30% of the income expenditure (Zairul, 2017). Families that pay more, especially lower and medium income families, are considered cost burdened because they may have difficulty paying for non-housing needs such as food, clothing, transportation, childcare, and medical care (Gary Pivo, 2013). Rate of affordability was measured by house price to income ratio according to Median Multiple methodology (Cagamas, 2013). The definition of affordability is essential before further analyzing the root cause of housing affordability.Issues relating to affordable housing has becomes a dilemmas among low and middle income group. The root cause of affordability among the group was due to the increase of non-housing expenditure by 4.7% based on the Consumer Price Index (Cagamas, 2013). Affordability is mainly defined by the relationship between household expenditure and income. Many authors (Yat es and Gabriel, 2006 Carney and Boyle, 2004) argues that housing affordability is affected by the distribution of house prices, household incomes and the structure of financing costs.Based on the growth of current housing scenario in Malaysia, the issue has been underpinned by the interface of three forces growing population, high rates of urbanization and growing economy. The imbalance between demand and supply, particularly in the affordable housing segment, has contributed to a high increase in housing prices. This has compounded housing affordability issues, particularly for the low and middle income population (Economic Developments, 2015). Malaysian government has introduced several affordable housing policies to facilitate home ownership among different groups of household income. However, little is done to attend the needs of the middle income group. Despite economic growth, 60% of the middle income group is young starters and majority of their income level falls under lower middle course (Dr. Azriyati, Dr. Rosly and Dr Kuppusamy, 2013). The increasing in housing prices, household expenditure and the lacking of more affordable housing policiesfor the middle group declining the rate of affordability for home ownership.Towards resolving affordable housing issues, the National Housing Policy (NHP) has been established to outline the direction and form the basis for the planning and development of the housing sector at the federal, state, and local anesthetic levels (10th Malaysia Plan, 2009). The NHP is introduced to provide sufficient and affordable houses to improve the well-being of the people as well as tackling the issues and quarrels faced by the housing industry today (Dato Ahmad, 2009). However, the NHP targeting on the affordability issue for all level of income group which is the low and middle income group. Targeting on the middle income group, the type of available affordable housing scheme by the government is as followsTable 1 Schemes for middle income group in Malaysia. Adapted from Zairul (2017)My First Home Scheme (SRP)PR1MAPPA1MEligibilityIncome limit for individual loans from RM 3,000 to RM5,000 per month or stick household incomes for up to RM10,000 per month.Eligibility to own property costs up to RM400,000Malaysian citizenTotal individual or household income (husband wife) between RM2,500 to RM15,000 monthlySingle or conjoinOwns no more than 1 property between the applicants and applicants spouse, if anyRM90,000-RM120,000 (joint income and not more than RM6000)RM150,000-RM220,000 (joint income not more than RM10,000)RM221,000-RM260,000 (joint income not more than RM10,000)18-35 years old and first-time buyers21 years old and above18-60 years old (for government servant only)Table 1 shows the available schemes for middle income group in Malaysia. Most of the middle income group consists of young starters who could not afford to buy their first house and at the same time, they are not eligible for low cost h ousing. This study will focus on the PR1MA housing policy which is aimed at ensuring the middle income group are given chance towards home ownership.In conclusion, affordability expresses the challenge each household faces in balancing the household income and household expenditure. Affordable housing schemes launched by the government was to promote affordability in all levels of income group. Towards realizing of home ownership, little has been done to cater the needs of housing for the middle income group. Even though the middle income group are eligible for purchasing affordable house from the affordable housing scheme, but their affordability does not depends only on the eligibility but also influenced by the household expenditure. It is important for the government to revise the term affordability to ensure the affordable housing scheme is able to balance with the income level of the group.3.0 METHODOLOGYThe study was conducted by three methods 1) desk review 2) process analys is 3) in-depth interview.This paper started by first understanding the definition of affordability through the method of desk review by searching relevant information on the meaning of affordability in local context. The definition of affordable housing is the subject of different analyses and debates among experts (Baqutaya, 2016). The source of reading materials was also searched through desk review. Types of affordable housing scheme available, the eligibility of the policies related, and the current issue of housing affordability was foc utilise in this method.The second method was process analysis which involves the collection of selective information through questionnaire survey and in-depth interview. The questionnaire survey were done among the young home owners of PR1MA in Putrajaya to determine age, occupation, and income bracket. In-depth interview was carried out to further study and is essential to review on factors influencing housing affordability among young starters . Thus, the questions were more detail and specified on the household expenses and in-depth understanding roughly affordability.4.0 DATA ANALYSISThis survey divided the study into two sectionsThe income kin of current young starters as home owners of PR1MA affordable house unit and,The category household size of the young starter.The survey with young starters involved two seances, starting with a pilot study conducted among the young home owners of PR1MA house in Putrajaya. The next session involved an in-depth interview with the young starters to study the factors that would influence the rate of affordability. The pilot study was conducted to determine age, occupation, and income bracket. Criteria for the selection of the respondents included the following 1) young professionals age between 21 to 35 years old household income or combined income not exceeding RM7500 monthly 3) home owner of PR1MA house in Putrajaya.Total number of young starter respondents from the current PR1M A home owners according to income category surveyed is as shown in Table 1. From the survey conducted, 60% of the respondents with household income range from RM2500 to RM4000, 20% range from RM4001 to RM6000, 10% with income ranging RM6001 to RM7000 and 10% from RM7000 to RM7500.Table 2 dispersal of Young Starter Survey PR1MA Respondents by Household IncomeIncome Category count of responsePercentageRM2500-RM4000660%RM4001-RM6000220%RM6001-RM7000110%RM7001-RM7500110%Total10100%The second session with the young starters involves an in-depth interview. During the interview session, the emphasis was on the factors influencing the rate of affordability. The category of household size of the young starter determines the percentage of household expenses from household income monthly. The interview feedback was used to study 1) the price of PR1MA house bought, 2) types of household expenses involved monthly, 3) alternative used by the young home owners to lessen mortgage burden.Table 3 sh ows the household size of the current young starter of PR1MA home owners. 50% of the young respondents are single, 20% of them are married without having children and 20% are with married status and blessed with one children. Only 10% of the respondents with higher household size with two or more children in a family.Table 3 Distribution of Young Starter Survey PR1MA Respondents by Household SizeHousehold SizeNumber of responsePercentageSingle550%Married with no children220%Married and have 1 children220%Married and have 2 or more children110%Total10100%5.0 FINDINGS AND DISCUSSIONSAccording to a study from Azriyati (2013), middle income households can be categorized into three sub-categories Low- centre of attention Income, Middle-Middle Income and Upper-Middle Income.Table 4 Categorization Income for Middle Income Group. Extracted from Azriyati (2013)CityIncome CategoryLower-MiddleMiddle-MiddleUpper-MiddleKuala LumpurRM2001-4000RM4001-RM6000RM6001-RM8000Table 4 shows the sub-categ orization of middle income group. The income category for lower-middle group is RM2001 to RM4000 middle-middle group is RM4001 to RM6000 and upper-middle is RM6001 to RM8000. In relation to table 1, 60% of the respondents falls under lower-middle income category 20% falls under middle-middle income category and the remaining 20% falls under upper-middle income category. It can be concluded that majority of the young starters income category falls under lower-middle income category which is near to the bottom line of low income group.Table 5 Calculation of affordability rate among Malaysians. (Source flexZhouse, Zairul (2017)) fictitious character 1CASE 2CASE 3CASE 4PROPERTY PRICESRM500,000RM400,000RM280,000RM150,000Net pay (household)RM7,500RM7,000RM8,000RM5,500Less statutory deductionsIncome taxRM225RM210RM240RM165EPF contributions (8%)RM825RM770RM880RM605Net bring in payRM6,450RM6,020RM6,880RM4,730Less monthly cargoMortgage Installments (6% for 30 years)RM2,700RM2,160RM1,512RM81 0UtilitiesRM300RM300RM300RM300Car hire-purchase (one car)RM800RM800RM800RM800Petrol and maintenance for one carRM1,000RM600RM600RM600Food and other expensesRM1,000RM1,000RM1,000RM1,000 childcare (one person)RM800RM800RM800RM800Insurance plan (RM200 per pax)RM200RM200RM450RM450Parents (RM200 per pax)RM400RM400RM400RM400Net savings(-RM600)(-RM490)RM1,018RM430Household to income ratio5.564.762.922.27From the table above, the calculation was based on the Consumer Price Index (CPI), 2013 which has increased by 4.7% (Cagamas,2013). The calculation above illustrates the typical monthly expenses of young starters in Malaysia. Against this scenario, the acceptable range for affordability current middle income home owners is between RM150,000 and RM280,000 (Zairul, 2017). Table 6 shows the price to income category determining the affordable rate.Table 6 Ratio of House Price to Household Income (Source Cagamas Berhad, 2013)CategoryHouse Price to Income RatioSeverely Unaffordable5.1 AboveSerio usly Unaffordable4.1 to 5.0Moderately Unaffordable3.1 to 4.0Affordable3.0 BelowThe house price for PR1MA house unit at Putrajaya are based on two prices, RM120,000 for 815 sqft and RM150,000 for 1,006 sqft according to the feedback through interview conducted. Table 6 shows the calculation of affordability rate among young home owners of PR1MA house in Putrajaya based on the data analysis section. It was learned that 60% of the young home owners income range falls under lower-middle income category. From table 7, both case shows negative disposable income of the PR1MA young home owners which is -RM1,174 and -RM1,218. In relation to data obtained and showed in table 3, the household size of the respondents contributes to household expenditure base on the feedback from the interview. As the rule of thumb, the housing is considered affordable if the debt service ratio is 30% of the income expenditure (Zairul,2017).Table 7 Calculation of affordability rate among young home owners of PR 1MA house. Adapted from Zairul (2017)CASE 1CASE 2PROPERTY PRICESRM120,000RM150,000Net pay (household)RM2,800RM4,000Less statutory deductionsIncome taxRM120EPF contributions (8%)RM224RM288Net take-home payRM2,576RM3,312Less monthly commitmentMortgage Installments (6% for 30 years)RM670RM810UtilitiesRM80RM300Car hire-purchase (one car)RM800RM800Petrol and maintenance for one carRM600RM600Food and other expensesRM1,000RM1,000Childcare (one person)RM800Insurance plan (RM200 per pax)RM200RM200Parents (RM200 per pax)400RM400Net savings(-RM1,174)(-RM1,218)Household to income ratioFigure 1 Non-Affordability Rate among Young Starter of PR1MAFigure 1 shows data analysis derived from the relationship between income category (table 1) and affordability rate calculation (table 7). Based on the results obtained, 60% of the middle-income group falls under lower-middle income category and the rate of affordability was compute based on the income range of this category which is between RM2500 to RM 4000. The results show the non-affordability for this income category. Figure 1 demonstrates the PR1MA young home owners under income range from RM2500 to RM4000 shows the highest percentage of non-affordability whereas the income category from RM6001 to RM7500 shows the least percentage.Figure 2 Types of Alternative to Increase Household IncomeFigure 2 demonstrates different alternatives taken by the young owners of PR1MA despite the non-affordability burden. Freelance is the most commonality way to increase household income and shows the highest percentage which is 70%. Other alternative such as renting out room, part-time insurance agent, and overtime stands 10% respectively.Base on the findings, the rate of affordability was affected by the monthly household income. However, based on the survey conducted, the household expenditure which has incl