Low & Medium Cost Housing: Key Trends & Indicators

An analysis by PropertyGuru DataSense ofresidential property transaction involving Low & Medium Cost (LMC) housingschemes has shown invaluable insights into trends, buyer profiles andtransaction patterns of this housing segment.

The analysis sought to determine market responses to LMChousing by examining approximately 7,900 LMC projects within Kuala Lumpur andSelangor, across 139,500 sales transactions from the 1970s.

LMC housing comprised just 10% of the total number ofhousing projects in those locations, yet made up 18% of total sales transactionswhich already indicates a demand for these types of homes.

As a result, LMC housing has a greater growth in price PSFcompared to private housing especially for those built between 1970 to 1980(30% more growth).

The high growth in LMC psf prices can be attributed to thesubsidised nature of public housing which rises to reflect what the market isactually prepared to pay.

However, the growth in LMC psf prices declined in 1990 to2010s as more private homes were built to meet urbanisation needs. The pandemicalso saw a brief decline but growth has now rebounded.

“What’s interesting is that whilst private housing pricegrowth remained flat from 2016, price growth in LMC housing continued toaccelerate,” said Joe Hock Thor, managing director of PropertyGuru DataSense.

“As private housing prices became too high or unaffordable,Malaysians then looked at the next available option which was LMC housing inthe secondary market,” he added.

Another key observation is that not all LMC housing areequal in price growth and demand due to factors such as location and propertytype.

Most notably, LMC cluster homes has showed the biggest hikewith a 537% increase in price psf compared to private cluster houses as supplyis severely limited.

A desire for landed homes is prevalent especially among LMChomeowners, driven by needs of more space and privacy as the family grows.

Location weighs heavily on prices too,especially for properties close to core urban centres. LMC housing where firstsale between 1970 to 1980 has shown 30% more growth in price PSF compared toprivate housing in the same year range.

Urban centres are the preferred location for LMC homeownerslikely due to the desire for proximity to central business districts, access toamenities and job opportunities.

Districts such as Petaling recorded a 52.89% growth in thenumber of LMC housing buyers over the years, followed by Kuala Lumpur (19.32%),Gombak (5.76%, Klang (5.71%) and various other outlying districts measured.

Roughly 70% of buyers were first-time home buyers andestimated 30% are investors cycling out on LMC housing. A majority of LMC homebuyersare between 31-35 years of age, followed by those aged 26-30 years old.

The most pertinent revelation in the study of LMCtransactions and trends, reveal the challenges faced by LMC homeowners inpurchasing into private housing.

Aside from issues of affordability, financial commitmentsand loan eligibility, the disparity between public housing and private housingis also a key factor.

Only 1 in 5 of those who purchase LMC housing move on to buyprivate housing, the remaining 80% are either unable or unwilling to do so asthe

Aspirations for more space and privacy lead to a strongdemand within LMC homeowners to move to landed homes, and the majority (68.72%)of those who are able to leave move into private housing do so by moving todifferent districts where terrace housing are more affordable.

Median per square foot price growth in private housing(housing built by developers/private sector) increased 50% more than LMChousing especially LMC housing built between 2000 and 2010.

As a consequence, LMC housing resident wanting to upgrade inKL would be severely limited in their options. The next available option wouldbe to move further away to another district, especially given landed terracehomes are the preference of LMC homeowners.

For a deeper coverage on the difficulties facedby LMC homeowners making the leap to private housing, check out our previousarticle. (link to articletitled ‘80% of Low & Medium Cost Homeowners Unable Or Unwilling To UpgradeTo Private Housing’)