KRI calls for sustainable housing financing as debt pressures weigh on middle-income households

KUALA LUMPUR (May 20): Malaysia’s housing financing structure may require a more sustainable approach as longer mortgage tenures are increasingly placing financial pressure on middle-income households and affecting long-term economic well-being.

Khazanah Research Institute's (KRI) research director Dr Suraya Ismail said extended financing periods of up to 30 years, as well as previous discussions surrounding intergenerational loans, may make homes appear more affordable through lower monthly repayments but could increase the overall repayment burden over time.

"It is as if it's cheaper every month, but in total, you pay three times more," she told reporters after speaking at the ‘Affordable Housing and Residential Market Demand and Supply’ session in conjunction with the Malaysia Building and Property Summit 2026 here yesterday.

In the past, she noted that housing financing structures were generally shorter, with many homeowners previously servicing mortgages over 15 years, allowing them greater financial mobility.

However, she said rising house prices, particularly since 2010, had altered the housing landscape and contributed to greater reliance on longer financing tenures.

She also said that KRI’s research found housing prices had risen faster than overall consumer inflation during the period, partly reflecting the broader expansion of financing within the housing market.

Suraya said the trend could eventually reduce household financial flexibility as larger portions of income are channelled towards mortgage commitments, leaving less room for savings, healthcare, education and other expenditures.

She said rising mortgage obligations could also affect broader economic activity as households burdened by long-term debt may have less spending power for other sectors of the economy.

"We don’t want to be an indebted society," she said.

At the same time, she said the issue was particularly affecting middle-income households, especially the middle 50% (M50) group, a classification introduced by KRI representing households between the bottom 20% (B20) and top 30% (T30) income groups.

She said many within the group remain financially vulnerable despite not being categorised as low-income earners.

Suraya also said KRI had previously advised against proposals involving intergenerational housing loans extending up to 60 years due to concerns over rising long-term household indebtedness.

She said while financing flexibility may help support home ownership, housing affordability should ultimately be addressed through more reasonably priced homes rather than increasingly prolonged debt commitments.

“What is the point of being a richer country, a more developed country, if we are all highly indebted,” she said.

On the supply side, Suraya said clearer distinctions are needed between social housing initiatives and affordable housing targeted at middle-income groups to ensure more effective policy implementation and resource allocation.

Programmes such as the People’s Housing Programme (PPR) remain important as part of the social protection framework for lower-income groups, while affordable housing for middle-income earners should continue to be strengthened through balanced public-private sector participation, she said.

Suraya also raised concerns over increasingly smaller residential units being marketed under affordable housing categories, saying affordability considerations should take into account not only pricing, but also liveability and suitability for households.

She further stressed the importance of better housing market planning and more granular data analysis, including understanding commuting and population movement patterns, to ensure housing supply better matches actual demand across different locations.

Suraya added that affordability assessments should move beyond broad national income classifications and instead reflect on local housing market realities and household income distributions.

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