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Revivifying the Basis of Homeowners’ Purchasing Factors on Affordable Housing

8 March 2021 - According to a Malaysia-based study on the residential property market, 4 attributes were displayed to describe the purchasing factor of housing finance, locational, structural, and neighbourhood. For instance, our previous article on "Unaffordable Affordable Housing in Malaysia" emphasised the market's consideration of housing affordability or Price to Income Ratio / Median Multiple by covering house price and household income which both fall under financial attributes.

Based on 3 past relevant use case on affordable housing in Malaysia on the B40s and partially the M40s, Aleevar has revivified the most notable homeowners’ purchasing factors by attempting to reiterate 4 overall attributes and breaking them down into 14 sub-attributes.

Among the 4 overall attributes, the financial category stands at the top (4.02), followed by locational (3.88), structural (3.74), and neighbourhood (3.72). As these use case were based on a 5-Likert scale, the range of the values indicate the importance of the factors such that 1 = least important and 5 = very important. Moreover, this ranking could be further explained by the sub-attributes as we dive deeper into the factors that determine the attributes (as shown in the sunburst diagram).

Financial attributes can be defined as factors that could affect one's affordability or even spending confidence. For instance, aside from the sub-attributes mentioned above, loan availability, family size, land ownership (freehold / leasehold), economic trends, and operation & maintenance costs.

To no surprise, household income (4.28) and house price (4.24) are ranked as the top 2 most influential factors when considering affordable houses. As previously mentioned, household income and house price are two important elements in housing affordability. These two are closely followed by down payment (4.16) and interest rates (4.04); which draws attention to the weight of a typical minimum down payment rate of 10% and an average of 3% interest rate (assuming a tenure of 30 to 35 years) on a person's financial ability especially when he or she falls under a lower- or middle- income class group.

Location-based factors refer to one's convenience in accessing a certain place (e.g. public facilities and amenities) and proximity away from home. For example, the availability of shopping mall, markets, schools, or daycare centres around the housing area. The availability of public transportation and own transport is typically regarded as well but it was not included in our study due to it being a locational dependent variable where generalising based on state-based studies may not be optimal.

Access to health centres (4.49) is ranked the highest possibly due to the importance of clinics and hospitals within the vicinity of a housing area to handle both complicated and non-complicated cases. Accessibility to working place (4.11) and building location (4.03) are quite similar in the sense where the former is self-explanatory while the latter is related to the housing unit situated in either an urban or a rural area. The proximity to school and daycare services (3.85) is also valued as households consisting of both working parents will have an easier time taking care of their children.

Structural attributes contain the physical conditions, and complementing qualities and facilities of the property. Typically, the number of bedrooms and bathrooms, and the size of the living and dining hall are the factors that make up the physical conditions while the complementing qualities and facilities are the house design, the ability to accommodate people with restricted mobility, and the area of parking space offered per house.

The type of building (4.03) indicates the category of residential property (e.g.low-cost flats or houses, high-rise units, terraced houses, and semi-detached and detached houses). This sub-attribute goes in line with the general standard of unit sizes. For instance, low-cost apartments usually range from around 800 to 850 sqft depending on the location. Thus, the unit size (3.92) is a key consideration as well as other perks such as handicap-friendly (3.9), and parking area (3.86).

Neighbourhood components could be perceived as the environment residents live in. Apart from crime rate and sociality, pollution is also one of the factors.

Crime (e.g. burglary, snatch thefts) has one of the highest impacts on affordable housing purchasing factors. This can be explained by the high crime rate reflected by the crime index ratio in Malaysia where Kuala Lumpur (592.3) and Selangor (304.3) have the highest crime index ratio per 100,000 population while Negeri Sembilan (295.4), Pulau Pinang (295.0), Melaka (275.9), Johor (262.4), and Kedah (258.3) are above the national level (256.6).

Although sociality is not as highly considered as other sub-attributes, it may be a vital element to building a united, actionable and sustainable community. Sociality revolves around a conducive social environment that promotes neighbourhood involvement within the housing area. The examples could be solving community issues by organising a meet-up, discussing solutions, and co-operating to resolve the problems.

Theory of Consumption Value

As an extension to the 4 attributes, 14 sub-attributes, or purchasing factors, the consumer purchase intention on housing can be categorised into 5 values — functional, social, conditional, epistemic and relational. A visual diagram has been created to present the definition of each value and its related sub-attributes.

Although household income is meant to be an indirect relation to price under functional values as a predictor of affordability, household income may act as a component of social values as consumers may associate their social status self-concept with the price of the residential property. To elaborate on epistemic values, it was mentioned that the developer's marketing strategy if associated with addressing environmental concerns, may be able to positively influence consumer's purchase intention.

Aleevar observed that the 14 sub-attributes are distributed across functional, social, and conditional values but not epistemic and relational values. It seems that the functional, social, and conditional values are the common basis of purchasing factors; while the absence in the association of sub-attributes with epistemic and relational values prompts us to think about how important these values are in the consumer purchase intention context for residential affordable housing in this new post-pandemic period. Hence, Aleevar highly recommends housing developers to conduct customised market research to address specific issues attributing to sustainable affordable housing development.

If you are interested to dive deeper into the sources, please visit the links below: Use case 1: An exploration of determinants of affordable housing choice (n = 468, Penang)

Use case 3: Strategies for Affordable Housing Delivery (n = 529, Penang)

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