EDGEPROP. 2ND AUGUST: “The fact that homebuying stimulates the economy means that government policies that support homebuyers have much bigger benefits for economic growth.”
Residential real estate purchases are key to economic growth, with Malaysian homebuyers contributing an estimated RM42.5 billion to the economy last year, according to Juwai IQI.
That is equivalent to about 2.7% of Malaysia’s 2022 Gross Domestic Product (GDP) of RM1.79 trillion, the real estate technology group said.
“The fact that homebuying stimulates the economy means that government policies that support homebuyers have much bigger benefits for economic growth,” its co-founder and group chief executive officer Kashif Ansari said in a statement today.
He explained that the RM42.5 billion of economic benefits represent only part of the full impact of the entire housing sector because it leaves out the tens of billions of ringgit that materials production, property management, rental property, maintenance and renovation and other real estate activities add to the economy.
It also leaves out the value of the real estate itself.
Kashif said that among Kuala Lumpur, Selangor, Johor and Penang, the benefit of home purchases is largest in Selangor with a contribution of 3.1% of GDP.
In Johor and Penang, the benefits to GDP are relatively high at 2.9% and 3.0%, respectively, while Kuala Lumpur saw the least contribution to GDP at 1.7%.
“On average, each time you buy a home, you generate for the economy an average benefit of around RM175,000, but the amount varies by state.
“In Johor, each transaction adds about RM150,000 to the economy. The benefits are about RM294,000 in Kuala Lumpur, about RM201,000 in Selangor, and about RM174,000 in Penang,” he said.
Juwai IQI used the statistical method developed by the economists at the United States’ National Association of Realtors (NAR), which has nearly 1.5 million members, to estimate how much Malaysian homebuyers add to the economy.
Kashif said in the NAR’s model, four elements make up the total economic benefit of home purchases — the income generated from real estate activities, related expenditures, housing purchase multiplier, and new home construction.