Malaysia's household debt

Malaysia’s total household debt is a whopping RM 560 billion as at 31 August 2010 – 55 % of the banking system’s total loans. This is about 72 % of the GDP. The debt is made up of borrowings in residential property, passenger car, credit card, securities and personal use. Residential property and passenger car comprise the largest portions with value of RM 230 billion and RM 123 billion respectively. This is equivalent to 48 % and 26 % of the total debt. Credit card debt is fast rising and has a cumulative value of RM 29 billion – 6 % of the total loans.

Malaysia’s average income per capita is about RM 2000 per month. The household debt to personal disposable income is 140 % in 2009. This figure is higher than Singapore’s 105 % and US’ 123 %. As the disposable income is about 70 % of the gross income, Malaysians owe double the amount they earn.

Of particular concern is Malaysia’s passenger car debt of RM 123 billion. At a quarter of household debt, this is a world record. The reason for this is the high car price in Malaysia and our penchant for wheels. With a population of 28 million, we have 19.8 million registered vehicles as at August 2010. This is a depreciating asset as the value and usability of the car reduces over time.