By Radin Ghazali
Could this be the great escape when it comes to owning properties in Malaysia? The term ‘renting’ has been used to describe the remedy of home ownership among the lower to middle class as well as millennials. These are the main groups of our varied socioeconomic backgrounds that have been hit hard by the upsurge of property’s price in the country.
Various means of help have been introduced to ease the woes of home ownership among those affected.
Rent to Own (RTO) Scheme is among methods used to make home ownership feasible for cash strapped people. Initiated in 2015, RTO is used to support PR1MA buyers that have successfully been balloted to purchase the homes, whose loan applications have been turned down by local financial institutions. The scheme includes buyers to pay rent along a substantial amount of money to be kept in Buyer’s Saving Account. The money accumulated in the account will be used to pay for the value of the house if the tenant agrees to purchase the PR1MA homes after 5-10 years. Sadly, PR1MA has announced on its official website that the RTO scheme is currently unavailable for applicants, hence aren’t we back to square one?
On another downside, getting a PR1MA unit boils down to pure luck as owners will be decided based on balloting. The odds of getting a unit is rather slim. There are even possibilities of ambiguous buyers who might be lucky enough to purchase a PR1MA unit for investment, hoping to rent out such units for a bigger sum of money. Now, wouldn’t that be opening another floodgate to more problems brewing within the system. This would indeed dampen those who are truly in search their ‘first home’.
The National House Buyers Association has called such difficulty of owning an affordable home as an impending national crisis and raised the alarm that the existing system will create a homeless generation. Hence, the controversies are present but how can we manoeuvre the problem?
Clearly, there is a high demand for homes and at the same time, we have an almost equal supply of residential properties in Malaysia. The problem is – the price tags do not tally with the people’s incomes!
We have an average income below RM3,900 among the B40s. Nonetheless, the available homes or the ‘oversupply properties’ in the market are dominated by high-end residential developments that cost at least RM650,000 and above. Folks in this category could only afford homes around or below RM100,000 and if they are lucky enough they could stretch it up to RM178,000. But it is a known fact that there aren’t many units with such price tags available in the market and even if there were, they would have been snapped instantly. Even subsidiary homes by federal and state governments aren’t valued within these low-price brackets. Rumah Selangorku houses are valued up to RM250,000 each, RUMAWIP are sold at RM300,000 while PR1MA homes are even priced up to RM400,000.
Things then would get even more complicated as another majority portion of potential home owners are from the middle-class category. Due to the creation of these socioeconomic brackets, these folks are neither here nor there. The M40 on average earns in between RM3,860 to RM8,319. Sadly, most of them are struggling to get loans via the conventional way, loans from the banks, and it would get even harder for them to be eligible for PR1MA due to the amount of their income that can be deemed as exceeding from the requirement.
Nonetheless, the Department of Statistics has recorded an increase in salary among the M40 folks from 6.3% in 2013 to 11.8% in 2014. Sadly, as their wages increased, so did the price of properties in the recent years. Hence, this has led to more difficulties to home ownership.
We are aware that policies and aids given by the state and federal governments are often tailor made to B40 who earns below RM3,900, which include BRIM, housing assistance and even subsidies. But the tabling of the country’s 2017 budget shows lack of offerings towards those within the M40 group as they continuously struggle to adapt to the increase of household needs and cost.
So, where are we heading now in terms of home ownership? RENTALS. We are curating our nation, with or without realizing it as a renting nation. If you can’t own one, rent one. It is the fastest and effective solution.
Even Second Finance Minister, Datuk Seri Johari Abdul Ghani has recently endorsed renting as the way to go if the means of getting a home gets slimmer as well as to avoid people from taking a huge chunk of debt that they can’t afford. An observant piece of advice but rampant rentals have already been happening in our society. People have succumbed to such fact and they are no longer living in denial. Rental to them is the way to go.
Most millennials are renting given the fact that their salary can’t accommodate home mortgages that would take a toll on their pay. Majority families from the M40 too are resorting to renting homes; be it high-rise and even landed properties. They would rent something big rather than buying a small home to accommodate their expanding family members. Bear in mind that M40 families tend to be upgraders, not the other way around.
The question arises, how far and how long can we go when it comes to renting homes? It is assumed that the longer we rent, we might be able to save and finally purchase a home with the savings. Ironically, it will become riskier due to ‘time factor’. The longer it takes, folks will suffer from higher monthly mortgage repayments due to the age constraint. Then, wouldn’t that be another form of burden to our middle-class folks, later in life?
Something needs to be done to stop such domino effects that are rippling through our B40 and M40 folks. We need to generate a mechanism that is workable without burdening the people. Government bodies and country’s leading think tanks need to tweak what has been implemented or perhaps erase the existing system completely to give way to a to a more competent solution when it comes to affordable home ownership.
Or else we will remain as a renting nation longer than what we have bargained for.
Source : www.propertyguru.com.my