By Geraldine Tong and Annabelle Lee
Property experts and consumer associations have mostly agreed with Finance Minister II Johari Abdul Ghani’s recommendation for young Malaysians to rent houses instead of buying properties.
(To read this article on Malaysiakini click here.)
“I recommend younger cohorts enter the rental market rather than going through the undue stress of owning a house,” Economics associate professor Poon Wai Ching told Malaysiakini.
Last week, Johari recommended that young working Malaysians rent houses long-term “until they have money to make a long-term commitment (of buying houses)” because this would encourage them to focus on building their careers.
In an extended explanation of his position, he was critical of the current culture where many young Malaysians committed themselves to “two big financial burdens” of purchasing accommodation and automobiles at the start of their careers.
Poon concurred with Johari’s that Malaysians should adopt the long-term rental culture found in more developed economies as her research forecasted the gap between house prices and income levels would continue to widen.
“Housing affordability has been a troubling issue for the country as since 2012, the increase in house prices has surpassed the increase in income levels.
“In 2016, house prices increased by 17.6 percent while income increased by 12.4 percent,” she explained.
Similarly, experienced chartered property surveyor Ernest Cheong strongly discouraged young Malaysians from buying properties.
“Young Malaysians are in no position to buy property purely on their own and (many) need to depend on their parents for their down-payment,
“This will take away their parents’ retirement money and jeopardise the family’s finances,” he said.
While National House Buyers’ Association (HBA) secretary-general Chang Kim Loong said Johari’s suggestions has its merits, he is apprehensive of whether prospective house buyers should just continue renting until they are ready.
“(That) is another issue, especially in view that increase in house prices are always going to outpace increase in salaries,” he said.
HBA believes that the traditional way for buying a house – that is to save for a 10 percent downpayment and taking a housing loan for the remaining 90 percent – is no longer a viable method for the lower- and medium-income population, he said.
He also added that there is no “magic number” for the right time to buy houses, instead it should depend on whether the buyer is financially ready.
“Don’t burden our children, the next generation, with property they can’t afford so therefore it is a good time to rent for the time being…. especially when house prices are so atrocious,” he also said.
Federation of Malaysian Consumers Association (Fomca) secretary-general Paul Selvaraj agreed with Chang, that one should only purchase a house when they can afford to.
“Renting should be an option. Only when you think you can make the commitment then you should purchase.
“With rental, you have a lot of flexibility, but once you are committed to a house, you’re locked in,” he said.
For many families, he said, house purchase is their number one expenditure, so people need to be more prudent when it comes to their expenses.
“The government’s responsibility is to make sure houses are affordable but each person, each family has to look at when they feel they can sustain the payment. Only then they should make that commitment,” Paul said.
However, Fomca deputy president Yusof Abd Rahman had a slightly different take than the others.
“If you think about the security and stability, I think it is better you buy property, because even rental rates will increase.
“That’s why I think in Malaysia, it is better to buy than rent,” he said.
Despite that, he stressed that it all depends on the situation, as one might prefer to rent if, for example, they are currently staying in an area they might not want to retire in.
Meanwhile, Poon recommended Putrajaya develop a house rental index in addition to the existing house price index so that Malaysians have complete information about the Malaysian housing market.
Existing government policies like 1Malaysia Public Housing (PR1MA) should also be re-assessed to ensure only genuine first-time house buyers qualify, she said.
PR1MA was launched in 2012 to assist middle-income households in owning affordable government housing built in urban centres.