Willing to take a lifetime loan to own a home?
By Zan Azlee
The government defines those who earn a monthly income of RM2,537 as the majority 40 percent or the B40. These people amount to 2.7 million of Malaysia’s population.
One of the major necessities of people, Malaysians, is to have a home. A roof over their heads. And that is something that the government has to ensure as well – home ownership.
And as we all know, the issue of affordable homes is something that has been discussed, debated and criticised for many years now. Basically, houses in Malaysia are just difficult to afford.
An average apartment or even a house in the suburbs of the Klang Valley would probably be between RM300,000 and RM400,000 per unit. Let’s take the middle amount of RM350,000.
If it is someone’s first home, then he or she would qualify to take a maximum loan of 90 percent of the purchase price of the property. That would mean he or she would have to come up with a 10 percent down payment.
10 percent might not sound like a lot, but that is actually RM35,000. And don’t forget legal fees and stamping duties for the sales and purchase agreement. That would probably set a person back around RM45,000.
Now if this person is earning RM2,537 a month, how long do you think it would take him or her to be able to save up that amount? Don’t forget that there would be the normal monthly expenditure to think about too.
Let’s say this person saves 10 percent of his monthly salary for the initial payment to purchase the house. That would be RM200 a month. To get RM45,000, that would mean saving for almost 19 years.
And after 19 years, there will be a loan of RM315,000 to service and that would take another few decades to settle. Basically, the home owner will probably never really own his home at all in his entire lifetime.
In the recent Budget 2016, the government outlined a few plans to encourage and increase home ownership among Malaysians. One of it includes the First House Deposit Financing scheme.
What worries me about this scheme is that it will only create more debt for Malaysians. And looking at how just owning an average priced home is already putting people in lifetime of debt, this could be risky.
Instead of creating more debt for the people, a better way to make owning homes more possible is to curb real estate speculation prices so that the appreciation in the prices of homes will be not be so exorbitant.
Another is to ensure the growth of income among Malaysians, be it in the public or private sector so that it reflects correlates with the increase in the cost of living.
As it is, the B40 (and yes even the new M40) is finding it near impossible to be able to own homes today without having to be locked in debt for an entire lifetime.