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In future, renting is the best option?

This article first appeared in New Straits Times (NST) on 17 August 2015.

A friend said that in future, no one would be able to afford a new home. Future generations would all be renting their homes. Look at the prices today. It’s already so high, how could anyone afford their own homes in future? I think he is not alone. Many have the same opinion and thus many have since either quickly try to buy one or taking the stance that since it’s too expensive, might as well rent instead of buy. So, would the future homes be too expensive that no one could afford to buy? It’s not possible to solve this by looking at Malaysia’s property market today. Let’s take a look at the property markets which are already years ahead of Malaysia. They would be a better example of what may happen in the future.

Let us look at property markets in countries more advanced, more expensive than Malaysia today. When we look at the property prices, even without conversion into RM, the prices in Singapore, Hong Kong, London or even Australia is already higher and worst in terms of affordability when compared to Malaysia. One recent example, the median price in Melbourne is already AUD668,030 (RM1.87 million) as at June 2015. I am not sure if there are really that many Australians who can keep buying at this price level. Oh yeah, an engineer in Australia is still earning a similar salary in figure as an engineer in Malaysia. I think even for a senior engineer in Malaysia, not many would be ready to buy a RM668,030 condominium today.

Hong Kong is getting unaffordable. However, we do not see everyone sleeping in the streets. What has happened today? Well, prices are indeed high but the developers are now launching units which are around the size of a hotel room. Yes, we are talking about sizes such as194 square feet. A prominent Hong Kong developer, Cheung Kong launched it last year and it was an immediate hit due to its affordable price tag; HK$1.9 million. (RM956,000) With such a size, it has enabled the price to be lowered to a level considered affordable for the middle income earners who has saved for a few years to buy their first home. My current home bought for RM540,000 is 1,743 square feet. I think it has a long way to go if it wants to catch up with Hong Kong’s price.

When we look at Singapore, the government continues to try and build HDB flats based on demand and offer them to qualified Singaporeans. For the singles, it’s harder to get a unit. The secondary units of today, even for HDB flats are already considered quite unaffordable. There are not many choices and the sizes are all below 800 square feet from my research. Yes, property remains the single largest purchase in our lifetime. As an example, even if we do not eat breakfast, lunch and dinner for 30 years, the saved amount would only be enough to pay for a 10% downpayment of a S$300,000 (RM837,000) property. For S$300,000 the choices are very limited and the sizes are small. You may search for more information in the leading property portal in Singapore: www.propertyguru.com.sg

Both Hong Kong and Singapore has very limited land space and ever growing population. As at today, for both of them, the homes remain accessible in terms of prices. The only setback is that the size gets ever smaller. If they are taken as an example of what may happen in future, I think we can already see it. There would be smaller units to maintain its affordability. However, when we take into account the available land within Greater Kuala Lumpur, this would be many, many years away. Further away should be acceptable in future too. These ‘distant’ areas are supported by new and upcoming MRT lines. From MRT 1 till MRT 3 as well as the existing and new LRT lines, monorail and trains. Yes, Malaysians can also still choose to drive too. Still believe that it’s best to rent and not buying? Happy believing whatever you think would happen, even if you believe renting is the best option.

written for NST.

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3 thoughts on “In future, renting is the best option?”

  1. Hello Charles,
    Unaffordable is the word that we had to bear for our entire life. Why did I say that? I remembered twenty years ago, the shophouse in my town sold at approx. RM200,000. Wow! That was so high, the people grumbled. Now they were selling RM450,000, the people still yelled so high.. Same goes to house, yet the same person still grumbled that the house’s price was unaffordable.
    What is unaffordable actually! Yet there are still peoples buying this unaffordable houses. How can they do that? Yes.. they save and plan to buy their own house. They sacrifice their comfortness to live luxurily to pay for the down payment. They bought a small house first and later turn them to a down payment. It took years for them to learn how to buy the house by saving their money. They just didn’t live to buy the latest gadget and fashion/trend like most people did. They put their priority to buy their own property first. They were just our father that owned their own house now which I think the value had increased several folds. Had we ever asked them how hard they are to own the house?
    Why can we be like that? Yes, we are so arrogant to have those luxury things yet we tend to forget our humanity to others that less fortunate than us! Then we shouted at the government that the house now are unaffordable. Do you think the price will go down..if it is, then somebody will snap them up first. So no way the price will go down unless they build smaller house or they use low quality material. Yes, there are families that really cannot afford a house due to some factors. But are we included in that group sector?
    Had we forget the 20% saving rule of thumb excluding our EPF? Can we invest to get more money? Wow, so many questions to ask..haha Please live it to our dreams, because our dreams might come true.

    • Hi Im, your story is very real. When my father bought his first home, the price was considered very high. He and my mother had to save and save and save and had to borrow some money from relatives too. It was very tough. I remember eating fish and meat only twice every week. I think my father understood what is ‘unaffordable’ much better than many who are shouting unaffordable today and yet drink coffee at Starbucks, wear a Tissot watch and drive a Japanese branded car. No joke, the one who’s wearing a Tissot watch actually told me just days ago, she had not enough savings for a home yet………… My own story? Quite sad too. Haha. My first apartment was 730sf. My wife and I were very worried we could not afford and cut everything and anything we could. My wife and I remain very grateful that we did not delay the decision to buy a smaller unit first and upgrade later. Thanks IM, you reminded me again, be real and take appropriate actions and stop believing anyone can save you.

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