I agree that the salary increase is slower than the property price increase in Malaysia. Actually, it’s the same for any other country. Why do I say so? Well, majority of everyone would get an increment of between 5 to 8 percent. This is above the official inflation rate. This increase in pay is based on our current pay. In other words, if we are earning RM5,000, then 5 percent meant we have extra RM250 per month. Minus the inflation of say 2 percent, then the 5 percent becomes only 3 percent or only RM150 per month. On a yearly basis, Rm150 x 12 = RM1,800.
Assuming we save every cent of our increment, that’s just RM1,800. A typical apartment, one car park in a secondary area within Selangor would be around RM300,000 or lower. STOP looking only at places where everyone wants to buy. A walk-up apartment should cheaper. Assuming the property price increase is only 3 percent, as per inflation, this would already be RM9,000. Hmm. RM1,800 versus RM9,000. Does it mean everyone would not be able to afford a property then? Not really. We do not normally pay for a property over a period of 1 year but it may be over a period of 30 years. Once we stretch that RM9,000 increase in property price over 30 years, it becomes bearable, for at least a few years until this property price increase starts to race ahead while your increment remains small.
As soon as we start delaying our decision to buy and instead spending the increments on other unnecessary stuffs, the term ‘unaffordable’ starts to creep in. It must be said however that over-stretching just to buy something we think fits our current ‘standard’ does not make sense either. Besides, the loan application is likely to be rejected today. Read here: Jan 2016:Whopping 62 percent loan rejection Buying a home, good enough for us to stay in so that we do not pay rental which is total loss meant that we can then hedge against inflation as well as continuous property price increase. Once we do that, we can then focus on our career, earn a little bit more and upgrade to a better home few years down the road.
Of course, we can try to take up a second job but do not earn more and then we spend more. We should realise that we are getting older all the time and the value of money is getting smaller? Yes, there’s also the argument that Ringgit’s value is dropping over time. In 1998, I think Ringgit dropped to as low as RM4.80 to US$1. Fast forward 18 years later, Ringgit is at RM4.10 to US$1. The point is not whether Ringgit loses its value over time. The really important question would be if we believe the value of money is getting smaller all the time, what are we really doing about it? What have we done and what will we do? The answer may involve some concrete steps. Happy investing.