Think. Why first-time home buyers need HELP

Everyone should own a home. However, everyone should also be responsible enough to own a home. Considering a couple, both engineers and with a monthly salary of RM5,000 each. If they did not SIMPLY spend, and their credit card has no outstanding, they should still be able to save RM1,000 each per month. This is RM24,000 per year per couple. In 5 years, they would have achieved RM120,000. Taking a 50 percent discount, this is still RM60,000. This couple can already afford a RM500,000 property with a 10 percent downpayment. The mortgage per month is definitely well within the Debt Service Ratio assessment by most banks too.

Question. Why are so many Malaysians continue to ask for ever more help to own their own home? I remember I saved like crazy just to afford my first home, together with my wife. Sorry yeah, our salaries then were nowhere near the RM5,000 that I quoted as example above. In fact I think, both of our salaries added up should be around RM5,000. Yet, we could afford a new car each and a small 730 sq ft apartment in Penang island. There were definitely no Starbucks, no fancy handphones, no overseas vacations and no expensive meals except for birthdays. Even Valentine’s dinner was celebrated in the usual cafe instead of Valentine’s set. Usual bill? RM60 per couple. Fortunately my wife is a very understanding soul-mate. Haha.

For couples who did not save as much as us, perhaps there are some good news in the upcoming Budget 2017. According to Kenanga Investment Bank Bhd, some goodies are coming. They include the reintroduction of the Developer Interest Bearing Scheme (DIBS), relaxed loan assessment methods, increased allocation of Employees Provident Fund (EPF) Account 2 and more 1Malaysia People’s Housing schemes. DIBS especially would be a sentiment booster. It said, “The issue is many developers tend to price-in the DIBS cost into the property price, resulting in higher prices.” The top barrier? It’s usually financing. For this to be approved, Bank Negara Malaysia will have to study the long-term impact on banking risks.

Kenanga is also proposing the EPF Account 2 allocation be increased to 40 per cent from 30 per cent. It said with this adjustment, “We think this measure could be more meaningful compared to bringing back DIBS for first-time house owners. This will be quite helpful in servicing part or the full 10 per cent deposit, or if one is unable to secure the full 90 per cent margin financing.” Kenanga also said lowering or removing the real property gains tax or increasing the 70 per cent loan-to-value cap on third house purchases was unlikely as these addressed “non-house ownerships” markets. Such a move at this juncture would also be detrimental to the primary market. Full article from NST here.

Honestly, it’s best that we save enough for that first 10 percent downpayment. This helps to put into perspective what we could really afford and some of the little sacrifices we need to make in order make it happen. Let’s really understand a landed terrace can still be less than half a million depending area or it could be many millions…. Buy what we could afford and work harder. Cheers.

written on 8 Sept 2016

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