Is a house really an asset? Or is it a liability?

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Someone asked me this question many years ago. “Why is property an asset when most of everyone owes most of the value of the house to the bank?” I replied, ‘most of the price you bought, not the value.” As for whether it is an asset or a liability, maybe we look at it from the Why, When and of course that Where question since we are talking about a property. The reason WHY I would always encourage people to buy a property, especially the younger generation is because I hope they do not spend their money. Yea, SPEND their money versus paying mortgage instalments. In such a case, property is debatable as to whether it is an asset but spending their money on a cup of coffee (RM15) plus a slice of cheesecake (RM15) is just an expenditure and nothing more. In fact, if we are able to INVEST the money elsewhere, then property need not be something we need for our future.  

Looking at WHEN, well the the reason I bought my first property was also because someone much more senior than me; my future father-in-law forced me to buy a property instead of renting a room or even a home since his daughter would have to be staying with me after we got married. Well, when I am a father-in-law in future, I may also require my future son-in-law to buy a property first. As for a preparation ahead, perhaps 10 years later from today, I would have to buy two similar properties, one each for my daughter and son. I could always sell it to finance my daughter’s education in future and as for my son, he may need one to fulfill his father-in-law’s requirement? Haha. Yes, as someone who has travelled to many advanced property markets as well as having worked for over 20 years, I think I have slightly more wisdom and experience than many of the young executives today. Hopefully they listen to me (including my daughter and son) when it comes to investing versus spending.

Buying a property requires a little more research. WHERE is extremely important. The answer is not on some areas someone told us. To me, the answer lies at our evaluation when we are exploring the area where we intend to buy. One example. A young professional may want to drive to the area from his office to know what’s available along the way. From typical jams and food to groceries and even cafes, as long as it meets all his expectations, then that’s a good area to buy. Perhaps MRT stations too but it really depends on the lifestyle of this young professional.  Second example, new parents would definitely want areas with nurseries, daycare centres and even schools. Perhaps another baby in the near future? Then, somewhere closer to a good hospital helps tremendously.

WHERE is thus dependent and should never be just a choice based on popularity of a certain area because if everyone already know about it, the prices are usually already on the higher side. I know, someone would like to point out to me that these popular areas would surely increase in price in future. I agree and I would like to point out that as long as the economy continues to grow and urbanisation continues to happen, more areas become popular. Plus, those first few batches of buyers to some of the popular areas today, do you think it was popular then? Haha.

Let’s not kid ourselves yeah. Can a property be a liability? Of course it could be! If we somehow stretched our financial capability too much and lost our job even for a few months, it is much harder to pay for a house versus ending our home rental and going for room rental instead. If the house we bought was supposed to be an investment that we wanted to rent out but the developer did not complete it and ran away with our money… It could also be a liability when we bought at prices which are very high, much higher than everything else in the market and well, the market crashes, then the property would lose a lot of its value and we would be saddled with a liability. There are certainly never ending other liability reasons but as a country with a median age of below 30 as well as a property market which is nowhere near advanced, I think property remains an “investment for a long time more. ” You would need to decide for yourselves. I have decided for me.

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written on 1 April 2018

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