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Kids are really ‘rich’ these days. In future, ‘poor’ for property?

Posted in Property, KL / Selangor, and Starting Property Investing

I had a dinner appointment in Plaza Batai, Bukit Damansara, KL with a bunch of university mates (juniors). Since I arrived very early, I dropped by Yellow Brick Road for a drink. The Mixed Berry Lemonade is RM15. I think it’s expensive but still better value for money than the bottled fruit juices in Starbucks. Quite a number of the tables were occupied and only 2 tables were without young kids. One of that table had three working professionals and another table had a blogger. (That’s me). Let me tell you the typical price of a meal here. Bangers and Mash is RM26. The Big Breakfast is RM32. Soups are cheaper, at RM16. Coffee starts from just RM8. Well, two ala-carte plates of delicious food and two drinks would be between RM80 – RM100. A meal a day for the next 29 days would be a total of RM2,400 – RM3,000 per month. It’s a meal, not three meals. The median household income for a B40 household in Malaysia is RM3,000.

Nope, I am not saying that these parents should not spend so much for food, especially for their kids. However, I think we can sort of understand what’s going to happen to the property market in the future. We assume the kids would be independent and would not ask their parents to buy them a property when they start working. The kids would already be pretty used to the price range of these cafes. It meant that in future, regardless of their salary, the amount they could save would have diminished tremendously. Okay, I think it will be bordering on impossible for them to buy a property in the city centre or some cool neighbourhoods through saving up for the downpayment by themselves. What’s more likely to happen would be the parents paying the 10-15 percent downpayment and then they (the kids) would pay the rest on monthly basis. Even with this arrangement, the unit they would be looking at would be smaller ones so that after the monthly mortgage, they could still maintain their lifestyle.

Familiar situation in some advanced countries. Actually, it’s already happening. Here’s one recent article. ‘Earning more salary but buying less property.’   Besides that, these are some more of the current situation. “Gen-Y can’t afford to buy a house until their parents die.” In the UK, this is the article about the state of the property market versus one whole generation. “Majority fears the future generations will never be able to buy a home.” When we look at these advanced markets and we believe that our property market is 10-15 years behind them, well we have seen the future. The reasons will always be the same. When people spend more, they have less. When they have less and they still want to buy a property, somehow it must be made affordable for them to buy. My son is just 3. My daughter is 5 and understands that we must work hard for money so that we can use money to buy things. I think she can stay with me until she gets married. Haha. Happy understanding.

written on 3 May 2018

Next suggested article: The more cafes in the neighbourhood, the higher the property price?

 

 

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