September 19, 2018
There are some news saying that the next generation may not be able to afford their own property. There are also news saying that in future, most people will rent instead of buying. They will point out to UBER / GRAB and Airbnb and expects me to agree. 🙂 I disagree with this view though. Perhaps I share 6 things about the future property market for this generation?
#1 – Buying is ok. Liking is another. A property which is big and near enough may be out of their reach. For example, a full facility condo of 1,000 sq ft and within 15km from the KL city centre is not likely to be affordable to this younger generation in future. They may be able to afford half the size of 850 sq ft and the price may still be affordable. Else, they can buy a much bigger place but the distance will easily double that of 15km. Yes, I am very sure by then they can rely on public transport too.
#2 – Support will continue. Perception stays. Government will still support with affordable projects even then, just like today. Of course, the issues such as unattractive location, not-so-attractive price and even the perception will remain the same. Remember the thought of low cost flats of yesterday? Things are changing but the perception cannot be changed overnight yeah. In future, they will compare with those nicer but more expensive projects from private developers.
#3 – Downpayment is still needed. It will still be tough to save. Looking at the number of things which are in trend these days meant that people will be attracted to buy versus saving up for a property. No wonder the national savings rate of Malaysians are dropping fast! Here’s an earlier article: “So many have zero savings“ about the state of savings for Malaysians. In brief, it’s not looking bright.
#4 – Median property price vs income will inch upwards. Just look at the numbers for the advanced countries would already tell us this fact. Okay, unless Malaysia is a country which is different from others. Instead of 3x annual median household income which will be affordable, chances are this will be higher than 4.5 like most other nations. This will either be under the ‘Seriously Unaffordable’ or ‘Severely Unaffordable.’ This is why PA and MA’s savings will come in handy. Or Pa and Ma better buy a unit today in advance for future. Here’s an earlier article about savings for the children being complemented by buying a property: Education savings fund can be complemented by property too
#5 – Loans will still be tough to obtain. Imagine a time when Bank Negara Malaysia forces every commercial bank to lend to anyone and everyone who wants to buy a property. I think this is a disaster waiting to happen because soon, the buyers will not be able to pay their monthly mortgages, banks will then have to take a huge pay cut to auction the property off and what IF more than half of all their loans go this route? This is why banks must only lend to people who can qualify instead of anyone and everyone.
#6 – Car cannot be compared to a property. It’s really possible to take the public transport these days in most part of the Klang Valley. It will be even more connected in the future. However, to say that the next generation will just rent because of GRAB or Airbnb culture is going to be very wrong. Without a car, one can survive. Without a property, it’s hard to sleep by the roadside and if we want to rent a place, it also meant that the owners will become much richer than the tenants simply because they bought a property earlier. Here’s a true story about property vs poverty.
Happy understanding and noting that that next generation needs to also understand that the world does not revolve around them. Richer parents may help but for the majority of us working Malaysians, please continue to read more and understand that financial savviness will be that main ingredient whether we are comfortable when we get older or we start complaining about the unfair world in the future. Cheers.
written on 19 Sept 2018
Next suggested article: 90% of future generation may not be able to afford a home