kopiandproperty.com attended the “Asian Tiger: A New Journey – Budget Commentary 2019” yesterday. It was organised by the Real Estate Housing Developers’ Association (Rehda) Institute. It’s good to have all these events where the experts share their opinions and perhaps the relevant government ministries could learn and implement some of them. Many good points were presented but I think for potential property buyers; first time home owners, this is quite important. Socio-Economic Research Centre (SERC) executive director Lee Heng Guie recommended that the Housing and Local Government Ministry (KPKT) should take the initiative to work with the private sector to promote the rent-to-own concept. He said the perception that owning a home is an urgent need must change if individuals cannot afford to buy them within a short period.”
In the recent weeks, we have been very occupied with the Peer-to-Peer (P2P) financing model. The impact to the first-time home buyers is however lower when compared to a good Rent-to-Own scheme. Three reasons I say so; downpayment, affordability and future. Downpayment is the single hardest issue for most first-time home owners. Many say that’s because the value of the ringgit is getting smaller, frankly it’s just how many of us spend the money these days. There’s too many things to buy / want. Just look at the recent 11.11 and we know that many were buying things they did not even need! A rent-to-own scheme allows first-time home buyers to start with renting and eventually upgrade to owning it after a few years. There is no high barriers of entry and generally most first-time home buyers could sign up.
Second thing is affordability. Many young working professionals are now renting homes they could NEVER afford in the future. For example, rental of RM2,500 for a property which may be priced at RM600,000 in the market. The only reason for the low rental was because there are many new units coming into the market and there is a price pressure for all existing units. One day, the demand will catch up and that’s when rental will rise. At the time, the first-time home buyers are caught between paying higher rental versus buying a cheaper home by themselves instead. Rent-to-own meant that the potential buyer is already renting a place they will buy in the future. Certainty is good.
Third thing is future. Not many understood that in the future, the Malaysian property market would just be following what has happened in many advanced property markets today. Property prices would not be dropping unless we face some financial crisis or even SUB-PRIME crisis. When we look back at these financial crisis, it is evidently clear that they recover within 18-24 months and property prices will continue its climb, just like everything else in the market. It’s unlikely that handbags, handphones and even branded handcream increases in price but the property price stays stagnant. Rent-to-own helps to ‘force’ a future in property for these first-time home buyers.
Do not worry if property prices will rise way too fast compared to income, they usually should not. Else, everyone suffers. Here’s an earlier article: When prices rise double income for 5 years? However, everyone must understand that property remains a basic need and it’s not possible not to plan to have one. Perhaps all father-in-laws should also help in asking the future-in-laws to get a property before they get married. Happy scouting for that first property. It need not be that dream property because after a few years, we could always upgrade to a better property.
written on 13 Nov 2018
Next suggested article: Will we spend when we rent. Do we do more when we own?