November 16, 2018
I love the title for REHDA Institute’s (RI) recent event: Budget Commentary 2019: Asian Tiger – A New Journey. As a Malaysian, I believe we share a shared responsibility towards our journey to become an Asian Tiger. Let’s roar, in the near future. Dato’ Jeffrey Ng Tiong Lip, Chairman of REHDA Institute gave his assessment on the recently announced P2P framework for the potential buyers to start their property investment journey. I think his speech is simple and clear. He said This p2p framework is a hybrid of home ownership scheme and a property investment scheme, detailed mechanism of which is not clear and we definitely need further clarifications on the implementation and regulatory structure.” He then gave two very important points which is already being discussed by many property people. They are as follows:
The 20% down payment – As the initiative is targeted at first time home buyers for properties between RM300,000 to RM500,000, we foresee a problem in buyers coming up with such down payment of between RM60,000 to RM100,000. As it is today, a 10% downpayment is already a huge hindrance to home purchase for most first time buyers and as such, will the target group be able to meaningfully participate in the Fund MyHome scheme?
2.Risk vs benefit – At the end of 5 years, the participant will have to either sell, top up the 20% value according to a market value/refinance the house to fund the other 80%. We need a more balanced risk / benefit treatment between housebuyers and investors because home owners may lose their downpayment in the event of a market downturn but will not gain if capital appreciation is not more than 20% over the next 5 years. On the other hand, investors will get 100% of the first 20% gain upside and will not lose in the event of 20% depreciation in value.
Beyond just the P2P initiative, RI has also proposed a Residential REIT in their Affordable Housing Report. This is to provide rental public housing for the B40 group. RI will continue to pursue this financial framework to help the government build more rental public housing for the nation. This proposed Residential REIT is different from the FundMyHome initiative which is targeted on boosting demand. Residential REIT is focused on assisting the government to build up the supply of public social rental housing for the lower income group who cannot afford to buy. RI will be formally submitting this proposal to the government and will be engaging the Ministry of Finance on this new transformational financial vehicle for the rental housing sector.
I personally think we should welcome all initiatives whether it’s to increase the demand for homes (this will help to reduce the unsold properties in the country). However, it’s extremely important to focus on building homes which are good enough for the people at a low enough price so that the B40 could own a roof over their head. Rental schemes if any should only be for the short term because to many, property could be thought of as a ‘forced savings’ which will be very useful when they retire and stop earning monthly incomes. Happy journeying, Asian Tiger.
written on 14 Nov 2018
Next suggested article: Income level is more important than property price, true?