What’s the average home price today? Well, it’s still below RM500,000 even for landed homes. Could we afford a RM1,000,000 home? We will look at the actual numbers below.
Shelter is a need
Shelter is a need. It means that everyone needs one. This is why when any calculation about living cost is made, they do not just look at the cost of food because that is way smaller versus the cost of having a place to stay, to feel safe and to really rest so that we can start the next day refreshed. This is also why many people struggle to save enough for a home, to buy a home and to continue paying for a home for the next 30 years.
Hedge against inflation
Congratulations to everyone who has already taken this first step to secure a place to stay and to hedge against inflation. Our first property may have been an affordable property. It could have been RM123,000 for an apartment of 730 sq ft. That’s my first property. In Malaysia, the average house price based on the latest available data is as per image below. Briefly, it ranges from RM339,039 for a high-rise unit to RM406,000 to a terraced home and then up to RM661,000 for a detached home. Info is from NAPIC.
Would it eventually reach RM1,000,000?
Is this expensive enough yet? If one day the average house price reaches RM1,000,000 could we actually afford them? By the way, if we were to tell the people who bought properties for RM85,000 in 1989 that their property will become RM540,000 one day, they will laugh at you. This was my home in Ipoh. If someone were to tell us that buying a high rise at RM180,000 in 2008 and we could sell it at RM460,000 many years later, we would laugh at them too. This was my high-rise unit in Kelana Jaya.
This is why we must stop laughing at some super high numbers. The reason is a simple one. It’s called INFLATION.
Inflation will eat up the value of our money
With the value of money getting ever smaller, the price will move up to compensate for the smaller value. Thus, we may think RM1,000,000 is huge today but in 20 years time, this RM1,000,000 may only be the same value as RM500,000 today. Anyway, do we know why some Malaysians could already afford a RM1,000,000 home today? The calculations below show the reason why. This mortgage calculator is from calculator.com.my
Monthly repayment is affordable to some Malaysians
RM3,892 is affordable enough for a combined household earning a net income of RM12,000 per month because it’s just 32% of the household income. As long as this household does not drive two Segment D cars which takes away RM5,000 of their salaries every month… It’s also affordable if this household does not have high credit card debts which are crippling their finances. It’s also affordable for all the T20 households and successful entrepreneurs. This is why every year, we do have transactions for homes which are RM1,000,000 or higher.
Do we have to buy a RM1,000,000 home?
The answer is it depends on you. A home sweet home is one which we could afford easily and provides us with all which we need. This is why it’s much more important to understand what we need and then decide versus looking at the location first before deciding. A popular location does not mean it’s the location which could fulfill your need and yet you will have to pay a premium for it because of the demand and supply equation.
Just need to remember that at the same time, prices may also rise faster too at these popular locations. Happy buying and one day majority of everyone may just look at a RM1,000,000 home like how we are looking at a RM500,000 home today.
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