Property Investment: How can anyone afford a RM1 million property?
If you asked me in 1998, this is my answer to you
RM1,000,000 (RM1 million)? It must be a big bungalow somewhere prominent. Meaning not in some village or far away places from the city centre. This property would most probably come with sufficient land space to park maybe 6- 8 cars? With all these cars parked, still have gardening space for the owner too. Maybe it will have a private swimming pool too. In fact, in comparison, a semi-detached home in a popular neighbourhood in Ipoh was only RM85,000 a few years before 1998. RM1 million can buy nearly 12 units of the semi-detached single storey home yeah.
If you asked me now, the below is what I will show you
Condos which are already above RM1 million. As usual, it’s those popular areas yeah. Based on the year of completion, these are not the newest and latest ones too. Those are even more higher priced than these. Else, it will be smaller in size. It’s always a question of bigger but pay more or cheaper but smaller. There’s also the distance equation. Buy further, then it’s cheaper too.
Okay, so the price is RM1 million if not higher, can anyone afford it?
It depends on whether this ‘anyone’ could have the 10 percent down-payment amount ready or not. 10 percent downpayment for a RM1 million property is RM100,000 yeah. Plus, the below would show the monthly repayment. I assume the loan period is just 30 years versus the potential 35 years yeah. I also show to you the difference between RM1 million, RM1.1 million and RM1.2 million.
When property price actually rises by RM200,000 the difference in the monthly repayment is RM4,427 minus RM5,313 and this is a difference of RM886 per month. It means that if this same person did not buy at RM1 million because he felt the timing was not right, this same person could still be able to afford to pay an extra RM886 a few years later to buy it at RM1.2 million.
Do not take high risk when it comes to property investment
The person intending to buy a RM1 million property, I would recommend for the person to at least earn RM15,000 net per month or higher. If this person is earning RM15,000 per month and has an increment of 5% per year, this RM15,000 per month would become RM16,537.50 in 2 years.
In other words, the person would be an extra RM1,537.50 per month which the person could allocate half of it (RM1,537.50 divided by two) to buy that RM1.2 million property and pay the owner an extra RM200,000. This is why when we look at calculation, it is possible for home price to rise further. Unless of course the price is already much higher than the salary / income of the person who could afford it.
Property price will increase or the property market transactions should stop
Someone asked if the property price can stop increasing. I asked him if he would sell his property at a lower price than what he paid for. He said, of course no! I answered, you have answered your own question yeah. The only way for property price to stop increasing is when the owner is willing to sell lower than the price they bought. It’s not just sell lower than their targeted price because lower than their targeted price may still mean a higher price than the price they paid for.
Then someone said something which is true again. He said, maybe the owner is in financial distress! I told him, I agree. However, is he saying the whole development, every owner is in financial distress? Reason is, if the whole development, every owner is in financial distress, I do not believe only the owners in that development will be having financial distress yeah. It has to be a much bigger problem and most likely it’s the economy yeah. I do not wish this to happen, do you wish for this to happen? Happy wishing.
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One Response
Forget Market Predictions, Focus on Reality: A Buyer’s Guide to Property Values
Have you ever wondered if skyrocketing property prices will ever stop? Let’s be honest, it’s a common and valid concern. But instead of relying on abstract predictions, let’s take a practical approach based on the simple equation of supply and demand.
Imagine someone asking you if you’d sell your beloved property for less than you bought it. Sounds absurd, right? We naturally resist selling at a loss. This fundamental truth applies to every homeowner, and that’s exactly why property prices rarely dip below purchase points.
Sure, you might argue “What about financially distressed sellers?” That’s a fair point. But wouldn’t widespread financial distress within a particular development indicate a larger economic issue, impacting far more than just that community? Wishing for such an economic downturn just to see lower property prices isn’t exactly a desirable solution.
So, instead of obsessing over market predictions, here’s a more empowering perspective:
Focus on affordability: When searching for a property, prioritize locations and options that align with your budget, regardless of future price trends. Remember, a comfortable purchase today is better than a potentially cheaper one tomorrow that strains your finances.
Do your research: Understand the specific factors driving property values in your target areas. Consider things like job markets, infrastructure development, and community amenities. These insights can help you make informed decisions that go beyond just price speculation.
Think long-term: Owning property is often a long-term investment. While short-term market fluctuations are inevitable, focusing on the property’s potential for long-term appreciation and personal value can bring peace of mind.
Remember, the decision to buy property is about securing your future, not gambling on market trends. By prioritizing affordability, conducting thorough research, and adopting a long-term perspective, you can navigate the property market with confidence and make informed choices that align with your needs and goals.