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Income level is more important than the property price. True?

Here’s a long article in NST which I think gives a very good idea about the property market versus the salary. Many prominent property people were also quoted. Read it here: ‘It’s more about income level, not pricing’  Let’s look at what Real Estate and Housing Developers’ Association Malaysia (Rehda) council member Datuk N. K. Tong shared about the state of the household income versus the pricing of properties. He said, “The overall market is soft basically because incomes are not high enough. We have that vision of a high-income nation but we just haven’t executed it. There are many issues but these are a legacy from many years of the property industry being somewhat dysfunctional. In the current market where there are many affordably-priced properties and you still see slow take-ups, that’s got to do with the economy.”

Rehda patron and immediate past-president Datuk Ng Seing Liong gave some advice to the banks. He said, “If banks just look at their salary, then getting a loan to be approved with a 90 per cent margin is out of the question as their income level has either maintained or increased by only a small percentage in the last few years, while cost of living has gone up. A lot of people these days are doing second or third jobs, so they have more income to support their family. Banks should look at that when approving loan margin.”  Rehda president Datuk Soam Heng Choon shared a similar idea as Ng. He said, “I am not saying that banks are out rightly rejecting housing loans. First-time house buyers are just not getting 90 per cent margin. Banks are only offering them 70 per cent margin because of their income level. This is why the loan rejection rate is high because buyers cannot afford 30 per cent downpayment.” Here’s that article in NST for reading pleasure. 

Perhaps I just explain my personal situation then. When I bought my first property, my household income (My wife and I) was around RM5,000. If we take the usual 35%, my wife and I could afford to pay up to RM1,750 per month on mortgage. Using a mortgage calculator with the usual 30 year loan and 10 percent downpayment, it meant that both of us could afford a property of up to RM380,000. She was driving a Perodua Kelisa (eventually for 10 years) and I was still driving my father’s Sunny 1.3 (eventually for 15 years). The first property we bought was RM123,000. A 730 sq ft apartment.  Of course, due to this, we managed to save enough to get our second property 4 years later. The property investment journey has since started in 2004. (Only 2nd property onwards that qualifies as property investment. First one is not, for me.) Perhaps the solution is about the right mindset coupled with right actions and not just focused on the income level or the property price. Perhaps Think Big, Start Small? Cheers.
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written on 18th Oct 2018
Next suggested article:  What a life! I need to take care of them I guess

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Charles Tan The Founder The Writer Kopiandproperty
Charles Tan

Charles is Founder of kopiandproperty.com He writes from his investment experience for the the past 20 years in investments including property, stock, unit trust and more as well as readings and conversations with many property gurus in the industry. kopiandproperty.com is an independent property blog which is not affiliated to any media company, property developer or even real estate agencies.

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