BY CAITLYN NG LI YUIN
liyuin@ocision.com

FOR many people in Malaysia, owning a property seems to be a dream that is just a little out of reach. Now it may seem as though that dream may be harder to achieve, especially among young people, as house prices continue to escalate.

According to NAPIC (National Property Information Centre), one telling sign is the declining number of transactions in Q1 2016 compared to Q1 2015. In Q1 2015, the total number of residential properties sold was 59,490 while in Q1 2016, sale dropped by approximately 17% to 49,612.

Other worrying trends include the number of new launches, which has also dropped. According to statistics gathered by Real Estate and Housing Developers’ Association Malaysia (Rehda), it went from a total of 9,938 units in H2 2015 to 7,172 units in H1 2016.

This challenge will have an even bigger impact on the youths who would like to own their dream home early on in life, what with high interest rates weakening their purchasing power and the financial institutions making the eligibility to obtain loans stricter.

“While it may seem like a near-impossible goal, especially if they have just begun working and have little to no savings, it is still achievable if they have set their mind to obtain a property while they are in their prime years.

“There would need to be a change in the lavish lifestyle of young couples and individuals, so that they are able to reduce their current struggle with debts. Instead of a preference to spend on holidays, cars, or the latest gadgets, they should choose to rethink their priorities and conform to a more frugal way of life.

“Finally, it is very important for us to educate them early on, that buying a house will be one of the best decisions that they will make in life, as it is a valuable asset for the future,” said Ekovest Bhd project director Christopher Yeo.

Other issues that the younger generation may face are loan financing, as well as finding sufficient funds just to pay for the initial deposit of the property. However, the Government has since taken steps to relieve those burdens, in the form of the MyDeposit scheme.

“The MyDeposit scheme should continue to be implemented as it is beneficial to first-time homebuyers. The Government should still look into allocating more funding than the current RM200mil, so that they would be able to accept more applicants,” said IJM Land Bhd managing director Edward Chong.

Another method that the Government could consider in order to address affordability and financing issues for youths would be to consider allowing the developers to come up with innovative financing packages.

“While waiting for completion of construction on their new homes, first-time homebuyers may have decided to rent a place nearby. In this case, they would not only need to pay for the rental, but also service the interest of the mortgage at the same time.

“How this works is that for the first couple of years that the property is under construction, allow for the utilisation of interest into the capital of the house, so ultimately, the homebuyers only need to service one item,” he added.

While the Government would like to increase homeownership in Malaysia, Rehda Penang chairman Datuk Toh Chin Leong opined that property prices will not be coming down any time soon. With the cost of construction, land prices and compliance cost all increasing, the feasibility of drastically reducing house prices is very low.

This has led to an increase in the number of unsold units. Backed by data from NAPIC’s Property Market Status Report, there was a total of 9,733 unsold units in 2014, whereas in 2015, there was a total of 11,316 unsold units.

“The developer interest-bearing scheme (DIBS) should be brought back for first-time homebuyers, which allows purchasers to pay a downpayment of between 5% and 10%, with the rest upon completion of the property.

“People do not understand that the bank is actually charging a higher interest rate for lower-end housing compared to those in the higher-end. This is because the banks tend to look upon purchasers of lower-end properties as a ‘high risk group’, which I think is unfair,” said Toh.

Toh also suggested that the banks consider a staggered repayment plan for first-time homebuyers, which is particularly beneficial for the youths and young couples.

“For example, a younger buyer who has just started working manages to obtain a loan to purchase the property of his choice. If the average monthly repayment is more than RM1,000, he may struggle to come up with adequate funds to do so.

“The banks can instead allow for a lower amount in the first year, such as RM400 per month, and then gradually increase the amount each year until he finishes paying the full amount.

“The younger generation would have just graduated and started their first job, so we should give them some time to progress in their career and build up their wealth as the years go by, thus making it easier for them to own their own home,” elaborated Toh.

These specialists were among a panel of experts present during the roundtable discussion organised by StarProperty. my on ‘Overcoming Malaysia’s Property Industry Challenges at Budget 2017’.

*Contact us at editor@starproperty.my.

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