Owning a home is a privilege we have a right to

house.jpgProperty prices are going crazy in Malaysia, and in particular, the Klang Valley. With average urban household incomes hovering in the RM50-60k per annum range, the average house in KL costs RM700k. That’s just ridiculous. While it’s everyone’s dream to own a home, i think the market has made it impossible to do so.

A typical unit at Ameera is on the market for RM750,000. Given a 90 per cent margin of financing (MOF) over a 20 year tenure, the monthly loan repayment for a unit there works out to be about RM4,855.

Conventional wisdom tells you that you should spend no more than 1/3 of your salary to pay for your home mortgage. Any more, and you begin to run into serious problems, including an inability to put aside enough savings. If you have to pay nearly RM5k monthly, that means you need to make RM15k a month, as a family. How many families do? How many jobs even offer that much? The average salary for an experienced employee in KL is… RM5k per month? How much does a fresh graduate make? RM2k?

To hit that RM15k a month household income, perhaps we should encourage more men to take several wives, preferably those who make good salaries!

Expect to see a lot of 30-somethings, married or single doesn’t matter, to still be living with their parents because they can’t afford to move out. It’s just sad, but real.

Owning a home is probably the single most important asset you can have. Your home is your base, your landmark, the rock upon which you build your life and your family. Going through life without one, is terribly frustrating.

To illustrate his frustration, the DJ quoted prices at the Menara Duta complex in the Segambut area which he says has gone from RM250,000 for a renovated unit at the end of last year to RM330,000 now for a standard unit — a jump of 32 per cent in less than a year.

“It’s unaffordable,” he said of current property prices.

Account manager Christopher Chew, 31, has also been hunting for a property in the past six months but has still not been able to find a suitable home to fit his RM300,000 budget.

Among developments he has looked at is the Cova Suites, a condominium development in the up-and-coming neighbourhood of Kota Damansara where a 1,300 sq ft unit is typically going for about RM450,000.

What can the Government do to help? The Government has done a lot to ensure the availability of low-cost housing, perhaps it’s now time for them to look into the needs of the middle class (whom also happen to make up a huge chunk of the electorate). 

The recent idea of setting a cap of 80% mortgage loan will stop the speculators perhaps, and, in the long run, decrease the size of the property bubble, but it will chop the legs off the average Joe who will simple not be able to find the 20% cash to make the purchase. 

Singapore has found an interesting compromise that i urge everyone to consider: cap the 70% mortgage loan for people buying their second home, but for those looking to buy their first home, keep it at 90%, or even increase it to 95%. Australia has an interesting model where home-owners are encouraged to buy home through a system of rebates (only if its the first home). 

In order to keep check against Ali Baba purchases, a national database of homeowners needs to be setup (similar to the national database of loan facilities Bank Negara keeps on everyone of us). Keep track of who is buying what, flag any unusual purchases, and ensure that the right people are entitled to the right tiered rates. Also make it so that 1st Home Purchases cannot be immediately sold for at least 5 years, to deter buy-and-sell tactics to make a quick buck. 

No average house is worth RM700k, not on the salary quantum most middle income Malaysians find themselves. The developers are riding the bubble, and at times, fueling it. The rich are getting richer, the middle class still can’t afford their homes (but are too middle income to qualify for low-cost housing!). Adam Smith’s Invisible Hand notwithstanding, the Government can’t allow this to continue. 

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