Unpopular Opinion: I may just want to rent — for my whole life
It is no secret. Thanks to the property boom followed by the inevitable glut fueled by capitalism and desperation, the properties in “hot spots” area in Malaysia skyrocket the way they never have.
Bank Negara (Malaysian Central Bank) has published an alarming statistics in a dedicated website. The problem is not about the loan approval rate, the properties are just not affordable. As of the Q3, we have 130,690 units as of 1Q 2017 unsold units of residential properties, a decade high, and a bulk of them are above RM250,000 and high-rise apartments. This is worrying, if the trend continues to grow it would definitely upset the supply-demand balance of our property market.
Luckily, our government realized this and took a proactive (well may be reactive, I guess) action to put a halt in development in luxury property development to curb this imbalance from spiraling out of control. Granted, the moratorium is only issued especially to RM1 Mil property and above (which I could never afford, nor want to if I could).
All the facts aside, the white elephant is exposed now. Central bank admitted it, Government took action for it (Luckily in Malaysia there is no big government-small government debate).
(I am glad by the way. I am always in position that government should intervene in the best interest of her people, not just for a minority of wealthy people who just want to add more money to their pile of wealth. The middle class is growing and they are empowered with information and facts. That’s a good thing.)
As a young people who just started out in life, just getting myself a steady job; and planning for things that I couldn’t afford to do now, this issue is close to me. As a civil servant, the chances of me being relocated to some part of Malaysia is high. So I am now thinking that having a house in where I should is way out my financial capability and having a house where I could afford might probably pin me down. People suggest — and quite vehemently — for those who can, to invest in property. Either rent it out or you know, flip it whenever you can. But I don’t think by doing that you are solving the problem. You might be solving yours, isn’t that selfish?
Just straight out buying house isn’t the only option. There is rent-to-buy scheme for PRIMA house introduced. Under this scheme, renters are eligible to buy the house at fifth or tenth year of renting at pre-determined price. how the scheme works is your rent is lumped with a portion of saving to help you pay for the house value. It’s quite neat, but it’s limited. You may apply nonetheless.
So what’s wrong with just renting house?
Germans don’t care. Germany has the lowest home ownership among the developed countries, only 41% (compared to Spain of 83.2%) in 2004. In 2014, the figure didn’t change much, only increased to 45.5%.
What does that tell us? That home ownership is not a key ingredient to a high economy of developed nation. I am surprised to see that there is no rate of home ownership reported in our government websites, although I did find a paper reported our home ownership in Malaysia has been more than 80%!
How do Germans do it? Well for starters, the government doesn’t incentivize home ownership and the regulatory environment kinda leaning to the home renters (such as capped rental price for three years). As in the words Matt Philips who wrote an article about it here say;
Those regulations, a solid supply of rental housing, and the fact that German property prices historically rise very slowly — that’s a whole other story — mean German rents don’t rise very fast. And because one of the main reasons to buy a home is to hedge against rising rents, the tendency of German rents to rise slowly results in fewer homebuyers and a lower homeownership rate.
That is a lesson to Malaysian policymakers — that policies should not only be geared towards homeownership, but also to home rentals. In that way, regardless of how one dwells the house, one may access the quality of life he or she could have. In other words, “inclusiveness” of property market.
