A Tall Order For First Time Home Buyers
By Siti Nur Suraya Ali
KUALA LUMPUR (Bernama) -- Buying a property nowadays appears to be a daunting task especially with the property prices escalating beyond the affordability of most people.
In the big cities, it is no longer about buying one's dream house, it is all about grabbing what ever is within one's means. As for most people getting their dream home close to their workplace and amenities will remain a distant dream.
Properties in the established areas within the Klang Valley costs no less than RM500,000 for apartment type dwellings and landed properties can easily go beyond RM1 million.
Even those who think of buying a second home for investment may find it difficult to see the returns in the short term unless they are able pay up in cash.
The dilemma is even greater for first time house buyers, who now have to cough out huge amount of upfront money and convince financial institutions that they qualify for a big loan amount.
PLANNING FOR PURCHASE
Therefore those who have just joined the world of employment or started a business have to start saving early to help them own a roof over their head.
The National Housing Board said first time house buyers have to be aware that to own a house one has to be able to service the loan payments and other related payments for example quit rent and assessments.
The rule of thumb is that one's housing loan repayment should not exceed 30 per cent of the income.
However, for this purpose the income takes into account statutory deductions such as EPF and SOCSO contributions.
Buyers have to be aware that when buying a property they have to get ready the 10 per cent deposit before signing the S&P and also have to bear the legal fees, stamp duty and others.
Therefore, they should be aware that they need extra money to cover the upfront cost.
Thus if one has no savings than it is better to rent first before buying at the appropriate time.
SAVINGS A NECCESITY
Meanwhile, Financial Advisor Teresa Koh opined that while one needs a job or a steady income stream in order to start planning for a home purchase, having savings at hand is crucial.
She stressed that one has to keep at least 30 per cent of the income as savings.
"Let us assume a young graduate earns RM3,000 a month and he keeps RM1,000 as savings, bearing all other unforeseen expenses or income, he should be able to accumulate RM65,000 after 5 years and this will help to pay the 10 per cent deposit if he wishes to buy a house costing RM500,000," she said.
If we assume he starts working at 25 years old, after 5 years, he should be ready with the deposit of RM50,000.
Meanwhile, in addressing one's financial objective a financial planner, Jeremy Tan, believes positive cash flow is equally important.
Moreover, apart from saving for the down payment, the objective of having funds to tide over contingencies is equally important.
"There is no distinct formula in achieving the financial goals and objectives. It is a matter of discipline, mind-set, priority and just doing it," he said.
A FIRST TIME HOUSE BUYER'S STORY
For a first time home buyer Rosemarie Khoo Mohd Sani, 31, she opted to purchase a second-hand medium cost apartment some 20 km away from the city centre as she could not afford a new one or somewhere close to the city.
"I would rather spend more than an hour commuting to work and save thousands on mortgage than pay a very high price for an apartment closer to the work place," she said.
She started saving at least RM300 per month as soon as she started working and by five years she had more than RM20,000 that helped her cover the up front payment.
Rosemarie's 830 sq ft apartment in Seri Kembangan costs three-times cheaper compared with the apartments within her office vicinity where the prices are stated in six figures.
"I bought the apartment in 2012 when the price was much cheaper, and now my apartment has almost doubled in value," she said.
Rosemarie urged all first time buyers to purchase their home as soon as they could and not to worry so much on the location as it is relatively easy to get around with own or public transport.
"A month could make a difference in terms of pricing for properties, so they need to act fast," she said.
GOVERNMENT'S AID FOR FIRST TIME HOUSE BUYERS
As for those who cannot afford to buy a home from private developers due to the exorbitant prices, the government is lending a helping hand.
Checks by Bernama revealed the Ministry of Urban Wellbeing, Housing and Local Government has several schemes and programmes under its wings namely the MyHome Scheme, People's Housing Programme (PHP), Housing Loan Scheme (SPP), and the 1Malaysia Civil Service Housing Programme which also involves Public Private Partnership Unit, the Prime Minister's Department, Ministry of Federal Territories and Perbadanan Putrajaya.
Government owned companies such as Syarikat Perumahan Negara Berhad (SPNB) are responsible to build the affordable Rumah Mesra Rakyat 1Malaysia, Rumah Mampu Milik and Rumah Idaman Rakyat while PR1MA Corporation oversees the 1Malaysia People Housing Program.
The Ministry of Finance also has its own financial vehicle, Cagamas Berhad, to help ease home loan applications and approvals via the MyFirst Home Scheme.
On Oct 25, 2013 during the 2014 Budget, the Prime Minister Datuk Seri Najib Tun Razak introduced the MyHome Scheme that allows more low and middle-income groups (households with an income of RM3,000-RM6,000) to purchase their first home.
Under this scheme, an incentive of RM30,000 is given to help eligible house buyers. Under this scheme if the house costs RM100,000, the purchaser only has to pay RM70,000.
The purchaser too need not pay the 10 per cent down payment for the house as this will be part of the RM30,000 paid directly by the government to the developer's HDA account.
The government has allocated RM300 million in 2014 for 10,000 units of MyHome to be built by private housing developers. This scheme was implemented on April 1, 2014.
Through the Tenth Malaysia Plan, 39,000 housing units will be built to cater for low income group earning less than RM2,500 per month and for resettlement of squatters.
Currently these PHP units are rented out for RM124 per month and sold at RM35,000 per unit in Peninsular Malaysia and RM42,000 per unit in Sabah and Sarawak.