Searching for That Dream House

Having a roof over your head is one of the basic necessities in life; apart from food and the clothes on your back (not so much that three shirts you have in your wardrobe in 3 'different' shades of white). 

Rental in Kota Damansara is getting outrageous. A run-down old flat will cost you around RM700-800 per month. An extra RM400-700 per month will get you a well-kept apartment. A basic condo unit can fetch up to RM2000-2500. Then there's the high-end condos for which you have to be ready to fork up around RM4000 per month. A landed house..let's not go there. Yet. Mission impossible.

This sentiment is felt across the country actually, where price of houses is reaching an all-time high; without any sign of stopping soon. Some took this as a sign of a housing bubble; a situation in which the price is driven up by the speculation that the price is going to get even higher until at one point, due to lack of actual need in housing, the system will burst, leaving people with mortgages they cannot afford. Like what happened in the U.S. a few years back. Once it crashes, it went with a Bang, not a mere Pop.  

In the Netherlands, if a property is vacant for more than a year, it is not a crime to occupy it. This is to ward off investors buying property and keep it until the price has gone up profitable enough to resell. An opinion of my German language teacher is that the need we feel to own a house is hammered into us by our society, without much benefit to us. He argued, what's wrong with paying rent your whole life? But of course, this, coming from a man who paid cash for his Viva car. 

What caused the property prices to grow exponentially in the last 30 years? The answer would lie in the government's policy. Like always, the government would conjure (or lately, say) something up with the best of intention (or so I would like of believe) at its core, until the success of the system became its own monster. 

In the 60s, bank would only approve housing loan, 60% of the total amount, and the repayment would last at most for 10 years. Now one can expect to get a 90% financing which has become a standard practice for most banks, and recently with the My First Home Scheme (M1HS),  lending margin can reach up to 100%. Monthly repayment was reduced as the repayment period which was at 10 years in 1960 has been extended to 30 and sometimes up to 40 years now. See the inevitable booby trap?

Let's look into the M1HS. This scheme allows fresh graduates who have just started working with a monthly income of less than RM3000 and is younger than 35 years old to take out a 100% loan, for a property that is valued under RM300k. For joint applicants with income of less than RM6000 combined, they can apply for a 100% loan for a property valued to up to RM400k. This means, young working individuals do not have to worry over how to fork up the 10% down-payment, what with having to worry about wedding/hantaran and stuff. 

This situation has seen young generation flocking to take out home loan and shop for their dream house, or for investments. The question is, is it a wise decision?

In my humble opinion, it depends on how informed you are on your current situation. You need to know if you are going to be committed to being responsible in your monthly spending. You need to know the prospect of the area you're buying into; is there many ongoing development that will add value to the area, etc. You need to know the developer. The owner if it is a sub-sale. The current bank valuation of the property. You need to be prepared to do research on a lot of these.

But in the end, who knows for sure if the market is going to continue this steady rise in the next 10 years? What if the market crashes tomorrow? Nobody can tell you the answer, even the most expert in the industry. Only God knows that. 

But put it this way; if you buy a home, in 1 year you will have won a total of 15% equity in your property if you took out a 90% 30-year loan. And imagine this; if you rent, in a year you would have paid 5% of the landlord's mortgage. So generous, eh?