Buying a home is seen as an investment, but also a societal right of passage. It is the highlight of adulting, owing to the fact that every investment requires the investor to do some serious financial planning, research on the markets, and understanding the economic conditions.
This holds true, especially when it comes to buying in a property. As one of the largest purchasing decisions we can make in our lives, it’s no wonder our parents embedded into our heads the mantra most Malaysian kids have heard at some point:
“Get a good education, get a stable and well-paying job, then you can buy your own home. It’s the peak of financial security!”
Well, Can Malaysians Afford a Home?
Housing prices have been out of reach for our rakyat for a while now. With all the uncertainty of 2020 and 2021, is buying a home in 2022’s current climate a good option?
To find out, we take a look at some of the facts and figures behind home ownership in Malaysia, as well as around the world to help you decide for yourself.
Housing Prices In Malaysia
From 2009 to 2015, the average Malaysian home price rose by as much as 74%. Kuala Lumpur, where the average price of a home costs RM 785,214, leads the charge as the most expensive place to live in Malaysia. This is followed by Selangor, Sabah and Sarawak.
Meanwhile, some of the cheapest housing in Malaysia can be found in historic Malacca, Perlis, and Kelantan, with average prices ranging in the region of RM200,000.
How Does Home Ownership In Malaysia Compare Globally?
Malaysia has a home ownership rate of approximately 70%, but this also takes into account informal housing. Informal housing refers to areas where groups of housing units have been illegally constructed, on land that does not belong to the occupants.
The country with the highest home ownership rate in the world is Romania, at 96%. Neighbouring Singapore, a relatively stable and developed country, comes in second, with a home ownership rate of 91%. A higher rate than in any other wealthy nation.
On the other hand, the United Kingdom, Germany, and Switzerland, being among the most developed countries in the world, have a home ownership rate of 62%, 51%, and 38%, respectively.
Why Is Home Ownership Different in Each Country?
In just two words: Government Policy.
After World War 2, many governments made a shift in policy towards home ownership. The idea was that if you reached retirement or lost your job, at least you would have some assets to live off.
It’s some form of security, if you will. Mortgage and lending facilities were provided, along with relief on capital gains tax to promote home ownership.
There is a lot we can learn about how different government policies influence home ownership rates. We take a quick look at some of the most developed countries in the world, to see how their decisions played out:
1) Home Ownership in the UK
Once considered a must, over the past few years, a shift in attitudes about owning homes has been taking hold. According to economists, this has been fueled by failures in economic policies. Prices are so exorbitant that many are unable to own a home and are left to rent instead.
2) A Renters Market in Germany
House ownership in Germany is among the lowest in the European Union due to high real estate transfer taxes. Rents, however, are regulated to prevent sharp increases and tenants also enjoy tenure security.
3) The United States Housing Crisis
In the US, home ownership steadily shot up prior to 2008 but by then, the housing market was in a bubble. It came crashing down due to years of cheap credit and lax lending standards. Soon, the ripple effects were felt throughout the entire global financial system.
So Is 2022 A Good Year To Buy Property?
For those who are keen to buy their first home or an investment piece, there is always opportunity to be found in a crisis.
Long before COVID-19, the Malaysian housing market was experiencing a rise in property overhang. This, among other factors, led to a slow downward trend in property prices since 2018.
Futhermore, Bank Negara Malaysia has lowered the OPR (Overnight Policy Rate) by four times in 2020!
The OPR is essentially an interest rate that determines how much it’ll cost for you to take out a loan; now, the lower it is, the cheaper it is to borrow money!
These indicators suggest the market is ripe for property hunters, and can potentially satisfy pent-up demand for housing.
Own Stay vs Investment
That said, the rental market remains soft. So, unless you are buying a home for your own stay, purchasing it in the hopes of being able to rent it out might be a tough ask.
The current global economic downturn is going to take a long time to recover. Investing in a house with the hopes of selling it in the near future, might come down to a test of your ability to hold on to the property until it fetches a decent price.
As Malaysia slowly shifts towards becoming an ageing population by 2030, reduced birth rates mean people will have access to more land in the future, which might make it cheaper to own a home.
Should the prices of property decline, home owners who may have inherited their property will want to reduce their losses and sell it off, in the hopes of making some money and upgrading their abode.
So where does all of this leave us? Well, it brings us back to the fundamental reasons for owning a piece of property!
If you’re planning to secure a home you can live in throughout your golden years, 2021 might be the best time to buy a property, especially if you can afford it.
Remember to always do your own research and evaluate current market conditions to help you make informed decisions.