Opinion

A house for RM300,000? Well…

In the recent budget review announced by Prime Minister Datuk Seri Najib Razak, one of the plans was to limit properties priced at RM300,000 to first time home buyers. I think this is a great plan, but what does this entail?

First off, where does one find a property priced at RM300,000? A quick search on Propertyguru and iProperty shows that there are actually a lot of apartments priced at this amount from Kajang to Cheras, as well as Tanjung Bungah (Penang) and Johor Baru.

Heck, you can even get a studio apartment at Empire Damansara here in Damansara Perdana for RM275,000. So it isn’t hard to imagine that if newly-established families are looking for a place to settle, there is a ready supply of properties for those wanting to buy their first homes at this price and even below.

The next question is, of course, if Malaysians can afford the loans for the house.

What is the median household income – meaning what does the average Malaysian household make?

According to Khazanah Research Institute’s (Kris) report published November 2014, 74% of households earned less than RM6,000 in 2012. The median household incomes for Selangor and Kuala Lumpur were RM5,353 and RM5,847 respectively in the same year.

That makes up an annual income of RM64,236 for someone living in Selangor, and RM70,164 for those living in Kuala Lumpur, four years ago.

With such an income, Ringgitplus has an amazing loan calculator website which gives you the rates you would have to pay on a monthly basis for a house valued at RM300,000. The monthly repayment seems to be hovering between RM1,400 and RM1,900.

Thus, it is affordable, per se, for the middle class Malaysian making the median salaries in 2012, let alone today in 2016. There shouldn’t be any issue for anyone having such salaries to survive with some RM2,000-plus a month, after paying for the house, right?

Wrong.

Bear in mind, we are talking about a household – two working adults and at least one child for that matter. Now, factor in the car loans, the repayment for the National Higher Education Fund Corporation (PTPTN), and also the cost of raising a child from infancy.

It looks less attractive, to be sure. With an average household having two cars in Malaysia, you’re looking at an additional RM600 to RM1,000 just to pay off the cars. Of course, a new household could make do with a single car instead, so halve that cost to RM300 to RM500.

If the household has access to public transport, all the better. Maybe they could opt out from having a car altogether.

Or better yet, they could just get a motorcycle carrying their kid in a strap on carrier. No danger there, right?

We haven’t yet factored in the cost of bills – electricity, mobile phones, water, sewage treatment and even Internet. Hopefully, they opt out of Astro for something cheaper, maybe Netflix or iFlix.

Wait, what about food, baby products and petrol?

I’m thinking all this up on the fly, but it honestly does not look good for the Malaysian household from a financial point of view. In fact, it looks really dire.

It would explain a lot as to why Malaysian households have no savings, why Malaysian households are in debt, and why Malaysian households are quite frankly on the brink of caving in and needing the option of a second job.

What’s the government’s solution to this?

Well, you now have 3% less deducted from your salaries for your EPF contribution every month, to deal with these costs. And yet, that doesn’t make sense either.

It would mean a few hundred ringgit more in hand for the Selangor and Kuala Lumpur examples I stated. Of course, this would be if the household incomes were merely salaries. If not, then it would be lower than the figures stipulated.

As much as I would applaud the government for such a brilliant programme in limiting these houses for first time buyers, it is highly unlikely that the median Malaysian household outlined by our statistics can cope with even opting for a house worth RM300,000, let alone take out a loan for a house on top of their current spending.

We could argue for them to cut out the Starbucks, eating out, even going so far as to tell them to start cooking at home and just go to work, then go home and stay indoors like automatons, but it is highly irrational to think people are rational to the point of being droids.

So what’s the solution?

Honestly, I am stumped on this one. Thoughts? – February 16, 2016.

* This is the personal opinion of the writer, organisation or publication and does not necessarily represent the views of The Malaysian Insider.

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