Home sweet home. The simple phrase is reflective of a person’s need for a shelter that is more than just a roof over the head. However, the rising cost of living and property prices have made it difficult for the lower and middle-income earners to afford a home. This five-part series will delve into the issue from several angles. The third part focuses on what a person should research before buying a home.
KUALA LUMPUR (Bernama) — Adam Mukhlis has had it. The 34-year-old does not want to think about buying a house in the near future. He would rather live with his parents-in-law.
Five years ago, he bought an apartment unit in Kajang for RM140,000. His loan tenure was 20 years with a monthly repayment of RM900.
He was unable to settle his monthly dues on time due to unstable finances. Eventually his property was auctioned off.
“Don’t buy a house when you have only started working because you don’t know how long you can keep at it.
“It doesn’t matter if you are single or with a family, life in the city is challenging for all. The salary may be higher, but so are the needs”, was Adam’s advice for the younger generation.
Perhaps there are many in the same boat, but the young should not despair.
What they need is to be less choosy about the kind of property they want to own and practice good financial management.
This is the view of Rohaniah Noor, a real estate consultant with Rina Properties.
“Many young graduates earn between RM1,500 and RM3,000 a month. It is not difficult to buy a house on that salary if they are money wise”, she said to Bernama.
From Rohaniah’s observation, the main problem among the young was their mindsets.
“They want to live large too quickly. They want the latest gadgets, to eat out often at fast food joints and fancy restaurants and spend without a proper budget.
“At the end of the month there would not be enough to save. It is difficult to put down the deposit for a house without savings”, she said.
The young were also inclined to buy a car first with a monthly installment exceeding 30 to 40 per cent of their salary, she said.
“And then we have credit card debts. These other high financial commitments are what makes it difficult for them to get a housing loan”, she added.
BUY ACCORDING TO MEANS
Rohaniah said although the prices of new homes were a bit on the high side, many in the market remain affordable.
“There are many homes in the range of RM120,000 and below in the sub-sale market or under auction, but many don’t see it. They are only looking at new homes.
“If what we can afford is only a flat unit, so be it. That is also a home. My first property was also a flat unit in Kajang. I’m still living there”, she said.
Low and middle-income earners are entitled to buy low cost houses and apartments offered by the government.
However, Rohaniah hoped that the government would be more aggressive in providing more affordable homes for the people.
The government, she added, should not rely completely on private developers to fulfill the needs because the latter’s goal was to maximise profit.
On whether the soon-to-be implemented Goods and Services Tax (GST) would affect the prices of homes, Rohaniah said at the moment, developers were anticipating higher real estate prices.
“If property rental are also taxable, then the extra charges would be passed on to tenants. We would have to wait until after April 2015 to be sure”, she said.
Many would think twice before applying for a housing loan these days, due to the high monthly installments.
This is following Bank Negara Malaysia’s recent move to increase the Overnight Policy Rate (OPR) by 25 basis points to 3.25 per cent.
This simultaneously led to the increase in the Base Lending Rate (BLR) and Base Financing Rate (BFR).
RHB personal finance banker Zarina Yusoff, told Bernama that the increase indirectly led to a longer loan tenure and higher monthly installments.
“Those who are already taking a housing, vehicle, financial or hire-purchase loan are expected to deal with a steeper loan repayment due to the increase.
“If their loan package is tied to the BLR and BFR, they have no choice other than to experience the surge in monthly repayment rates”, she said.
Those who cannot afford the increase would have to wait until the OPR is decreased or for newer and more affordable loan packages.
Zarina said the requisite for housing loans today were stricter and depended on certain criteria for eligibility.
This is to avoid late payments or fraud.
She advised new buyers to assess their financial ability to repay loans by looking at their monthly pay and other commitments, while comparing that against the price of the home they wanted to purchase.
“Every bank has their own procedure, package and interest rate. The higher the cost of the home, the lower the interest rate offered.
“Buyers can choose to take the Islamic or conventional loan. Each has its own benefits and drawbacks. The buyer must take into account his own situation before making the choice”, she said.
Those thinking of buying a home should do prior research considering that it is potentially the priciest investment of their lives.
Failure to do so could lead to devastating consequences such as bankruptcy, marital conflicts leading to divorce and health problems, said Khairul Anuar Shaharudin, a lawyer with 15 years of experience in real estate.
“Many buyers think they are going to get the keys to their home as soon as they sign the sales and purchase (S&P) agreement, but they don’t.
“This typically happens among buyers of sub-sale properties where the previous owner had yet to settle their loans in full”, said Khairul Anuar.
When engaging lawyers, he reminds future house buyers to find out the costs involved to avoid claims of being cheated by lawyers.
Under the Legal Profession Act 1976, any property transaction entails a legal fee of one percent for the first RM150,000 of the house price, decreasing to 0.7 per cent and ultimately 0.4 per cent for houses priced RM7.5 million.
DON’T BE AFRAID TO ASK
Potential house buyers need to aggressively ask their lawyers for details regarding the transaction, instead of merely signing along the dotted line.
“Don’t hesitate or be afraid to ask anything. If you don’t know the difference between leasehold and freehold, find out. If it is a leasehold property, ask what would happen to the house after 99 years. The house you are buying may be your biggest investment, particularly if you’re going to live there”, said Khairul Anuar, who wrote the book ’40 Soalan Yang Anda Patut Tanya Kepada Peguam Anda Sebelum Membeli Rumah di Malaysia’ (40 Questions You Need To Ask Your Lawyer Before You Buy a House in Malaysia).
Among the information that future buyers need to know is what is claimable if the developer fails to complete a house as stipulated in the S&P agreement or if it is completed with shoddy workmanship.
The time frame for a landed property to be completed is two years while a strata or multi-storied building is three years.
“A buyer has 24 months upon vacant possession to search and file for complaints against any defects found”, he said.