Consider renting properties, experts tell younger generation
In fact, Suraya said, the rental market was supposed to complement home ownership.
“Renting is not a substitute to home ownership but is complementary. It is not an inferior choice but you have to look at it in terms of the rent-to-income ratio,” she said at the PropertyGuru 2018 Property Outlook Forum yesterday.
To a question by PropertyGuru Malaysia’s country manager Sheldon Fernandez on whether the rent-to-own scheme was a long-term viable option or a short-term good measure to tackle affordability issues, Suraya said it was important to understand that one did not rent just because one could not afford a house.
She cited research she was currently undertaking in relation to renting and how to take those in the vulnerable urban group out of social housing projects once they had reached a certain income threshold.
One of the things Suraya looked into, she said, was how much were the rental prices within a 3km radius of social housing projects, and the figures came up to RM800-RM1,000.
“It is very difficult in Kuala Lumpur and certain hotspots in Selangor. If we are serious about rental, then it should be affordable too.”
She said a family of four might not be able to afford a rental of RM800.
Suraya said what needed to be monitored was the rent-to-income ratio and the house price-to-income ratio.
“You need to look at the fine print and do your own calculations. Compare between paying RM300,000 and a rent-to-own unit. Which one will you have to pay more?
“Once you do that calculation, you can decide. If not eligible for a conventional loan, then you can go for rent-to-own.”
The rent-to-own scheme enables potential buyers to buy a property by renting for a certain period agreed to with the scheme provider.
The buyer can eventually purchase that unit when the rental tenure matures, or when the buyer is able to secure a housing loan.
Jones Lang Wootton executive director Prem Kumar said the renting option offered more flexibility.
He noted the current mindset of millennials was to own a property when they were as young as 25.
Although this was not a bad thing, Prem said owning a property at that young age meant it would eat into their disposable income.
At a time when one should be accumulating financial wealth, they would be servicing loans, he said.
“This age group of between 25 and 35 that I know all own properties and are stretched to their financial limits.
“Their mortgage instalments are pretty high enough to eat up whatever balance that is left.”
Prem recalled that 30 years ago, he never thought of owning a house and would just rent a property for between RM250 and RM300 at that time.
“I was quite happy to do that because I knew my income wasn’t at a level to enable me to service mortgages,” he said.
Another point to note, Prem said, was that the younger generation these days received support and backing from the older generation.
This meant that the younger generation did not need to earn a high income as they were supported by their parents.
“They do not have their backs against the wall. If tomorrow they cannot service the loan, they will ask their parents for help. And their parents will say ‘yes’ for sure. There won’t be a situation where they’ll say ‘no’.”
He called for a mindset change for the generation to not necessarily think they must own a property at that young age.
He said youngsters could opt for a lower-priced unit when they were younger. When they got a bit older and had a higher income, they could upgrade and live in a much better house, he added.
However, Prem said this mindset would be hard to change as it had become entrenched.
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