Thursday, March 17, 2011

First home scheme: Making it work for all

Young Malaysians, especially those in the cities, are whining about the unavailability of houses below RM220,000 that they could purchase under the My First Home Scheme.

Back home, their parents and parents-in-law heave a sigh of relief as their children and grandchildren will no longer have to stay in rented houses, apartments or flats.

Besides seeing their children graduate from universities, most parents dream of seeing their children start their own families and have their own homes.

The newly-launched scheme, which comes with 100 per cent financing as the 10 per cent deposit is guaranteed by Cagamas Bhd, is aimed at helping those aged below 35 to own their first house sooner.

Contrary to what some people think, the scheme could prevent a property bubble as it actually dampens speculative activities.

This is because the scheme encourages developers to build residential units costing between RM100,000 and RM220,000.

Given Malaysians aged between 20 and 35 make up about a third of the country's population, and considering the thousands of new job market entrants annually, demand for houses within that range is massive.

So, besides helping first-time house buyers, the scheme also signals developers to build certain types of houses within a certain price range.

In prime areas in the Klang Valley, Penang and Johor, affordable homes may not be available, so the young first-time buyers with a monthly salary of RM3,000 and below have to settle for houses outside the cities.

But think long term. The first homes may be away from urban centres, yet now is the opportunity to buy a house without downpayment, with attractive interest rates and repayment period.

Unless there is severe econo-mic recession or property bubble, the value of houses always goes up.

What one earns now may seem like peanuts. However, five to 10 years down the road, one is likely to move up the career ladder and receive a fatter paycheck.

With a combined income of the spouse and sufficient savings and returns from other investments, one can sell or rent the first home and buy a bigger house in prime areas.

Also remember that the earlier one owns a property, the better it is, as a property is like a hedge against inflation, while the money for rental is channelled for home repayment.

In the meantime, it helps to manage one's finances wisely. Avoid the credit card debt trap and differentiate between "needs" and "wants".

It is perfectly normal if one does not own the latest iPhone or iPad, and the baby need not be dressed in designer clothes.

Statistics from the Credit Counselling and Debt Management Agency (AKPK) shows that majority of Malaysians who are in debt are those between 20 and 40 years old, male, married and those with an annual income of RM24,000.

The government, meanwhile, should do more to improve accessibility as affordable homes are away from the city centres.

The high-income economy may not be fully realised by 2020 if the future generation is stuck servicing home and car loans, spending hours on the road to reach homes situated kilometres away from the workplace, and exhausting their hard-earned money on petrol and car repairs. This is against the backdrop of rising food prices and utility costs.

With efficient and affordable public transportation like train network and feeder buses, the issue of young families staying far from city centres can be addressed.

Property developers can attract more buyers for houses built outside urban centres by incorporating entertainment and recreational facilities targeting young families and Generation Y (Gen Y), those born after 1980.

Developers also need to stop whining about the house price under the scheme as the large group of people aged 35 and below provides a ready market for medium-cost residential units. Besides, developers may have been enjoying handsome margins from high-end residential projects, which are sold like hot cakes to speculative buyers.

In fact, Gen Y, currently the darlings of advertisers, may become developers' blue-eyed buyers. - By Hamisah Hamid of btimes.com.my

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