When can I own my dream home? Where do I find the money to buy a house? These are the questions that constantly plague the new generation of first-time house buyers. Many young adults are struggling to buy a house due to the escalating prices of houses in Klang Valley and Penang.
Property prices in urban areas such as Penang and Kuala Lumpur rose by up to 40 per cent last year fuelled by low interest rates and a surge in speculative buying whereby investors snapped up multiple properties in hope that prices keep on rocketing upwards.
The prices of houses are exorbitant and it is beyond reach of an average income earner. The average price of a KL residential property is now about RM485,000, or roughly nine times the average urban household annual income of RM54,000 and there will be a possible sign that the market is heading for a bubble.
The Demographia International Housing Affordability Survey rates markets, whose property prices are 5.1 times median income or more, as “severely unaffordable”. The sharp increase in prices of houses are far outpacing income growth thus creating many who are unable to buy a house. Some have resorted to buying a house far from the city resulting lengthy commutes to work.
Secondary markets of older homes are not cheap either and one may need to fork out more money for house repairs.
The government imposed RPGT (Real Property Gain Tax) has been less effective in curbing the escalating prices of houses. The high prices of property in urban areas prompted the Najib administration to introduce a first-home ownership scheme in March in addition to the loan-to-value ratio cap in a bid to stave off discontent.
The government’s My First Home Scheme launched in March will enable young adults aged up to 35 and earning less than RM3,000 to get 100 per cent financing to buy houses worth between RM100,000 and RM220,000 with a repayment period of up to 30 years. However, lawyers and bankers say the first-home ownership scheme will not help those who take home RM3,000 in total household income as the amount will not cover loan repayments due to rising prices for food, other basic necessities and utilities.