INSIGHTS INTO HOME OWNERSHIP FOR MILLENNIALS
The situation and possible solutions
BY JACQUELINE BENITA PAUL
One of the major concerns among millennials in Malaysia is housing. In comparison with generation x, the ratio between income, expenses and property prices is vastly different for millennials. An average millennial’s salary ranges from RM2.5k to RM3K and according to JobStreet’s Job Outlook 2018 report, the average salary increment yearly without a promotion, is no more than 10% and with a promotion it is merely between 15% and 19%. With rapid increase in cost of living (average yearly inflation of 2.27%) while income growth has only grown 4.6% Another factor to consider is millennials’ need for instant gratification. In a world where so much is available with the push of a button, it’s no wonder that millennials are so used to the concept of instant gratification which hinders them to weigh the long-term benefits of being home owners and the compromises needed in the beginning. As a result, young Malaysians tend to save their money for travelling which leaves little room for savings for a home. Financial illiteracy also contributes to the challenges faced by millennials looking into home ownership. Due to the introduction of instalment plans especially for the latest gadgets, luxury items or even business loans, most young Malaysians are faced with the risk of having to have a poor credit score (Ctos). On the other side of the spectrum, there are many young Malaysians who stay away from financial commitments which then leads them to have no credit history. However, a lack of credit history can be viewed negatively by credit agencies. Put it this way, if you don’t trust yourself to spend within your means with a credit card, how can an agency trust that you will be able to pay back your loan? However, to overcome the property glut, the Malaysian government and various agencies have developed various forms of aid to smoothen the process of home ownership among first time home buyers.
1. MY FIRST HOME SCHEME (MHFS)
Instead of paying 10% down payment, this scheme offers homebuyers to get 100% financing from financial institutions. To qualify, the applicant must be under 40 years old with a gross income of not more than RM5,000 per month for a single borrower and gross income of not more than RM10,000 per month for joint borrowers. The scheme is limited to employees in the private sector. Participating banks include OCBC, Affin Bank, CIMB, Bank Islam, Ambank, Hong Leong and Maybank. For more information, visit any of the participating banks or visit www.srp.com.my.
There are three reasons to consider the FundMyHome scheme.
a. You only need to pay 20% of the purchase price of your dream home.
b. No monthly payments for 5 years.
c. You can move into your dream home right away. After 5 years, you have the choice to sell your home or refinance it. You will also need to share a portion of the capital gain with the institutional funders. As this scheme is intended for home buyers, the FundMyHome does require a 5-year commitment from the homebuyer. So, if you’re looking for a quick profit through this scheme, we suggest looking elsewhere. For more information, visit www.fundmyhome. com .
3. MAYBANK HOUZKEY
This is a scheme offered by Maybank2Own which allows you to rent to buy your dream home. Unlike other schemes, there is more leeway in the age requirement (18-65 years old). The entry cost of the scheme is a threemonth security deposit which is still significantly less than the 10% of the property value that gets piled up further with the additional transactional fee. The scheme absorbs the transaction costs such as stamp fee, legal fee, etc into the financing amount that you will be paying for in your monthly payments. After 12 months you have the option to migrate to mortgage, cash out, continue paying rental with an additional 2% per annum after 5 years or leave the scheme after 5 years with no strings attached. To learn more about the scheme, visit www.maybank2own. com . each year between 2010 and 2016, there is a clear reason why millennials see home ownership as a distant dream. Areas with high corporate occupancy such as Bangsar, Mont Kiara, KL Sentral, Mid Valley and more are also areas with some of the highest prices for property, ranging from RM300,000 to RM500,000 for a 850 sq ft home. The lack of space makes it impossible to share the cost. It is also not suitable for millennials who are planning to have a family.