Youths should start renting first before buying a house, experts advise

SHAH ALAM – Financial experts has recommend for youths to not rush into buying a house and instead start with renting one first if they are still financially unstable.

Dr Syafiee Shuid, an Assistant Professor at the Kulliyyah of Architecture and Environmental Design, International Islamic University Malaysia (IIUM) said the young generation was still earning low incomes compared to the price of houses which were high especially those located in the city centres even though the minimum wage has been increased to RM1,500 effective May 1.

“Rental is a good choice especially if they think the house location is not suitable for them to live at and if they are financially unstable. They could choose the type of house, location and the rental rate based on affordability and they could also decide if they want to move to another house,

"Data shows that in 20 years, the comparison between salaries and house prices are significant as most houses that were launched cost more than RM300,000 especially in the Klang Valley, Johor Bahru and Pulau Pinang,” he told Sinar Premium.

He added that real estate could be a profitable investment, but it was also very risky.

“If the young generation purchased a double storey house or a house that is not a low-cost house which is beyond their capability to pay for, they would not be able to pay off the loan and monthly maintenance fees and might end up using up all of their savings.

“Other than that, if they choose an unsuitable location, it would be quite hard for them to rent out or sell the house especially with the current economic situation,” he said.

Syafiee said factors that led to youths not being able to buy a house, was due to low salaries and it also has something to do with their bank loans.

“Usually, banks will observe one third of our income for house purchases. For example, if their salary is RM3,000, only RM1,000 should be allocated to pay back the affordability index, which is less than 30 per cent from the applicant's salary.

“The average affordable houses are now worth more than RM300,000, hence a minimum salary of RM1,500 will not be enough for the youths to buy houses.

"The privilege of young people in buying houses is the long loan repayment period but at the same time, they would be facing difficulties for loan approval from the financial institution due to various factors,” he said.

Nevertheless, the government’s effort in providing various types of houses in the market such as micro housing could help young people own a house.

“In Kuala Lumpur, the micro housing trend is quite popular as youths get to buy a small house which is less than 500 square feet, for less than RM300,000.

"Probably in the 1980s, a 900 square feet house costs only around RM20,000 but now it is only 500 square feet and it is expected to get smaller from time to time,” he said.

Meanwhile, economic expert from University Sains Islam Malaysia, Faculty of Economics and Muamalat Professor Dr Nuradli Ridzwan Shah Mohd Dali was of the view that home ownership at a young age was a good move due to the long loan repayment period.

This, he said would enable young people to actually end up owning their own house rather than renting for the rest of their lives.

He said although many people think that real estate is a profitable investment, the young people needed cut their coat according to their cloth.

“If their salary is RM2,000, then it is better to use the money to rent a RM200 room if they have other commitments.

“It is true there are many people who are eligible to own a house, but young people should spend based on what they could afford,” he said.

He added that it was hard to sell a house in a short period especially if it is not located at a good area.

“We buy a house based on our ability. Do not follow others. There are some people who want to buy a luxury house as their first house as they are influenced by some friends. But with a low income, they might not be able to carry the financial burden.

“Buying a house requires detailed planning. Young people’s determination to buy a house is good but it is preferable if they start with a small house and then they could buy their dream house after they are financially stable. They could also rent out their previous house,” he said.