As we wait, properties may become harder to afford

by Datuk Seri Michael Yam

I recall reading a letter written to the editor of a popular daily which caught my eye. The man related the story of the advice given by his grandfather and father about getting onto the house ownership ladder as early as possible. He was a young man, a fresh graduate in the mid-70’s with a starting salary of RM900 per month. He came from a humble background and every month he had to carefully allocate his limited earnings to his ageing parents and younger siblings as well as plan for his expenditure.

With his meagre salary, he rented a place close to his place of work so that he did not need a car, ate modestly at food stalls and saved every ringgit he could. Life was no doubt rather tough in the beginning but he worked hard at his job. He built up his career and gradually moved up the corporate ladder and by then, managed to save enough to buy a small Datsun (now Nissan) for RM8,000 (with 80% loan) and also put the 10% down payment for a linked house in the outskirts of PetalingJaya priced at RM83,000. It was not near his workplace but that was all he could afford at the time.

It was a choice worth his sacrifice, the location he chose to stay has today boomed into a township and the home he bought is worth more than RM800,000. Looking back, the man made a wise decision to have his own financial planning set at an early stage and we should all learn from the young man’s experience.

Lesson number one

Choose a property that you can afford at that particular time when you are ready to purchase. The longer one waits, the higher the property price would become and the increase of such price will be higher in rate than the increase in our salaries and savings.

Wait further to try and match the original price tag, and you will find yourself chasing after the property forever and lose out on other opportunities.

Lesson number two

Be realistic in your choice of your first home. Everybody wants to buy their dream home but unless we are realistic and practical, this will remain a dream forever. While the young man in the story above is lucky enough to buy a linked house in the outskirts of Petaling Jaya during that time, it is now impossible for young new graduates to purchase a landed three-room unit in the same area. Whilst it may be prudent to plan ahead for future needs and family expansion or proximity to ageing parents and other priorities, we should be open to other affordable choices – perhaps a strata property, a studio or one bedroom unit, or a location further from the major urban centres where prices are relatively cheaper.

Eventually, when salaries have gone up and the need for bigger units is more evident, you can upgrade to a more suitable housing unit which could be partially funded by the capital gains from your initial unit. The purchase of that bigger unit may otherwise be impossible if you wait until you have accumulated enough savings and earn a high enough salary!

Lesson number three

The most important lesson to first time house buyers is to start saving for your home purchase early. Prices are not going to be cheaper in the future as development costs will continue to increase due to price hikes in land, building materials, labour, logistics, utilities and inflationary pressure which will inevitably lead to escalation in house prices. In addition, the challenge to come up with the 10% down payment, be it for purchase from the primary or secondary market, will be tremendous.

The Employees’ Provident Fund or EPF housing account II from the monthly contributions will help to a certain extent but it needs time to grow the fund and you still need to come up with the upfront payment and other acquisition costs – legal fees, stamp duties etc, so it makes sense to start planning and saving for your first house purchase as early as possible in your career, along with other plans like car purchases, getting married or starting a family.

Youths of today should have greater awareness and appreciation for the importance of saving for their future and investing in property at an early age rather than constantly changing their smart phones, buying designer goods and frequently hanging out at overpriced cafés and bistros. Buying a house definitely cannot be an afterthought that youhave not prepared yourself financially for; for some who are more fortunate, you might be able to seek help from your family members in planning for your first house purchase but for those who are not, without early and proper planning you will find that you will never have enough to buy a house of your own even later in life.

Let’s take heed of the lessons learnt from the young man’s life story. At some point in the future you may look back and be grateful that you purchased the home despite some struggles to make a living. The young man, now older and wiser is sitting on a lot of gain and equity for his next purchase for investment.

Datuk Seri Michael Yam is the president of REHDA Malaysia. Apart from managing his own consultancy firm, he is an independent director of several public-listed companies and also a global bank in Malaysia.

Source: StarProperty.my

  1. NEO
    April 8th, 2014 at 16:53 | #1

    There are 2 main points I got from this article:

    1) As what stated by the article, buy property as early as possible (which I agree)

    2) The hidden message -> market is slowing down now. This kind of article is needed to boost sales.

  2. Chris
    April 8th, 2014 at 17:33 | #2

    Agree with NEO. Agree with the general message the article is trying to convey, but it just felt too one sided, overly-positive about buying property like nothing else matters.

    It should at least include some advises for first time buyer to not just rush into it blindly. Few years ago when I actually learnt more about purchasing property *after* i sign all the agreement. It felt like I just threw some 30k into the sea. How I wish I do my research properly back then. What to do, I was young and stupid, probably still stupid now.

  3. KiKuanCheng
    April 8th, 2014 at 19:56 | #3

    Oh yeah, look at Michael Yam’s photo, he’s waiting for you to take the bait…..:)

  4. peter
    April 8th, 2014 at 20:01 | #4

    Notice, The question never arises about maybe, it’s better to short term rent in the current market? But then, what do you expect from the head of REHDA, in the end he wants people to invest. New 3 Sty Gated on the mainland renting at 900 per month, half?! Most Probably more like 1/3 the monthly installment. It’s no wonder when I look at the things in peoples shopping trolleys, people are not spending. And recently even Moonlight Bay by Ivory, 1 unit condovilla reached auction stage(?!?). Lots of empty oversized Condos on the Island. Hundreds and maybe thousands of units of New Condos are about to flood the market in Bukit Mertajam and Butterworth. I am ready with my popcorn to enjoy the show.

  5. penanglang
    April 8th, 2014 at 20:59 | #5

    Quote : REHDA has grown as the leading voice of development of developers in all property categories, from traditional housing projects ….

    Quote : REHDA’s guiding principle is to provide responsible leadership to all property developers in building quality housing and real estate for the nation.

    Quote : Specifically our objectives are : To promote and co-ordinate the development of land and construction of buildings for residential, commercial, industrial, tourism and other related purpose by members

    Who is the President of REHDA ?

  6. penanglang
    April 8th, 2014 at 21:29 | #6

    Dear Michael ,

    Here is a proposal for developers
    – Once the developer buys a land for RM XX million , the developer will have 3-5 years to develop it
    – If nothing is done , the govt will take back the land and return 75% of the total land price
    – If land was owned by a private owner, the previous owner has the right to buy back the land at 25% discount

    This would encourage developers to REALLY start building quality houses

    What do you think ? Good for house buyers right ?

  7. Father
    April 8th, 2014 at 22:17 | #7

    Lesson number four :

    Don’t swallow hook, line and sinker everything that you read or hear … especially those coming from people with vested interests !

  8. Micheal
    April 9th, 2014 at 00:20 | #8

    Lesson number Five :

    Don’t trust anyone from REHDA or associate….. they talk bull & cock.

    I am waiting and watching what will happen to this developers (Greedy dung), shows begins this year onwards…. we should see developers and speculators of properties suffer at least the next 3 years

  9. Ah Dog
    April 9th, 2014 at 07:54 | #9

    Lesson number six:

    If you’re buying super condo for investment, then you’re in a deep trouble. For those condos with current market price ~RM500k, then it is still OK as there is a demand. But if you’re the owner for those SOHO/condo on top of commercial shop lot, you will have some trouble.

    I am seeing too many new super condo with empty units….

  10. E4
    April 9th, 2014 at 09:00 | #10

    I think getting a 150K low/medium flat might get you now where if your income is limited. This kind of unit won’t appreciate much now and probably may maintain or increase slightly, but you are likely to make a loss at the end when u sell off.

    What Datuk’s intention is to urge all walk of life human being to tied up with lifetime loan regardless of big or small. Then only the market will turn, bank will evolve.

  11. GongKia
    April 9th, 2014 at 10:11 | #11

    He is telling a story of the mid-70s. Do you know what was the interest rates like then? Do you know what was the employment rate like then? Do you know how did the banks behave then? Mid-70s ah…….Hahahahaha……..

  12. Kuntakinte
    April 10th, 2014 at 13:38 | #12

    as we wait..property will crash and easy to afford

  13. yoyo
    April 10th, 2014 at 13:50 | #13

    I just don’t understand, why so many people wish to have property prices crash?

  14. toto
    April 10th, 2014 at 14:02 | #14


    Got meh? So many people wish to have property prices crash? No lah, only Kuntakinte lah. The rest just don’t like Michael Yam’s face only….:)

  15. james
    April 13th, 2014 at 23:26 | #15

    Forever also got two different opposite moral of story.
    If that man purchased at higher pricing before economy crash, then mr.yam will say this fellow “so hai”.

    Life is always uncertainty. You will never know what is inside of a box of chocolate.

    Once, Who can foresee China economy can surpass Japan.
    Once, Who can foresee Korean Samsung can surpass Apple.
    Once, Who can foresee PRK can surpass Barisan

    As long as you are buying to stay (not buying to flip).. It will no hurt if the pricing increase or drop because you will be continuing staying for quite for long time. By that time, the next cycle will be return again.

  16. Kuntakinte
    April 14th, 2014 at 09:04 | #16

    toto :
    Got meh? So many people wish to have property prices crash? No lah, only Kuntakinte lah. The rest just don’t like Michael Yam’s face only….:)

    because they want to buy more.. haha

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