I was at a dinner with my dad and his friend, Sarah, last week.

Over the meal, dad spoke of owning a house and Sarah (not her real name) said she’s been renting for over 15 years.

“That’s such a waste of money,” he said. “If you forked out just a bit more every month, you could’ve owned a home by now.”

Sarah was silent for a moment.

“I just graduated at that time and didn’t have a lot of savings,” she replied. “Not everyone has the privilege to buy a home, especially when property prices are artificially high.”

Privilege. This word struck me.

Then I realized how true it was.

From 2009 to 2023, the average housing price has more than doubled.

According to numbers from The Edge, an average apartment now costs about RM583,000, representing an annual growth rate of 7.11% from 15 years ago.

Kuala Lumpur has surged to RM708,402, surpassing the national average and setting a new record in the industry, followed by Johor, at RM656,648.

The least expensive states were Melaka (RM305,463), Pahang (RM338,690), and Perak (RM343,028).

The prices are mainly driven by demand. but it doesn’t come from the average citizen.

It’s the rich.

Many of them buy 3-5 properties, the more the merrier, with the purpose of renting them out and using the money to repay monthly instalments.

Due to this, housing prices have been artificially driven to a point where it’s impossible for the average fresh grad to afford.

The main issue is not even the rapid increase in housing prices. It’s our wages.

Within the same period, fresh grads now are still earning the same as compared to previous generations.

Meanwhile, literally everything has increased in price.

Then there are the golden rules which we have to abide by before owning a home:

• Have at least 5-10% of the property’s value for down payment.

• Another 5-10% for lawyer fees, stamp duties, Sale and Purchase Agreement (SPA), etc.

• Ensure that your monthly instalments do not exceed a third of your total income.

This means that, if your target home costs RM600,000, you would need to save up at least RM60,000.

Not to mention that you would need to already have 3-6 months of emergency funds too.

With fresh grads earning an average of RM3,000 per month, it would take them 8.3 years to save up RM60,000.

This is assuming that they set aside 20% of their pay.

By then, your down payment would have already inflated to RM106,000 (using the annual growth rate of 7.11% mentioned earlier).

How then, can the current generation even afford to buy a home?

Affordability is only part of the story.

If you buy a RM600,000 condo now, someone has to pay a higher price to buy it in the future.

By then, developers would have created newer and more modern condos beside yours.

This will greatly diminish the value of your property, as newer condos are more comfortable and offer much more facilities.

I think there are not a lot of upsides to owning a property right now.

Renting, on the other hand, gives you the flexibility to relocate closer to your workplace.

Your rent is fixed for 1-2 years (maybe more) depending on your agreement, allowing you to plan your expenses easily.

The costs are significantly cheaper, as most of the maintenance and repairing fees are borne by the landlord.

If anything unfortunate happens, you can always move to a different place.

Like it or not, I guess that’s the reality of the younger generation now.

What are other people saying about this?

What is the sentiment on owning property?

I asked this question to our patrons on Friday.

Out of 48 votes, 17 (or 35%) of them selected “renting with no plans to buy yet.”

Another 29% of them are already buying.

That’s all for this week’s newsletter!

Disclaimer: The information contained in this newsletter is for informational and educational purposes only. Nothing herein shall be construed to be financial, legal, or tax advice.

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