Will You Ever Unlock Your First Home?

With the prices of property on an upward spiral, buying a home may seem like a fool-proof investment vehicle. But while some people are still able to afford the sky-high prices, most Malaysians can’t.

These days, the purchase of one’s first home is fraught with hard decisions amidst the few choices in property market. The short of it is that the laws of supply and demands are driving up the prices of property in urban areas.

Dig a little deeper, though, and you will discover a chaos of speculation, increasing material and labour costs, profit-driven developers, and scarcity of land. While changing circumstance is far beyond the reach of most, there are several options available in the here and now to address home ownership concerns.

What are your options?

In 2013’s Budget, the government allocated RM320 million to Syarikat Perumahan Negara Berhad to construct 1,855 low- and medium-cost houses priced between RM110,000 and RM250,000 and 21,000 units of Rumah Mesra Rakyat, which, after a RM20,000 subsidy, will sell for about RM45,000.

Furthermore, the National Housing Department was allocated RM543 million to build 20,454 units of public housing priced between RM30,000 and RM40,000 (as opposed to the market rate of RM120,000). The government had also instituted a requirement for developers to allocate 30 percent of housing projects above five acres for low-cost housing.

Two years ago, the government set out to alleviate the housing situation by introducing the My First Home Scheme or Skim Rumah Pertamaku (SRP) to provide 100 percent financing for those earning RM3,000 and below. Soon after, the income limit was raised to RM5,000 and the maximum loan amount was hiked up to RM500,000, provided that applicants could prove that this was their first home purchase. Applicants whose loans were approved could have their down payments waived to help finance their loans or to furnish, as well as, renovate their new homes.

Am I eligible?

Following the introduction of the SRP, the 1Malaysia People’s Housing Programme (PR1MA) was put forward to assist individuals and families in the middle income bracket, that is, for those earning between RM2,500 and RM7,500. PR1MA came to be as a result of the PR1MA Act 2012 where the government will endeavour to plan, develop, construct and maintain affordable housing for these middle-income folk in key urban areas. The main thrust of the programme is to build 500,000 affordable homes by 2018.

When and how much?

In the immediate future, 80,000 units will account for the first batch of PR1MA houses to be built under a public-private partnership. 20,000 houses have already begun construction with another 60,000 to roll out by end of 2013. These 80,000 are planned to be ready for vacant possession between 2015 and 2016. Of the 80,000 homes, PR1MA will build 50,000 homes on lands belonging to the Federal or state governments, government agencies, and/or government-linked companies, whilst the other 30,000 will be built by private developers.

These homes will cost between RM100,000 and RM400,000. Although first-time home owners will be favoured under these schemes, the government plans to offer PR1MA homes in areas where the demand by first-time home owners is low to existing homeowners.

Are these effective?

However, the effectiveness of the SRP and PR1MA programmes remain to be seen. It has been reported that loan approvals under these schemes only range in the hundreds despite having over 250,000 applications. Furthermore, the pace and the ability to produce low-cost homes of quality is uncertain as the implementation of building these homes in different states have different ramifications for the private developers involved in these public-private partnership. The chief reason for this, besides costs, is that each state has different laws and regulations that affect property development.

Doing your homework

A key problem for first-time home owners is the issue of affordability. In creating options for oneself, one first needs to understand the mechanics of affording a home and the costs involved. That is where iMoney comes in: as a centralised location of the best financial and market information on the home loans, coupled with latest information and news to help first-time home owners make wise decisions and get the best deal in their first purchase.

Many first-time home buyers are not aware of the cost involved in purchasing their first home and how one can stretch their Ringgit further. Comparing all home loans available in Malaysia can help in choosing the most suitable loan package according to one’s means.

Furthermore, engaging agencies like PR1MA or talking to banks is a good start towards augmenting one’s understanding of purchasing a home. Whilst the 2014 Budget is yet to be revealed, this generation of young, first-time homeowners will have to assess their options through financially-astute approaches regardless of government initiatives.