HOME ownership has always been a sore subject among millennials especially with the ever-present financial stretch making it hard for those living in major cities to realise their dreams of finally having a home of their own.
According to a Bernama report, among the younger generation’s major concerns are the property prices that are now multiple times more than the annual household income.
In fact, millennials, aged between 25–40 (and even those of up to 45), are delaying the purchase of their first home. But what’s keeping them from buying homes at the rate of previous generations?
Bernama reported Universiti Putra Malaysia’s (UPM) Dr Mohammad Mujaheed Hassan as saying that a study has indicated that other factors also contributed to the issue.
Citing a study entitled ‘The Variations In Preferences of The Young Generation In Klang Valley Towards Housing Property Demand’ conducted by UPM in mid-2022, Mohammad Mujaheed, who is also involved in the research, noted that today’s younger generation has high financial commitments.
A total of 2,523 respondents aged 25 to 45 in Kuala Lumpur, Selangor and Putrajaya with individual monthly income of RM4,360 to RM9,620 were interviewed in the study aimed at identifying this group’s financial level, in terms of their ability to save, invest as well as their financial liabilities.
Speaking to Bernama, he said that out of the total, 1,697 respondents (67.3%) were committed to monthly car instalments of between RM800 and RM1,200.
“For them, owning a car is a benchmark of their success in life. Ironically, some of them take the public transport to work and leave their car at home,” he remarked.
Besides that, Mohammad Mujaheed said the study also shows that 1,833 respondents (72.7%) have credit card commitments with at least two banks.
“Having a credit card is a ‘responsibility’ for the younger generation as an alternative for them to have regular access to credit and as cash advance.
“The study also reveals that 843 (33.4%) of respondents were renting with monthly rental of RM500 to RM1,200,” he said, adding that 73.9% of the respondents had no disposal income for savings or investment.
According to Mohammad Mujaheed the study further revealed that the younger generation prefers to rent due to several factors, although they can afford to buy their own home based on the monthly rentals they paid for.
“They argue that the location of the house that they can pay for is far from their workplace, on top of other payments such as tax assessments, maintenance fees, etc that will further add to their financial burden,” he added.
“By renting, they only have to fork out for their rent and utility bills. They said that their rented house is only for them to rest and sleep at night. Much of the time is spent outside their house and at work.”
At the same time, some of these millennials are tied to personal loans, among others for their wedding, while others are caught in the credit card debt trap.
This situation is not surprising as the Credit Counselling and Debt Management Agency has earlier highlighted that the majority of youth who were declared bankrupt in the country was due to credit card debts.
According to Mohammad Mujaheed, the tendency for the younger people to give other priorities rather than home ownership has caused many to be saddled with longstanding debts, hence preventing them from buying a house despite getting older.
“The situation is rather serious and has largely contributed to cases of being blacklisted by financial agencies, living in debt, bankrupt and perhaps problems such as stress, borrowing from ‘along’ (loansharks), etc,” he said.
He said while it is not wrong for the younger generation to own a car or apply for personal loan, they should give priority to home ownership as it is an asset compared to a vehicle which is a liability as it depreciates in value each year.
“A house is an asset with its value appreciating every year. While it is not wrong to rent, but on hindsight, through monthly rentals, it seems that we are ‘helping’ the owner to settle his housing loan repayment,” he reckoned.
Mohammad Mujaheed said if the problem persists, this group will continue to delay the purchase of their home to meet other needs, adding that it is feared that they will be unable to own their own home in the future given the consistent upward trajectory in the price of residential properties.
“The younger generation should no longer adopt a wait-and-see approach. The longer they wait, the higher the prices of houses given that the growth of household income is not at par with the growth in property or house prices,” he was reported as saying, adding that what’s worrying is that this group will end up as ‘homeless’ when they reach their golden age.
Without ruling out the possibility that this group would ‘share’ a home with their parents or other family members, Mohammad Mujaheed said that this could only be realised if their parents actually own a house of their own.
“Otherwise, a family will be faced with the possibility of being homeless or continue to rent permanently (from one generation to another) as they do not own any property,” he stressed.
Housing affordability gap
Meanwhile, Universiti Teknologi Mara (UiTM) Seri Iskandar’s Dr Azizul Azli reckoned that the huge gap between income levels and house prices is what has prevented the younger generation from owning a house.
“For example, annual salary increments are about 2% while property values increase between 6–8% each year. Just imagine, for only two years, property prices have risen by 12% while salaries have only increased by 4%,” Bernama quoted him as saying.
“Despite the price fluctuations in the post-COVID-19 property market recently, prospective buyers are still not able to ‘catch up’ as their income is still at the minimum level.”
As an example, he said average starting salary for fresh university graduates is around RM2,500 a month and if they buy a house worth RM300,000, their monthly commitment will be about RM1,500, and that is not viable when the escalating cost of living is factored in.
That being said, he went on to call on the government to play a more effective role in helping the group to own their first home at a younger age.
Incentives, he added, should be given to developers to build more landed properties so that this type of residential property can be sold at lower prices.
Azizul pointed out that while the country has an abundance of land to be built on by developers, the developers are “obviously profit-driven” by building double-storey houses as this only involves small-built-up areas but with larger profit as they can sell hundreds of units for small land lots.
Azizul also said that the current practice of allowing developers to provide basic amenities at housing areas further contributed to the hike in house prices.
To reduce the costs, he said the government can take over the construction of such facilities in addition to providing subsidies for building materials and others that may be deemed necessary.
“At the same time, there is also a need to reduce the bureaucratic red tape as this has also contributed to higher construction costs, causing developers to hike their selling prices,” he added. – Jan 19, 2024
Main pic credit: Bernama