THE lowest-income groups should rent houses because of their deteriorating affordability to own a home, a recent Khazanah Research Institute report recommends.

The report – Rethinking Housing: Between State, Market and Society – said this can help those who are currently not ready to shoulder financial commitments that come with home ownership.

Lead author of the report Suraya Ismail said renting is an option given the high proportion of consumption-related debt for B40 households.

The report citing Bank Negara Malaysia’s data said about 53% of household debt of the B40 group in 2015 were related to consumption, including purchase of vehicles and personal financing.

“Renting is not an inferior good, it is part of shelter. It is something you can do until the salary is good enough,” Suraya said.

She said some are in a hurry to own a property at a young age.

Property expert PPC International managing director Siders Sittampalam told The Malaysian Insight that the maximum value of a house, for those earning RM3,000 a month, is RM150,000.

He, however, said in places, such as the Klang Valley, there is hardly any affordable housing available in that price range.

Siders said one should be able to allocate about a third of his income to service borrowings for home financing, assuming that there are no other forms of financial commitments.

“(Theoretically) repayment should not exceed one third of your salary. Practically, you certainly have other commitments.”

The property expert said affordable housing is not seeing much of an uptake due to the mismatch in supply and demand, with prices often exceeding buyers’ affordability.

This, he said, had eventually led to unsold units.

“Many of the loans get rejected because the buyers are not eligible.

“On top of the cost of buying the house, there is also a maintenance cost, known as outgoings.”

This includes assessment tax, quit rent and in the case of a high-rise building, service charges.

“That’s why it is virtually impossible for a person in the B40 group to buy a house.

“Many have bought it with the assistance of parents who churn out large deposits.”

Since allocating a third of a monthly salary for home financing can be too taxing, renting remains the “only option” for those in the B40 group until income levels exceed RM4,000 per household and if property value does not escalate.

B40 beg to differ

A freelancer who declined to be named, and who belongs in the B40 group, said most people under the category cannot afford to buy a house even if they wanted to.

“For now, nobody is buying a house except for the ones who really have money. I don’t think the B40 group can afford it anyway,” she said.

“They can’t even if they want to. People have to rent unless they are staying outside Kuala Lumpur or Selangor.”

S. Keshvindran, however, is of the view that owning a house is possible.

“It’s true, because it’s the first rule of money management. Do not commit yourself to invest into something you can’t afford.

“I think most B40 know this, but the real question is, for how long are we supposed to rent a house?”

He said dishing out huge chunks of salary on rental, in addition to expenses and other financial commitments, is not practical.

The 27-year-old technician said the rental can instead be spent on servicing monthly repayments for home financing.

Keshvindran said buying a house is an investment, whereas renting will not generate a return as opposed to owning the asset.

“They are telling us to spend money first so we can save, and I think that’s an absurd and very shallow statement.” – May 13, 2019.