Ah… there it is, the age-old question of the century. Should you rent a home, or buy instead? How do we draw the line and recognize if we’re making a financially wise, or not-so-wise decision? People move out of their family homes to pay monthly rent and get their own places for numerous reasons. Some common ones that come to mind are – A need for privacy, relocating for the sake of a job, overseas studies, migration. Meanwhile others leave home for more unfortunate reasons – Bad blood with the family, getting thrown out of the house by your folks and eviction. The list is endless, but the goal is fundamentally the same, to have a place of your own.
租房 vs 买房：买房更常见吗？
The short answer to the question is a yes. Strangely enough, there seems to be a bias whenever the topic is thrown into a conversation. Particularly for Malaysians, a majority believe that owning a property is always the way to go. Perhaps this has something to do with the fact that society often associates homeownership as a measure of success in adults.
Over time, this causes many of us to anchor homeownership to successful self-worth. We’re sure you’ve heard of the 5C s in life – Cash, Condo, Credit Card, Car & Country Club (apparently, not Choice, Chance & Change). Without the fundamental 3Cs – Cash, Car & Condo, most would not consider you a “successful” individual.
That brings us to a question that begs to be answered- Just how feasible and attainable can buying a property be? And at which point does the benefits of buying a home outweigh renting one? There are multitude of factors regarding this matter.
First things first, you should know that Malaysia is currently going through a severe phase of property overhang. Property overhang happens for several reasons – A mismatch in seller-to-buyer pricing, poor urban planning, studies inaccurately reporting the state of our property market, the lackadaisical attitude among developers to name a few. And despite the ongoing issues, properties are still as shamelessly expensive as ever.
So, why are Malaysian properties valued at such murderous prices? According to the Global Property Guide, house prices in Malaysia rose an average of 5.2% yearly, 3.3% inflation-adjusted, between 2016-2018. In case some of you don’t know what inflation adjustment is, it means removing the effects of inflation to determine an asset’s actual value – commonly used in investment. Theoretically, if there is a property overhang in our country, housing prices should go down, yes?
Pricing and property overhang, two extremely conflicting elements, are insufficient to paint the bigger picture. The other force at play here is the imbalance in the rise of household income to housing prices ratio, which is reported to be 5.6:7.9% as of 2020. Couple that with the recent (and ongoing) MCO that has affected both consumers and property market alike, it’s easy to see people aren’t buying properties still, despite numerous efforts by the government to help consumers afford one i.e.: HOC 2021, 鲁马威普 和 鲁玛雪兰莪.
Let’s assume the MCO and rising living costs have urged you to rethink your home buying plans and you’re wondering if renting is the better alternative for current housing market. Maybe you are currently renting and would like to find out if your decision is sound. In that case, let’s take a look at some of the pros and cons of renting a home.
Instead of saying renting is cheaper, we prefer the word predictable expenses. Rent prices are typically fixed until your tenancy agreement with the landlord ends, in which case it is subjected to renewal and potential rental price review. Until then, having a fixed rental price means more leeway in budgeting your financial situation. You need to prepared rental deposits. Knowledge, or clarity in this sense is power, and that allows you to save up or scale back your expenses monthly. There’s a common perception the longer you spend your time renting properties, the bigger your loss. This is because all the money spent doesn’t build equity, which is true.
Flexibility can be both a boon and a bane for many. If you’re unfazed by the sudden request from your landlord to move out of their property like we mentioned above, good for you. But if sudden eviction bothers you, then this is the part and parcel of flexibility that you’ll have to put up with. Overall however, renting allows you to relocate with relative ease. If you find your current living space undesirable, you merely have to stick it out until your tenancy agreement blows over before packing up and leaving. Some may choose to terminate their tenancy agreement early, either by providing a notice period, buying out, or locating a replacement in their place. Worst case scenario, you lose your deposit.
Renting a property simply means you’re only living there for a brief period of time. Everything else is secondary. Suppose the area you’re living in suddenly blooms in the property market overnight, and your landlord wants to bump up the rental price. In that case, you might have a reason to worry about the housing costs. Or perhaps your area has suddenly turned into a high crime rate area, your quality of life might take a dip. But neither of these concerns the property value, not unless you’re renting-to-own or looking to resell.
There is truth in the saying that owning a home brings you and your loved ones a sense of belonging. And perhaps it is the same belonging that has motivated many others to pursue the dream of owning a home for a cliché happily-ever-after. There’s nothing wrong with that if you’re willing to spend a portion of your life paying off mortgages and miscellaneous costs to keep the house running. Even a nomad would eventually think about settling down at some point in their lives, simply because the older we get, the harder it is for us to get around with our mobility. You’ll get the pride of ownership.
Buying a home is one of the most tedious things you’ll ever face as an adult. There is a reason people say buying a home is a painstaking affair. Even after saving up and purchasing a home, you’ll have to tank upfront expenses, ongoing expenses, additional and hidden costs. And we’re not talking about renovations, furnishings and moving homes; we mean closing costs.
Say you’ve bought a house, but you have no plans to live in it for now. Leaving the place vacant is a waste. In that case, you could consider renting it out to, hopefully, a kind and responsible tenant that won’t leave you feeling like you’ve let your place to a tenant from hell. The residential property could be turned into a reliable source of income.
Another point that falls under home equity, though it can stand on its own too. We’ve previously established that owning a home can help build equity. In financial sense for long-term period, it is good for buying a property. The fundamental principle to having better equity is to pay off your loan in the shortest yet most attainable time possible, or spruce up your place and hope to the property market gods that your property value rises. Getting up to the property ladder could be easier for you.
The dilemma of renting or buying a home is never a straightforward one. There are multitudes of factors that prospective buyers, first-time buyers and renters need to acknowledge at play here that will affect your choice to opt for either one. At the end of the day, it’s important for us to realize that there is no hard and fast rule to homebuying. Ultimately, it all boils down to how we choose to live our lives instead of letting others dictate the major life choices that we make.