Not everyone loves to buy property. Some (usually the younger ones) say spending on vacations is better than buying property. The former gives a feeling of happiness. The latter merely adds debt and worry of not being able to pay on time.
Here are 10 reasons why some don’t buy that first property.
1) Paying too high rental today versus my salary. Two issues here. One, rental of RM2,000 per month means you are likely staying in a property valued at RM500,000-600,000. (Yes, the rental market is not awesome for some owners right now).
Two, you will not want to downgrade by buying a property of your own and paying more. A RM600,000 property requires a monthly mortgage of RM2,700. We have yet to calculate the renovation and the furnishings.
2) No money left every month. Plenty of choices today. Wants versus needs is usually blurred until you write it down and categorise them accordingly. RM300 saved is enough to pay for a property which is nearly RM70,000 or higher. Crazy but true…
3) Most of my friends don’t own a property anyway. Peer pressure is working negatively here. A reminder though: Usually only the minority will be better off than the majority. That’s why there’s just one manager and hundreds of junior executives.
4) Buying that property can wait. I am still young. Frankly, this is quite true. Prices will always have to be affordable regardless of when we buy, whether it’s today, tomorrow or 10 years later.
The reason for affordability? They will use distance (build it further away) or size (build it smaller). So, think – which is better? Something BIGGER and NEARER versus in the future when it’s further and smaller?
5) I’m staying with my parents. They love you, and you don’t want to move out. It’s the best opportunity to buy a property, rent it out and still stay with your parents. Many people do not have this option. Always be grateful with what you have and make it work.
6) I need a BETTER car. Better is very subjective. For a junior executive, a Vios enables him to be perceived as much richer than his peers but there will be a time when a Vios can be bought with just the credit card. (High credit limit). However, buying that Vios versus that reliable Axia for example will really take away too much of our salary every month.
7) Nothing fits me in the market. The ones you want are too expensive. The ones you don’t want are within what you can afford.
By the way, that first property will usually not be the only property you stay in forever. Buy one, start paying and a few years down the road, upgrade to a better unit and sell the current one or rent it out. After a few years, the rental yield is usually positive.
8) I hate property. Just remember that property can be the key to everything you like. Selling a RM400,000 property which has appreciated to RM500,000 six years down the road is a vacation plus a new Vios and many more other smaller stuff.
IF you still hate property at that time, you can sell and keep that RM100,000 or more. Surely we do not hate cash?
9) The banks keep rejecting my loans. Whoa, if this is the reason, is it the fault of the bank? Actually when banks stop lending, they stop earning profits. They want to lend you money. Just try to ensure you qualify for one and everyone will be happy.
10) I actually want to buy. I am just waiting for the property bubble to burst. This is a question of when, right?
This article first appeared in kopiandproperty.com
Charles Tan blogs at property investment site kopiandproperty. He dislikes property speculators and disagrees that renting is better than buying. He thinks it’s either property or poverty. He is presently the CEO of an auction house auctioning assets beyond just properties.