The challenge of owning a house in urban areas

AFFORDABLE housing is a subject matter which a great many homebuyers are talking about. Often, friends will comment how crazy the housing market has become.

Those who own one house, which is their primary residence, might feel the pinch when it's time to upgrade. Those who own more are probably enjoying the growth in equity.

For those who do not own a home and just starting their careers or a family, it's a nightmare for them. When salaries have not kept pace with the appreciation in home prices, the dream of owning a home becomes more distant by the day.

Knowing that is a growing problem, the Government on Tuesday launched My First Home Scheme, a programme that will enable people earning less than RM3,000 a month to get 100% financing from banks to buy houses costing between RM100,000 and RM220,000 to be repaid over a period of 30 years.

The monthly repayment sum should not exceed a third of their gross salaries but can go up to 50% if a bank allows for such a percentage.

The premise of the scheme is great but the way home prices are going, one will find it hard to find a home between that price range in the major urban centres of Malaysia.

It should be possible to find homes priced in that range in the rural and smaller towns in the country, but not in the major urban centres of the country.

The plight of the young or those with a salary of up to RM3,000 a month over housing needs will exacerbate as urban migration rises.

In 2009, according to Unicef, 71% of the population in Malaysia was urbanised but those flocking to the large and expensive cities will rise even further as the economy develops, more so as services widen its gap with manufacturing as the engine of growth.

The other issue is the rising cost of living.

Let's say a person working in Kuala Lumpur earning just under RM3,000 a month wants to buy a house costing RM220,000. If he or she is lucky to find such a house and is charged 4% interest over a period of 30 years, the person will have to pay around RM1,050 a month in house repayments.

Knowing that houses costing that much would be a long way out, a person would most probably need to own his or her own vehicle and factor the cost of vehicle ownership, utilities and the ever-rising cost of food.

He or she will do well to balance his ledger at the end of every month.

The best solution, as I have said before, is for the federal and state governments to actually build homes costing that much in the major urban centres for the public to buy because I don't think there is a private sector developer in town who will be willing to sell homes at that price.

Deputy news editor Jagdev Singh Sidhu wonders if it's even possible for a higher middle income family to afford a second house in Kuala Lumpur.

By The Star (by Jagdev Singh Sidhu)