KUALA LUMPUR, Oct 16 2017 : Young bumiputera entering the job market need to get their priorities right by putting home ownership on top of their list.
This was an advice by Datuk Seri FD Iskandar, the president of Real Estate And Housing Developers’ Association Malaysia (Rehda) in a recent interview with The Mole.
“I think it was the right call when our Prime Minister said the bumiputera community should get quality properties in urban areas. For that, we should buy ourselves a house that we can afford and not worry too much for now if it is located in an area not yet fully urbanized. The urbanization will get there sooner than we expected,” he said.
Iskandar was referring to a statement by Datuk Seri Najib Razak on Sept 29, when he called for the Bumiputera community to look out for opportunities to expand their ownership of property in major urban areas.
The government, through Pelaburan Hartanah Bhd (PHB), had created the Amanah Hartanah Bumiputera (AHB) or Bumiputera Property Trust scheme to strengthen Bumiputera participation in the national economy through creation of wealth in the commercial real estate sector.
Praising the scheme, Iskandar said bumiputera, especially those who just started their career should consider investing in it considering that it had been paying over six per cent dividend over the past three years.
“Even the banks can’t offer that much. We have to quarrel with them just to get 3.75 per cent. So, please make it a priority to buy property. It is your biggest investment, biggest commodity and biggest asset.
“You hit the job market at the age of 25 and you usually get married when you are 27 or 28…so, by that time you would want to live in your own home. Therefore, just go ahead and buy a house that you can afford. It will be okay as the property prices will go up,” he said.
Iskandar insisted that with the exception of very few cases, those who bought property will see their value increasing over time.
“I always like to give my own example…around the end of 1991, I had just started working for two years and didn’t have much money. My family was staying in Damansara Utama at that time and not far from our house lived this uncle who was planning to migrate to Perth (Australia).
“He asked me, Iskandar, why don’t you buy my house…so, I asked back how much (he was willing to sell it). His house was an end-lot….it’s quite okay, as he offered RM200,000 while its market price at that time was RM220,000. It was completed around 1978-79, so at that time it was just 13 or 14 years old.
“After going to the banks to check how much loan I was entitled to take, I told the uncle that I could only afford to pay RM180,000. We haggled a bit before setting the final price at RM190,000.
“I then sold some of the shares that I bought earlier and pay him RM40,000 (cash) while the rest was settled through a Bank Bumiputera loan. I still have the house, and today its worth is about RM1.5 or 1.6 million.
“So, yes, it is your biggest investment in life, but it is also the biggest enhancement of asset value in your life. Value of everything else drops. Sorry to say, but when you buy a car, its value drops by 20 per cent the moment you drive it out of the dealership.”
Iskandar said it is important to educate young bumiputera about the importance of investing in property.
“Cars, accessories, handphones…well, I’m still using my old Blackberry, but even among my junior staff I noticed that those who used to own a (Samsung) S7 have now upgraded to S8. Last Monday, I got a shock as there were even those who are now using the new iPhone 8.
“I was thinking, my God! They’re willing to pay RM5,000 for a phone, while just six months ago they were using iphone 7.
“I asked (one of them), have you bought a house….and he said, not yet as he was still living with his parents and he is just 27 years old. I told him that whatever it is, this is the best time for him to buy a house as he should prepare (for his future) from now.”
Iskandar said it is normal for those who just started their career to complain about high property prices, but they should bear in mind that the rate will just go higher if they do not buy a house now.
“You may say now that it’s expensive but six months from now you would probably lament ‘why didn’t I buy it at that time’.
“I’m talking about those between 20 and 30 years old…you must remember, they could get a maximum bank loan for a house for up to 30 years. So, they should buy now.”
Iskandar said it would be good enough for first home buyers with limited financial resources to buy properties located in the outskirts of an urban centre.
“So, what has happened now, if you cannot afford to buy a home near KLCC, Bangsar, Damansara Heights…it’s okay for you to buy in Puchong.
“That’s because in five years’ time, you will realise that you can no longer afford to buy properties in Puchong.
“It’s really alright to buy properties around KLIA, Sepang, Dengkil, Salak South…because that is where the Federal capital is, complete with the infrastructure. Even if it is not fully urbanized now, it will be in five years’ time.
“Always find something that you can afford, as next time Inshaallah (God willing) you can come back to the (property) market and get an even better deal.
‘You must bear in mind that the house that you buy now, even if it’s far from the urban centre, will increase its value so that you would have extra capital if you want to buy a better property in future.”
Iskandar said he had given the same advice on property ownership to young bumiputera at conferences and would like to offer the same at institutions of higher learning.
“I want students to know that once they enter the job market, instead of buying a car first, they should invest in property instead. I know it’s going to be tough for them at first, but they simply have to do it.”
He also suggested several incentives for first time property buyers such as zero interest rate for housing loans to buy a house lower than RM500,000.
“We can then set conditions such as that they can’t sell the house for up to seven years as we want to avoid speculations or it being rented out. I think we have to start campaigning about this,” he added.
On property prices which keep on rising, Iskandar said there should be a holistic approach involving the federal and state governments, local authroties as well as developers.
“For instance, the Selangor government’s land conversion premium used to be about four or five per cent of future market value but today they charged us (developers) 25 per cent.
“Then there’re the development charges of the local authorities and also infrastructure development charges…everything being dumped on the developers.
“Developers, they would take the burden as much as they can, but once they can’t do it anymore, they will pass it to the buyers,” he said, adding that all quarters must work together to manage the property prices issue.
Iskandar, nonetheless, cautioned that it would also not be good for the country’s economy if property prices are to go down.
“It must be a healthy increase. How do you define a healthy increase? It must be between five and seven per cent. So, for property prices to go down, I think it’s going to be almost impossible. What we want is for it to stabilise and not to go up too fast or too high,” he said.