Should millennials buy or rent a home?

An expert says it depends very much on 2 main factors — individual preferences and financial condition

by FARA AISYAH / pic by TMR FILE

TO RENT or buy a home is a common dilemma for many millennials.

Renting seems like an easier way of having a home, although it is only a temporary approach of ownership.

Purchasing a house is a hard but important decision for many to make, as they have to save money for the down payments and manage their financials to qualify for mortgages, among others.

Bank Islam Malaysia Bhd chief economist Dr Mohd Afzanizam Abdul Rashid said the answer boils down to individual financial ability to own a house.

“We understand that most houses, especially those in the urban areas, are beyond the affordable threshold. In that sense, it is better for the millennials to rent a house as this will help them avoid unnecessary debt burden.

“Plus, renting a house would give them the flexibility to move around should they find a good deal (with lower rental), especially when the residential property market is plagued with excess supply,” he told The Malaysian Reserve.

Institute for Democracy and Economic Affairs senior fellow Dr Carmelo Ferlito concurred and said it depends very much on two main factors — individual preferences and financial condition.

“(An) individual preference means that some individuals prefer long-term stability over mobility and flexibility, while others might have the opposite preference. None of them is absolutely better.

“To pursue an individual preference also means to deal with the personal financial situation,” he said.

Ferlito also said there is nothing wrong with renting a house, debunking the saying that everyone must own a house for a better life.

“Renting is a better option if you want to have flexibility and mobility,” he added.

Axis Real Estate Investment Trust head of investments Siva Shanker said there is no answer to the dilemma.

“Everything depends on your financial abilities. If you can afford to buy a house, then it is good to buy it at a young age as you have longer time to accumulate wealth and invest in more properties.

“If you don’t have money to buy a house, then rent. The thinking that paying housing loan is cheaper than paying rent is completely flawed. In today’s market, there is no way rent can catch up to capital value,” he said.

Siva said it is easier to exit tenancy agreements compared to mortgages.

“If you’re unsure of your financial abilities, then you can rent a house for one year or six months. If you can’t afford it, then you end the agreement and rent a cheaper house.

“You can’t do that with mortgages. If you can’t serve your loan, it will affect your CCRIS (central credit reference information system) and financial abilities in the future,” Siva added.

Zerin Properties Sdn Bhd real estate negotiator Natasha Gideon said it is a ‘Yes’ and ‘No’ situation.

“The answer is ‘Yes’ if you have the means to do so and you have a stable job, and you reckon you will be able to repay your mortgage in the next few years, just until this fiscal slump dies off.

“If you work odd jobs or are just starting out, have no idea of where you want to buy, I suggest you do not give in to peer pressure. Rent a place before you decide to buy,” she said.

Natasha added that buying a house seems to be like an expensive trend to follow — instead of a need.

Khalil Adis Consultancy Pte Ltd founder Khalil Adis suggests millennials to consider buying instead of renting.

“Millennials should buy a property as Malaysia is a developing country where property prices are still relatively affordable compared to a developed country like Singapore where properties are very expensive.

“However, the supply of affordable homes, particularly within the Klang Valley, is very limited. As such, millennials will need to look further away where there are upcoming infrastructure projects like train stations and highways. Such projects will help unlock your property value over time,” he said.

Alternatively, Khalil added that millennials might want to look into the peer-to-peer (P2P) funding schemes or the rent-to-own (RTO) concept that is being rolled out by various private developers.