KUALA LUMPUR, Sept 18 — As Millennials and Gen Z enter their prime earning years, the decision to rent or buy a home is becoming increasingly pivotal.
With rising property prices, shifting job markets, and evolving lifestyle preferences, young adults are faced with a complex choice.
Should they embrace the flexibility of renting or invest in the long-term stability of homeownership?
This guide breaks down the pros and cons of each option to help you navigate this crucial financial decision.
Datuk Chang Kim Loong, honorary secretary-general of the National House Buyers Association of Malaysia, sheds light on the key factors to help you navigate this choice.
Renting
Pros:
- Lower upfront costs: Renting requires a smaller initial deposit compared to the significant down payment, legal fees, and stamp duty needed when it comes to purchasing a property.
- Fixed monthly expenses: Renters benefit from predictable monthly payments without the additional costs of property taxes or maintenance, which are typically handled by landlords.
- Flexibility: Renting offers the freedom to move easily if job opportunities or lifestyle changes arise, making it ideal for those with uncertain long-term plans.
- Reduced financial risk: Renting avoids the potential financial risks associated with property value fluctuations and market volatility.
Cons:
- No equity building: Monthly rent payments do not contribute to property ownership or equity accumulation.
- Potential for rent Increases: Renters may face higher rental costs over time, which can impact long-term financial stability.
- Limited customisation: Renting often restricts the ability to personalise or renovate the living space according to personal preferences.
- Stability concerns: There is a risk of being asked to move if the landlord decides to sell the property or change rental terms.
Buying
Pros:
- Equity building: Mortgage payments contribute to property ownership and equity accumulation, potentially enhancing long-term financial security.
- Stability: Homeowners enjoy greater stability without the risk of rent increases or lease terminations, provided mortgage payments are maintained.
- Personalisation: Owning a property allows for customisation and renovations to suit personal tastes and needs.
- Potential for appreciation: Property values may increase over time, offering the possibility of financial gains through appreciation or rental income.
Cons:
- High upfront costs: Purchasing a property involves substantial initial costs, including a downfpayment, legal fees, and stamp duty.
- Ongoing expenses: Homeownership comes with additional costs such as mortgage payments, property taxes, and maintenance, which can add up over time.
- Less flexibility: Buying a property ties you to a specific location, making it more challenging to relocate if personal or professional circumstances change.
- Market risk: Property value can fluctuate, which may lead to financial losses if the market declines.
The choice between renting and buying a property in Malaysia depends on various factors, including financial situation, market conditions, and one’s lifestyle.
In short, renting offers flexibility and lower upfront costs, while buying provides long-term equity and stability.
As there’s no "one size fits all” answer for everyone, financial planner Felix Neoh from Finwealth Management, advises young Malaysians to always do their homework first before any transactions.
"Purchasing a property is an opportunity to purchase an asset with capital appreciation potential. However, it can also be a cause of capital loss and financial instability and hardship, regrets.
"Do your homework well so that you do not overpay for properties. Compare the price per square foot vs rental per square foot of different locations so that you know the potential of the property in question” he said.
Centre for Market Education chief executive officer Carmelo Ferlito tells youths to consider the trade-offs in terms of career opportunities before signing up for a new home.
"I think Malaysians should realise that it is perfectly normal not being able to purchase a property after graduation or in the early stages of their career.
"It is always a matter of trade-offs based on personal preferences.
"For example, if you wish to remain flexible in your work decision and you are open to accept experience abroad and move around the world, then you should avoid long-term financial commitments,” the economist said.
Recommended reading:
- Is owning your own home the ultimate goal for young Malaysians today? Well, yes and no, and here’s why
You May Also Like