Buying Your First Home? Find Out How MyDeposit Scheme Can Help

Updated 23 Aug 2017 – By Loanstreet


Malaysia’s house price is 2 times more than the ideal affordable house price in key urban areas, according to Bank Negara Annual Report 2015. Because of this, our house prices are deemed “seriously unaffordable”, while houses in Kuala Lumpur and Pulau Pinang take it a step further by being “severely unaffordable”.

In light of this, our government has since 6 April 2016 allocated RM200 million to MyDeposit programme to partially offset the down payment on home loans for people who aspire to own their first home. On the face of it, it looks like another round of free cash giving campaign. However, we would want you to understand the full details of this initiative, given that this initiative has relatively small target group.

What is in the package?

The government will help foot the bill for 10% down payment, up to a maximum amount of RM30,000, of your first home.

Who is eligible?

  • You are a Malaysian citizen who is older than 21 years old
  • First time buyer in your household (meaning both of you and your spouse have not bought property before)
  • Your gross household income lies between RM3,000 and RM10,000 a month
  • You are able to get financing from banks

Condition

  • The price of the house is RM500,000 and below
  • The property must be sub sale
  • You can only sell the property 10 years after Sale & Purchase Agreement date
  • The property should not fall under any other category of government initiatives to encourage home ownership, such as 1Malaysia Civil Servants' Housing Programme (PPA1M), 1Malaysia Housing Programme (PR1MA), People's Housing Project (PPR), Federal Territory Affordable Home Project (Rumawip) and Rumah Mesra Rakyat
  • Sale & Purchase Agreement must be signed within 30 days upon receiving approval from MyDeposit

How can I apply?

  • Can only be applied online. Click here to see the step-by-step guide to apply for the scheme.
  • The application window is open from 6 April to 30 June 2016

Why is this a good initiative?

From the home buyers’ perspective:

Without doubt, this initiative benefits all Malaysians who have been planning to own their first home. The thoughts of owning houses in Malaysia are always being beaten down by high property prices in recent years. With down payment being taken care of, home buyers can afford to buy house without draining cash reserve, and keep cash especially for future monthly loan payment.

From the government’s perspective:

By giving out RM200 million to MyDeposit, the MyDeposit home buyers would potentially generate a total spending worth at least RM2 billion (assuming all properties are priced at RM300,000) in the property market. If this initiative is being rolled out regularly in the long term (although the current one will end in 30 June), it would provide a boost in domestic spending, and drive economic growth. Furthermore, to stay aligned with other government initiatives to bring down the property prices, the introduction of purchase limit of RM500,000 is a good way to mitigate the risk of applicants pursuing overly unaffordable property, and in turn discourage high-property-price market.

How would this become a bad initiative?

From the home buyers’ perspective:

According to Bank Negara, the middle income class with an average income of RM5,662 can only afford a house worth approximately RM 240,000, assuming they do not have existing loans, and use all residual income to pay mortgage loans without saving a single cent every month. Coupled with stagnant economy and high property price, this may not be a good time to buy a house. Think about the commitment that will make you pay for the next 20 to 30 years. A good way to prevent yourself stumbling into financial predicament is to consult a certified financial planner.

The scheme is a “helicopter drop” of money from our government, but we do not want to see people being lured into the fantasy of owning a house without careful financial planning.

From the government perspective:

The fact that both household debt are already sky-high in Malaysia doesn’t bode well for this initiatives. Thanks to stubbornly high property price and heavy reliance on individual transportation, Malaysia’s household debt to income ratio stands at a staggering 146%, which is among the highest within emerging markets. However, the ratio is deemed “unsustainable” because of lower income level in Malaysia.

Most households in urban areas are already indebted. By encouraging first home ownerships, the government is steering more and more “clean” people away from being debt-free, not to mention buying decision and S&P agreement has to be completed within two months when property prices are deemed seriously unaffordable.   

Therefore, this could turn out to be a risky move since the initiative, on the dark side, is encouraging people to take up expensive debts.      

Conclusion

Despite the ifs and buts, we still generally see this as a good initiative to help citizens who are really eager to own a house. Nevertheless, we would like to see this initiative to be launched with more price cooling measures, so that people may benefit not only from subsidized down payment, but also benefit from lower borrowed amount. By doing so, we could make owning houses more sustainable from the financial perspective.

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