Buying your first home? The MyDeposit scheme can help!

Updated 01 Mar 2018 – By Loanstreet


Most Malaysians, while growing up, used to play 'pretend houses' in one way or another with their siblings and peers. Their imagination would carry them from grand palaces to woodland huts, as they created their own safe abodes, complete with furnishings. As adulthood set in, the dream of owning a property could not be further from reality as skyrocketing prices put many properties out of reach for the average household.

According to a report by the Department of Statistics Malaysia (DOSM), the median monthly household income for Malaysians increased to RM5,228 in 2016 from RM4,585 in 2014. The ideal price for an affordable home - based on that DOSM figure - should thus be RM313,000 before it's considered affordable. However, the prevailing price tags in fundamental urban employment centres remain steep, as evidenced by NAPIC's Malaysian House Price Index 2017 report, which states that the actual average price of a property in Malaysia is RM404,835.

This is a situation which has caused our house prices to be deemed “seriously unaffordable”, while houses in Kuala Lumpur, Sabah and Pulau Pinang take it a step further by being “severely unaffordable” based on the income levels of households.

In light of this, Prime Minister Datuk Seri Najib Tun Abdul Razak announced during the tabling of Budget 2018 that it will reopen the First House Deposit Financing Scheme (or MyDeposit) to help people who aspire to have their own property with their down payments on home loans.

"At the tabling of the 2018 Budget, Prime Minister Datuk Seri Najib Abdul Razak agreed to continue the MyDeposit scheme with an allocation of RM25 million," said Deputy Urban Wellbeing, Housing and Local Government Minister Datuk Halimah Mohamed Sadique.

On the face of it, it may look like another round of free cash-giving campaign. However, we would want you to understand the full details of this initiative, given that it can be potentially beneficial to you.

What is this scheme about?

From December 15 2017 till February 15 2018, the MyDeposit scheme was accepting applications to make home ownership possible for first-time buyers. New property owners who are succesful would see the government helping to pay the 10% down payment or a maximum amount of RM30,000 (whichever is lower). This is a one-off form of assistance, and would not need to be repaid.

Who is eligible?

  • You are a Malaysian citizen older than 21 years of age.
  • First-time buyer in your household (should a married couple want to apply, they will not be eligible if one of them has had a property before).
  • Your gross household income lies between RM3,000 and RM15,000 a month.
  • You are able to secure financing for the property from financial institutions.

What are the terms?

  • The price of the property is RM500,000 and below.
  • The property must be from a new licensed project under a licensed property developer only.
  • The purchase of a residential property under any private project is allowed so long as that project does not receive subsidies, incentives or other financial assistance from the government.
  • 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 scheme.

How can I apply?

If you think you were eligible for this scheme and had all the supporting documents, note that this scheme was only available for application online. All that was required was for you to go to the Sistem Pengurusan Perumahan Negara (SPRN) website, sign up for an account and fill up all the information required.

Why is this a good initiative?

From the perspective of home buyers:

Without a doubt, this initiative benefits all Malaysians who have been dreaming of owning their first home. The thought of owning a property in Malaysia was always something that was far out of rech for many citizens due in large part to the ever rising property prices in recent years. With one's down payment taken care of, home buyers can now afford to buy a property without completely draining cash reserves, as well as still having some cash on-hand for future monthly loan payments.

From the perspective of the government:

By allocating budget to the MyDeposit scheme, the successful MyDeposit applicants would potentially generate a total spending worth at least RM2bil (assuming all properties are priced at RM300,000) in the property market. If this initiative is rolled out annually in the long-term, it would provide a boost in domestic spending, and drive economic growth.

Furthermore, to stay aligned with other government initiatives to bring down the prices of properties, the introduction of a price cap of RM500,000 is a good way to mitigate the risk of applicants taking up overly unaffordable property, and in turn discourage high prices in the property market.

How would this become a bad initiative?

From the perspective of home buyers:

According to Bank Negara, the people who fall within the highest percentage of households are within the RM2,000 to RM3,999 income bracket and the RM4,000 to RM5,999 income bracket, with 26.1% and 22.6% respectively. These people would only be able to afford a property that has a price tag of RM222,150 - RM247,200 or RM318,600 - RM354,100 respectively.

This is assuming they do not have existing loans and use all residual income to pay their mortgage loan without saving a single cent every month. Coupled with a slower economy and the already-high property prices, this may not be a good time to buy a property. Think about the commitment that you'd have to pay for the next 20 to 30 years. A good way to prevent yourself from falling into a 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 property without careful financial planning.

From the perspective of the government:

The fact that household debt is already sky-high in Malaysia doesn’t bode well for this initiative. Thanks to the 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.      

To conclude 

Despite the ifs and buts, we still generally see this as a good initiative to help citizens who are really eager to own a property. 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 dream homes more sustainable from the financial perspective.

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