With the health of the property market looking so bleak nowadays, how will youths and those in the lower income bracket be able to afford a home of their own? This is where the government has stepped in with a host of affordable housing schemes to help out, such as the Skim Perumahan Rakyat 1Malaysia (PR1MA), Skim Perumahan Mampu Milik Swasta (MyHome) and Program Perumahan Rakyat (PPR).
Peek into PR1MA’s process
The one that is on many people’s minds is perhaps PR1MA which, for the uninitiated, is a plan that is targeted at the middle-income households (also known as the M40 group). The developments are located in key urban centres nationwide and are priced affordably without compromising on quality: between RM100,000 to RM400,000.
Homes under the scheme can be owned by anyone that falls within the eligibility bracket:
All one would need to do is register an account with Perbadanan PR1MA Malaysia and submit the name for a balloting process. The required documents would need to be verified and uploaded, after which you will be notified of any PR1MA development launch in your preferred locations. Finally, there is the step of selecting the preferred unit based on availability and determining the right financial solution.
There are a few solutions to choose from, courtesy of the PR1MA HOPE Home Assistance Programme: end-financing, rent-to-own scheme and Care by PR1MA. Now affordable home ownership just got a whole lot easier with the arrival of the PR1MA end-financing scheme, aimed at easing the burden of monthly instalments in the beginning. It features:
What is this new financing about?
Under this step-up financing scheme, which was implemented in January of this year, an eligible individual will be able to receive more for less. Remarkably reduced rejection rates allow for higher end-financing amount (90% to 100%) with lower monthly instalments, as compared to other conventional financing schemes.
PR1MA has a panel of four banks which interested homebuyers can choose from, Maybank, CIMB, RHB and AmBank. Consisting of a neatly packaged loan that lasts for the first five years, it allows for the individual to improve their financial planning through two methods.
One is that the monthly instalments are reduced for the first five years, but will be increased to a higher amount for the consecutive years until expiration of the loan. Secondly, the people who qualify would also be able to withdraw from their EPF Account 2 to be a part of the monthly instalments.
Nevertheless, according to the EPF chief executive officer Shahril Ridza Ridzuan, once the funds in EPF Account 2 are withdrawn to purchase a property, the account will be sealed. This means that no other types of withdrawal will be allowed, such as for medical and education purposes, even for Hajj withdrawals. As such, those who decide on this option will be trading in their long-term capacity for a short-term ability.
If there was an emergency and the individual required cash, then it would be a difficult situation because the PR1MA property cannot be sold off immediately; all new homeowners are obligated to keep the property for a minimum period of five years.
A closer look at the yays and nays
The most ‘yay’ part of this scheme is the increased maximum salary from RM10,000 to RM15,000. It allows for people from the middle-income group to purchase a PR1MA property as well, instead of just the lower-income group. The demand for the pricier units will also see an increase as more people will thus be able to afford them.
Another factor to consider is that with the reduced holding period on the PR1MA developments (from ten to five years), people who have already bought a property would be able to sell it after a fairly short period of time, whether it is because they are upgrading, their family is growing or they are looking to explore the market.
However, the raised ceiling price and lessened period of ownership factors do bring about some concerns. One of it is that the prices of other developments in the vicinity of PR1MA projects may be affected. Since the scheme offers considerably affordable prices for the units, the more established sub-sale ones may find it difficult to find ready buyers.
This will create a situation where speculative activities may take place: people taking advantage of the two modified regulations to flip properties in the near future. The locations of the PR1MA projects are favourable, which means that the prices will have a good possibility of appreciating in the five years holding period, thus the ease of selling them once the time is ripe.
The affordability of housing has always been a matter that weighs on many Malaysian minds. According to a research conducted by Khazanah Research Institute (KRI) in 2015, median house prices were 4.4 times the median annual household income on a national level. This signified that the housing market falls under the ‘seriously unaffordable’ market.
While it is commendable that the Malaysian government is clearly doing its best to help out people in the lower- and middle-income group to afford a house of their very own, it still remains to be seen whether their recently reworked rulings will bring about an adverse effect on the property market.