To buy or to rent?

PETALING JAYA: Buying a new home is a long-term commitment and by its nature, nothing else can be more daunting.

It is an obligation that can last up to 30 years for the average purchaser.

In view of this, many choose to rent and property players say that is not a bad option.

As head of corporate investment at Carey Real Estate Sdn Bhd Shawn A. Valerio pointed out, a new terrace house in Rawang could cost about RM500,000.

If the purchaser gets a 90% loan, it would mean a monthly repayment of more than RM2,500.

On the other hand, the same house can be rented for RM1,500.

“That is a savings of RM1,000 every month and that money can be invested elsewhere, such as mutual funds or investment-linked insurance properties,” Valerio told theSun.

Otherwise, he said the savings could go into purchasing a cheaper property as an investment.

The first step towards acquiring a property is itself a big commitment. Apart from the downpayment, which is usually 10% of the cost of the property, there are legal fees and other costs.

By the end of the 30 years, when the loan has finally been settled, the purchaser would have paid twice the original cost of the property, taking into account the interest.

The good news is that by then, the value of the property would also have more than doubled, so there is no loss.

While buying property is an investment, renting it is seen as “burning money”. Nonetheless, according to financial advisor Marshall Wong, there are advantages to renting.

“One is practicality. When you rent, it is easier to move if you have a need to. For instance, you may want to live closer to your workplace, so if you get a new job somewhere else, you are likely to seek out new property to rent,” he said.

On the other hand, there are many considerations to account for when purchasing property.

“This is especially so now when the Covid-19 pandemic has led to so much economic uncertainty,” Wong said.

“For instance, is your job still as secure as you think? Will your industry or your job survive through the lockdown?”

Wong said making a commitment to buy new property during the pandemic may be a risky undertaking.

“If it’s a newly launched project, are we confident that the developer has the financial capability to see the project through?”

Another consideration is the fact that purchasing property is not a one-time expenditure.

Over the course of ownership, there are repairs and maintenance costs to worry about, as well as quit rent and assessment rates to be paid to local authorities.

Finwealth Management Sdn Bhd director of financial planning Felix Neoh said for anyone who is still unsure which way to go, the better option is to rent first.

“Look at that as a trial run. In the meantime, you can review your lifestyle needs and net worth position to see if it is viable to commit to buying a house.”

Neoh said the idea of buying a house now and selling it for profit later has its roots in the colonial past and is reflective of a capitalist mindset.

“Others will argue that it is our upbringing that has ingrained in us the belief that having a roof over our heads brings peace of mind. There is also the social perception that you have not ‘made it’ until you own your own home,” he added.