Wednesday, 28 November 2018

How to Escape From the Rent Trap


There’s an increasing number of Malaysians are getting caught in the ‘rent trap’ and with the accommodation costs taking up so much of their income that they are struggling to save enough to buy a home of their own. Renting was once a stopgap measure while people saved up for a deposit to get a mortgage for their first home. Unfortunately, the booming property prices over the recent years have dampened the dream of home ownership for many, especially for those who intend to purchase property nearer to the Kuala Lumpur City Centre. Statistics has proven that property prices in Klang Valley have been rising between 15% and 18% annually. The Real Estate and Housing Developer’s Association Malaysia (REHDA) speculates that home prices will increase by about 2.6% margin of increase after the Goods and Services Tax (GST) that was implemented in April 2015. On the other hand, an apartment in the city center like Arte in Mont Kiara, can cost as much as RM676 per square foot, which means that home buyers will have to fork out close to RM550,000 to afford a basic 800 square-foot (sqft) unit, that’s more than half of the mean monthly household income.

Due to the disparity in property prices and income, many potential home owners are consequently locked out of the prospect of owning a home and are now facing a lifestyle of unstable renting. The increment of property prices have produced a spill-over effect on the rental market, which sets many tenants up for greater financial challenges as they now have to deal with diminishing ability to set money aside to save. We have examined few ways you can explore to avoid property rental trap with the end-goal of purchasing your own home.

1. Staying with parents

The biggest advantages of staying with parents is that it allows you to save a lot on expenditure, rent, utility bills to even grocery bills. This is true for fresh graduates who had earn an average starting salary of RM2,500. While the rental for a one-bedroom apartment in Kuala Lumpur can easily cost RM1,500 that will leave the struggling young worker with little to spare throughout the month.

Although living with your parents is hardly a feasible long-term solution. Why not save that money to secure sufficient resources for down payment of your first home? It will be more rewarding and if all else fails, you can always offer to do the house chores.

2. Keeping a healthy rent-to-income ratio

Usually, in the rental market, tenants should not be spending more than 1/3 (33.3%) of their monthly net income in rent. Many landlords would keep this ratio in their mind when screening tenants. Apart from providing financial security, it will give the landlord better place of mind knowing that their tenant is not in a huge money crunch every month.

If your rental is edging a little on the high side, you might want to consider moving to more affordable accommodations, which could be smaller or located further away from the city centre. However, you would need to consider aspects such as fuel prices and the length of your daily commute that could rack up significant costs and throw your budget off balance.

3. Factor in all your expenses

It is important to line out your budget and expenses to get an accurate figure of just how much you need to fork out on monthly basis. Miscellaneous items like maintenance cost, internet, insurance and utility bills needed to be factor in as they could take up a large portion of your income. This will allow you to set an appropriate budget to manage your finances effectively, as well as to identify areas in which you can make some adjustments to your savings.

Apart from contributing to your down payment, your savings could serve as an emergency fund to prepare you for life’s unexpected twists and turn. Here’s an advise for long-term financial security, it is recommended that you save 1/3 of your income for retirement, beginning in your 20s. You can keep tab of your weekly or monthly expenditures that will set you on the right financial track to escape rent trap.

4. Up your income

There are multiple ways to increase your income without working two jobs. Passive income can be generated by investing your money in investment tools such as unit trusts, real estate investment trust (REITs) or bonds. Younger adults can afford to be aggressive with investing strategies and consider investing in stocks. Although the market tends to be volatile and fluctuate easily, younger adults have the luxury of time to study their investments. Heading towards financial freedom attainment is never easy. However, being proactive and financially aware of your spending habits that will allow you to navigate the turbulent terrain with greater tact and ease.


9 comments:

  1. Harga sewa rumah dan harga jualan rumah tak pernah menurun pun saban tahun. Kalau tengok harga sewa rumah di bandar-bandar macam Shah Alam memang agak pitam. Kadang kala bayar sewa bulanan dah menyamai kalau kita bayar monthly installment untuk loan rumah. Walau bagaimanapun, kita boleh tengok skim sewa beli yang disediakan oleh Kerajaan Negeri bagi beberapa buah negeri seperti Selangor, rumah Selangorku, rumah PRIMA, etc.

    ReplyDelete
  2. sy bakal berpindah hjg thn ni mmg pening nk cari umah yg sesuai dgn gaji dan keperluan...waduhhh

    ReplyDelete
  3. Nieyl bersyukur sangat, sebab seawal usia 20-an, ayah nieyl berikan sebuah rumah untuk nieyl .Cuma kalau diberi rezeki yg lebih, nieyl nak beli rumah sendiri juga. Cuma kena cari yg sesuai dgn harga dan kemampuan bulanan nieyl dan husband :)

    ReplyDelete
  4. thnk you for sharing abam kie

    ReplyDelete
  5. satu, tinggal dengan parents mek tak berapa stuju. kedua tu stuju kalau kena dengan harga, mknenya kena allocate duit gaji untuk itu (nak ke tak nak memang kena buat). ketiga sama macam nombor dua jawapannya. keempat kalau perlu, kena buat dua kerja yang tak mengganggu kualiti kehidupan serta kerja hakiki.

    ReplyDelete
  6. Nak beli rumah blm mampu lagi.. Hehe..thank sharing

    ReplyDelete
  7. zaman sekarang duduk rumah dengan parents benda biasa, kadang orang nampak macam tak patut, tapi keadaan ekonomi yang mencabar,maka terpaksa...

    ReplyDelete
  8. Intersting, How to up up income..Good luck

    ReplyDelete