Avoiding the Pitfalls of Expediting Home Ownership
By Dr.Dzulkefly Ahmad
We believe that if the BN government insists on doing short term popular measures rather than working on more sustainable mid-term polices, where are in to create a generation of younger Malaysians strapped in debts after being already overburdened by their PTPTN loans immediately after leaving universities and all.
It came as no surprise at all that the Federal Government’s My First Home Scheme (SRP) has been lauded by many, especially the young adults and more so, developers. First announced in Budget 2011 and later launched by the Prime Minister on 8th March, the scheme is targeted at assisting young working adults in the workforce.
In brief, the scheme offers 100% financing for young adults who have just joined the workforce and are earning RM3,000 or less per month. Financing are from 25 selected financial institutions for houses costing between RM100,000 and RM200, 000 and the payment spread over 30 years. 50% They could however, fork out a 10% downpayment, which is guaranteed by the government through Cagamas Berhad, the national mortgage corporation. Additionally there are 50% exemptions on stamp duty on instrument of transfer and on loan agreement instruments.
Many improvements to the original scheme have been proposed including incorporating flexibility on price ceiling to be based on location, including extending it to those over 35 as many young professionals in big cities who earn more than RM3,000 a month could still not afford their first home.
It would be politically unpopular and seemingly irresponsible if I were to oppose this scheme. However, it would be even more irresponsible and foolish on my part if I were not to caution and better still in fact to reprimand the government for such imprudent measure and ‘shortermist’ policy that would expose the target group to undue financial stress and eventually into insolvency. I have stated in my parliamentary debate and I will know state it again here in an unambiguous term.
While I wouldn’t want to dispute the intention of the scheme having sinister motive, as alluded by many, of endearing the younger voters to the BN, especially with the fact that it was launched on the watershed date of 8th March (of 12th GE), I must fundamentally say that the entire scheme is ill-advised from the viewpoint of prudent financial management and sustainability, though however well-intended.
While not wanting to draw parallel with the US sub-prime crisis, as it is not exactly the same with Bush’s home ownership campaign, the intention is however not dissimilar including some similar measures. Bush’s innovative measures included ‘zero-down-payment, mortgages with no monthly payments for the first two years etc.
Compounded by the infamous financial derivatives that were ‘over-leveraged’, it triggered the sub-prime mortgage crisis in the US which finally brought the collapse of the global financial market. Arguably not entirely the same but there are in fact pertinent lessons to be learnt.
It must be categorically said that buying a house and being able to service its installments are two different things altogether. Anyone could afford a house with zero-down payment easy credit scheme but surely not many are eligible the fact that they could not service the monthly installments over the long run.
