Are you wrestling with the classic dilemma of renting or buying a house in Malaysia?
It's a big decision, and the property market's ups and downs, coupled with the desire for a place to call your own, can make it feel overwhelming.
Don't worry, you're not alone! Many face this same crossroad, and the "right" answer isn't one-size-fits-all.
Let's break down everything you need to know to make the best choice for your future.
The Malaysian property market is as diverse as its culture, offering everything from bustling city condos to tranquil countryside homes.
Prices, trends, and regulations vary significantly between states and even cities, making it crucial to understand the local landscape before making a decision.
Several factors are currently shaping Malaysia's housing market:
Malaysia's economy, after a robust rebound of 8.7% in 2022, faced a slowdown in 2023 with a growth of 3.7% and it has registered a real GDP growth rate of 5.9% as compared to a year earlier, in Q2 2024.
The economy is projected to grow by 4% to 5% this year, which influences property demand and prices.
This economic growth, however, comes with its set of challenges, particularly in the housing market.
Inflation has impacted the cost of living, with consumer prices rising steadily.
In August 2024, the inflation rate slightly decreased to 1.9%, down from 2% in the previous month. This affects purchasing power and housing affordability.
The Overnight Policy Rate (OPR) set by Bank Negara Malaysia (BNM) influences mortgage interest rates.
The current OPR, as of September 2024, is 3.00%. The central bank hiked the key rate five times since May 2022, with a cumulative increase of 125 basis points.
The key rate has been unchanged since. Changes in the OPR can impact the cost of borrowing for homebuyers.
Initiatives like the Home Ownership Campaign (HOC) and various affordable housing schemes aim to boost homeownership, especially among first-time buyers.
Policies related to foreign property ownership, such as the Malaysia My Second Home (MM2H) program, also play a role, although recent changes have made the MM2H program more stringent.
Rising material and labor costs are driving up property prices, with construction prices expected to increase by 15% in 2024.
The choice between renting and buying hinges on your financial situation, lifestyle preferences, and long-term goals. There's no right or wrong answer, but understanding the pros and cons of each option is essential.
Renting offers unparalleled flexibility, making it an attractive option for those who value mobility and minimal upfront costs.
Buying a home is a significant financial commitment, but it offers the potential for long-term financial security and the freedom to personalize your living space.
Equity Building: Mortgage payments gradually increase your ownership stake in the property, building equity over time.
Property Appreciation: Real estate values generally appreciate over the long term, increasing your investment. Although, this can vary greatly depending on location and market conditions.
Forced Savings: Mortgage payments act as a form of forced savings, helping you build wealth.
Stability and Security: You have a permanent place to live without the risk of rent increases or lease terminations.
Customization: You have the freedom to renovate and personalize your home to your liking.
Potential Tax Benefits: Depending on the prevailing tax laws, you may be able to deduct mortgage interest or property taxes.
High Upfront Costs: You'll need a substantial down payment (usually at least 10% of the property price), plus funds for legal fees, stamp duty, valuation fees, and other closing costs. For a RM500,000 home, these upfront costs could amount to around RM70,750, excluding the down payment.
Ongoing Expenses: Homeowners are responsible for mortgage payments, property taxes, insurance, maintenance, and repairs.
Less Flexibility: Selling a property can take time and effort, making it less ideal if you need to relocate frequently.
Market Risk: Property values can fluctuate, and you could potentially lose money if you need to sell during a downturn.
Financial Strain: A large mortgage can strain your finances, especially if interest rates rise or you experience a job loss.
Let's delve deeper into the financial aspects of renting and buying to help you make an informed decision.
Security Deposit: Typically 2-3 months' rent, refundable at the end of the lease term if the property is in good condition.
Utility Deposit: Usually equivalent to 1 month's rent, covering potential unpaid utility bills.
Monthly Rent: The primary ongoing cost, which can vary significantly based on location, property type, and size. For instance, the average monthly rent in Kuala Lumpur is significantly higher than in smaller towns.
Utilities: You'll be responsible for paying for electricity, water, gas, internet, and other utilities. These typically range from 200 to 300 RM per month for an average apartment.
Maintenance and Repairs: While major repairs are usually the landlord's responsibility, you may be responsible for minor maintenance and upkeep.
Down Payment: Typically at least 10% of the property price. The higher your down payment, the lower your monthly mortgage payments and overall interest paid. For a RM500,000 property, the minimum down payment would be RM50,000.
Loan Amount: The difference between the property price and the down payment.
Interest Rate: The percentage charged on the loan amount, which can be fixed or variable.
Loan Tenure: The duration of the loan, typically ranging from 10 to 35 years.
Monthly Installment: The fixed amount you pay each month, comprising principal and interest.
Legal Fees: Fees for lawyers to prepare the Sale and Purchase Agreement (SPA) and loan agreement.
Stamp Duty: A tax levied on the property transfer and loan agreement. First-time homebuyers may be eligible for stamp duty exemptions on properties valued up to RM500,000 until the end of 2025.
Valuation Fees: Fees for a professional valuer to assess the property's market value.
Insurance: Home insurance (fire, theft, etc.) and mortgage insurance (MRTA or MLTA) are essential.
Property Taxes: Annual taxes paid to the local authorities, including assessment tax ("cukai pintu") and quit rent ("cukai tanah") or parcel rent ("cukai petak") for strata properties.
Maintenance Fees: For strata properties like condominiums and apartments, you'll pay monthly maintenance fees for the upkeep of common areas and facilities.
Sinking Fund: A collective fund for major repairs and renovations in strata properties.
Let's compare the estimated costs of renting and buying a hypothetical RM500,000 condominium in a major city, assuming a 30-year loan tenure and a 4.5% interest rate:
| Cost | Renting | Buying |
| Upfront Costs | ||
| Security Deposit | RM3,400 (2 months' rent) | |
| Utility Deposit | RM1,700 | |
| Down Payment | RM50,000 (10%) | |
| Legal Fees (SPA & Loan) | RM9,500 | |
| Stamp Duty (MOT & Loan) | RM11,250 (Exemption may apply) | |
| Valuation Fees | RM1,000 (Estimate) | |
| Total Upfront Costs | RM5,100 | RM71,750 (Estimate) |
| Monthly Costs | ||
| Rent/Installment | RM1,700 | RM2,280 (Based on 90% loan of RM450,000) |
| Maintenance Fee | RM170 | RM250 |
| Property Taxes (Annual/12) | RM100 (Estimate) | |
| Insurance (Annual/12) | RM150 (Estimate) | |
| Total Monthly Costs | RM1,870 | RM2,780 (Estimate) |
| Total Cost after 7 Years | ||
| Total Upfront Cost | RM5,100 | RM71,750 |
| Total Monthly Cost | RM157,080 | RM233,520 |
| Total Cost | RM162,180 | RM305,270 |
| Other Considerations | ||
| Property Appreciation | None | Potential increase in property value |
| Equity Building | None | Gradual ownership of the property |
| Loan Interest Paid | None | Significant over the loan tenure |
Note: This is a simplified comparison, and actual costs may vary, please refer at your own risk. It's crucial to consult with a financial advisor and obtain accurate quotations from banks, lawyers, and valuers. The table does not include potential rental increases, property appreciation or depreciation, or income earned from investing the down payment. The calculations are based on information gathered from various data such as iMoney, and Loanstreet etc.
Property Appreciation: While property values generally appreciate over the long term, there's no guarantee.
Loan Interest: The total interest paid over a 30-year loan tenure can be substantial.
Opportunity Cost: The down payment and upfront costs could be invested elsewhere, potentially yielding higher returns.
Covid Discount: As pointed out by Juwai IQI, many renters in Malaysia are still enjoying a "Covid discount," with rents below pre-pandemic levels. This could make renting more attractive in the short term.
Financial considerations are paramount, but lifestyle and personal preferences also play a significant role in the rent vs. buy decision.
You value flexibility and mobility: If your job or lifestyle requires frequent relocation, renting offers greater flexibility.
You prioritize experiences over ownership: If you'd rather spend your money on travel, hobbies, or other experiences, renting frees up cash flow.
You're unsure about your long-term plans: If you're not ready to settle down in one location, renting provides a temporary housing solution.
You want to avoid the responsibilities of homeownership: Renting eliminates the hassle of maintenance, repairs, and property taxes.
You're in a high-cost area with low rental yields: In some areas, it might be financially more advantageous to rent and invest the difference.
You desire stability and security: Owning a home provides a sense of permanence and belonging.
You want to build long-term wealth: Property appreciation and equity building can contribute to your financial security.
You value customization and personalization: Owning allows you to renovate and make the space your own.
You're financially prepared for the commitment: You have a stable income, a healthy credit score, and sufficient savings for the down payment and ongoing expenses.
You plan to stay in one location for the long term: Buying is generally more advantageous if you plan to live in the property for at least 5-7 years.
For expats considering buying or renting in Malaysia, there are additional factors to consider:
Visa Requirements: Your visa type will determine your eligibility to buy property and the restrictions that apply. The MM2H program, for instance, offers a long-term visa option for retirees and investors, but the criteria have become stricter.
Foreign Ownership Restrictions: Each state in Malaysia has different minimum purchase price thresholds for foreign buyers, and there may be restrictions on the type of property you can buy. For example, in Selangor, foreigners can generally only purchase landed properties with strata titles above a certain value.
Financing Options: Securing a mortgage as a foreigner can be more challenging, and you may face higher interest rates or lower loan-to-value ratios.
Tax Implications: Be aware of the tax implications of buying, owning, and potentially selling property in Malaysia as a non-resident.
Cultural Differences: Familiarize yourself with local customs, laws, and practices related to property transactions and tenancy agreements.
Ahmadsyafii'ei Abdul Kudos, senior lecturer at Universiti Sains Islam Malaysia Faculty of Engineering and Built Environment, said during interview in New Straits Times.
This highlights the importance of financial planning and prioritizing long-term goals:
"Young people need to be more aware of the issue of homeownership as it is an important step in ensuring long-term financial stability."
"Owning a home (instead of renting one) not only provides a permanent place for them to live but also serves as an investment with the potential to appreciate in value over time."
"With good financial planning and a better understanding of the real estate market, young people can achieve their dream of owning their own home."
"The trend of renting is ingrained in today's young generation, it may have negative implications on their lives over the long term."
"First of all, they will continue to pay rent, which may increase over time, without the benefit of long-term asset ownership."
"Secondly, not owning their own home can undermine their financial stability and complicate future planning, especially in old age."
"Some of them dream of owning a luxurious house and prefer to wait until they can afford to buy their ideal home."
"However, they don't realise that house prices keep rising. This may lead to young people being trapped in an 'always unable to afford' zone when it comes to home-buying."
Source: Consilz Tan (LinkedIn)
Consilz Tan, senior lecturer at Xiamen University Malaysia, and also fellow at the Center for Market Education mentioned in interview in Free Malaysia Today.
This perspective emphasizes the potential benefits of renting, especially in a rising price environment:
"Homeownership had created a “household debt trap” leading to a retirement crisis."
"We should focus more on rental markets instead of homeownership."
"Without proper financial planning and fund allocation, one should not rush into housing debt just to own a house."
Kashif Ansari, co-founder and group CEO of Juwai IQI pointed out in Free Malaysia Today.
This suggests a positive outlook for the property market, but also highlights the need for careful consideration of affordability:
"House prices would continue rising throughout the year."
"The drivers of the (property) market have been relatively high employment and household income in Malaysia, infrastructure development and pent-up demand being released after the pandemic."
"The government is spending billions to make housing more affordable and constructing tens of thousands of affordable homes every year. It has built 250,000 affordable homes so far and is aiming for another 250,000 by end-2025.”
"Mapping affordable housing prices according to local income levels was a huge step forward."
“That will make it much easier and cost-effective to provide affordable housing that’s appropriately priced for the people.”
There's no one-size-fits-all answer. It depends on your individual circumstances, financial situation, and long-term goals. Renting offers flexibility and lower upfront costs, while buying provides stability and the potential for long-term financial gain.
This depends on the property price, your down payment, and the loan terms. As a general guideline, your monthly mortgage payment should not exceed one-third of your gross monthly income. You can use online mortgage calculators to estimate your affordability.
The average rent for a condo in Kuala Lumpur can range from RM1,500 to RM4,000 or more per month, depending on the location, size, and amenities. The average rent for a one-bedroom apartment in Kuala Lumpur's city center is approximately 1,612 RM (Malaysian Ringgit) per month.
Yes, foreigners can buy property in Malaysia, but there are restrictions. Each state has its own minimum purchase price threshold for foreign buyers, and there may be limitations on the type of property you can purchase.
Foreigners can apply for mortgages from local banks, but the process can be more complex, and the terms may be less favorable compared to those offered to Malaysians. It's advisable to consult with a financial advisor familiar with expat financing options.
Legal fees typically include the Sale and Purchase Agreement (SPA) fee and the loan agreement fee. These fees are usually calculated as a percentage of the property price and loan amount and can amount to several thousand ringgit.
According to Juwai IQI, many renters in Malaysia are still enjoying a "Covid discount," meaning that rental rates are still below their pre-pandemic levels in some areas. This could make renting a more attractive option in the short term.
The decision to rent or buy a house in Malaysia is a significant one that requires careful consideration of your financial situation, lifestyle preferences, and long-term goals.
There are compelling arguments for both options, and the "best" choice varies from person to person.
By understanding the intricacies of the Malaysian property market, weighing the pros and cons of renting and buying, and seeking expert advice, you can make an informed decision that sets you on the path to a secure and fulfilling future in your chosen home.
Remember that thorough research, careful planning, and a realistic assessment of your needs and capabilities are the keys to making the right choice for you.
Don't navigate Malaysia's property market alone. Juwai Asia provides expert guidance for a seamless buying experience. Contact us and find your perfect home together with confidence now!
Citation, Reference and Related Information about Rent or Buy a house in Malaysia
1.EdgeProp
Pros and cons of buying and renting homes
2. Global Property Guide
Malaysia's Residential Property Market Analysis 2024
3. Property Guru
11 Things Every First-Time Homebuyer In Malaysia Needs To Know
4. Free Malaysia Today
Focus on renting instead of homeownership, says analyst
5. Loanstreet
Buying vs Renting: Which is More Affordable?
6. Malay Mail
Rent or buy? The essential pros and cons every Millennial and Gen Z should know
7. The Edge Malaysia
Juwai IQI: Malaysia’s average residential rent increased 3.9% q-o-q in 2Q2024
8. Statista
9. iMoney
10. Global Passport
The Cost of Living in Malaysia | An Expert Guide
11. Great Eastern
Should you buy or rent a property in Malaysia?
12. StashAway
Complete Guide For First Time Home Buyer to Buying a House in Malaysia
13. New Straits Times
Improve housing policy to encourage home ownership among young people
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