Looking at property ownership realistically and responsibly

FOR obvious reason, house ownership is something that is very close to the hearts of most Malaysians. Be it offering a roof over one’s head or an investment, property has been an interesting conversation to most.

The last several years, the subject of property have centred around how much who made, or how many properties so-and-so has. This has resulted in many - young and old - jumping on the property bandwagon.

However, in today’s climate - tight lending conditions and affordability issues - the conversation has turned. The topic of today’s conversation is, where can I get something below a certain price point?

While interest continues, much of the excitement has fizzed out. In a way, that is good because it is important to look at housing and property ownership realistically and responsibly.

Because of the exorbitant increases of properties between 2010 and 2013, a third perspective on housing has emerged, other than a roof over one’s head or as an investment instrument. Some view the properties they are living in as equity.

For example, they may have bought a property for RM500,000 and it is now worth RM1.2mil. Although they have not completed paying up their loan, they think they have made an extra RM700,000. Even after having deducted the loan, they consider that they are still “in the money”.

The thinking is that, “I have equity locked within these four walls and it is only smart to unlock this equity.”

They console themselves with the fact that they are now old and they don’t need such a big house. There are two separate issues here. It is fine to downsize, especially now that the children have left the nest and if selling that house means one can buy a smaller house, with the proceeds from the original property.

However, to sell the house in order to get equity from it is something else. If one takes this route, there are a few things to consider.

The first is, where are you going to live? Can you move in with a family member? Or will you rent? With prices continuing to be high, will the proceeds be enough to buy another that will enable you to carry on with the lifestyle you are accustomed to?

Each of us have our centre of gravity, or the area we are accustomed to. Because prices continue to be high, will the sale of this house be able to buy you another in the same area or will you have to move to a less desirable area?

The above are issues that have to be considered carefully. Age is another. If one has several properties, that is fine. But if one has only property, to so call “release equity” may not be prudent.