HSBC study: Only one-third of millennials can afford houses

Consequently, prevailing median house prices are beyond the reach of most Malaysians. This is primarily attributable to a gross mismatch between housing supply and demand amid diverging expectations between households and developers.

KUALA LUMPUR: Only one-third of millennials (those born between 1981 and 1998) are able to afford to own homes due to escalating house prices and slower salary growth, according to HSBC’s first Beyond the Bricks study.

In a survey covering over 9,000 youths from nine countries including Malaysia, HSBC Malaysia retail banking and wealth management head Lim Eng Seong said many millennials did not have proper financial planning for a home purchase, with only 16% having set a budget.

“About 64% have set an approximate budget, while 20% had no overall budget in mind,” he told reporters yesterday.

The study surveyed participants from Malaysia, Canada, China, Australia, France, UAE, the UK, the US and Mexico.

Lim said overspending is also caused by not budgeting for the additional costs of home ownership beyond the property purchase price.

“The common reasons for overspending are renovation (93%), legal fees (47%) and buying furniture (43%).

“To cope with unexpected costs, 67% of new homebuyers withdrew money from their savings, 56% cut back on their spending, 30% took out a new or larger mortgage, 25% borrowed money from family and 8% borrowed from friends.”

According to the study, Malaysian property prices increased by 3.2% in 2016, while real wages in 2017 are only expected to increase by 3.9%.

Lim said a higher number of millennials would be able to afford homes if developers built more affordable homes.

“If you have more choices of homes, then the 35% number can go up. The industry needs to support this agenda. There’s still huge demand and a lot of programs have been rolled out.

“As our infrastructure improves, such as the MRT, so does our accessibility. This should give the opportunity to our developers to build more affordable homes in more locations.”

In view of the lack of cash to afford a home, Lim said many millennials are willing to make quite a number of sacrifices.

He said a total of 62% would consider spending less on leisure and going out; 41% would be prepared to buy a smaller than ideal place; 23% would consider buying with a family member and the same percentage would be prepared to rent out one of their rooms to help with costs.

“Even 14% would would be prepared to delay having children while 10% would move in with a relative to save for a deposit,” said Lim.

He added that financial support from parents can make a difference when saving for a home, with 29% of the respondents stating that they had received funding from their parents.

“Additionally, 23% of millennials moved back with their parents to save for a deposit.”

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