MyHome Programme – really making homes more affordable?

An honest look at the MyHome Scheme, which has just been announced. Will it help lower income earners buy property at last?

The Government recently launched the MyHome (Private Affordable Ownership Housing Scheme) programme, to allow low income earners to purchase homes. It was reported that 10,000 low-cost houses will be built under this scheme. The National Housing Council (NHC) has allocated RM300 million for this project that is part of the Government’s promise to help make homes more affordable.

But will this initiative be enough? Before moving on to efficacy; let us first break down how this is going to work.

So how does it work?

Taking the reported example; a low-cost apartment or home costing RM70,000 with a low-cost ceiling price of RM40,000 will see the government contributing RM30,000 to offset the cost of this property, enabling the buyer to purchase at RM40,000 only. It remains to be seen whether the subsidy will be given straight to the developer or to the buyer to pay the purchase price. Buyers will not be allowed to resell the property within 10 years from purchase.

Ceiling price for the definition of ‘low-cost’ will vary from state to state but the maximum subsidy a buyer can receive is RM30,000.

Ok, but how do I qualify?

You must be a first time house buyer with a household income of no more than RM3,000. If you’re a housing developer looking to participate in the programme, you will to apply at the Housing and Local Government Ministry’s special committee for this programme.

I earn exactly RM3,000 and am eligible for the programme. How much will I have to pay for my house loan monthly?

Let's use the example mentioned earlier where houses cost RM70,000 and after the subsidy, you only need to pay RM40,000. It’s unlikely you have RM40,000 in savings if you earn RM3000 per household (of course if you do, more power to you!) so you will still need a homeloan.

The first hurdle is getting a home loan. If you have a car and unpaid credit cards, getting your home loan approved will be a challenge. Let’s say you meet this first challenge (since the sum is small in comparison to other home loans) and you’re on your way to securing the house of your choice. The maximum number of years allowed for repayment is 30; and you opt to take this as the monthly instalment will be at its lowest. At the best available interest rate for these requirements (4.6%), your monthly repayment would be about RM206.

That’s quite low and may be even lower than the repayment of your car loan. If this really becomes available to those who need the aid; it sounds like a good deal.

Of course, it’s important to remember that buying a home will also involve purchasing insurance, paying legal fees and any other land fees and taxes that may crop up. Always factor these variables when calculating if this move is something you can afford.

However, the report does mention that cost ceilings for low cost houses differ from state to state. In the Klang Valley, it is now rare to find any kind of property selling any less than RM100,000. At this price, a subsidy of RM30,000 will see the price being RM70,000 and monthly repayments reaching RM350. Figures will always vary as will situations.

Why is this being done?

In a report by the Star Newspaper; the average household income needs to earn RM14,580 in order to own a home in the Klang Valley. At RM14,580, each person would need to earn RM8,000 a month in a two person household to qualify. In Kelly Services Salary Guide 2013; only executive/upper management level heads in most industries with command such a salary.

So essentially, though the report blared ‘Klang Valley still affordable’ – it appears to be only affordable if you’re in upper management.

Perhaps the Klang Valley is a bad example of a place to seek to own property. But it is hoped that this scheme will help people who earn much less than RM8,000 a month live in a safe and decent home.

Will it help me?

How helpful or efficient the programme will be remains to be seen. There are of course certain concerns. Will developers cut corners just to make the price low and attractive? Will banks offer loans to these customers? And most importantly; will the aid really be available to those who truly need it?

What do you think of the programme?

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