Friday 29 Mar 2024
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KUALA LUMPUR: In this day and age when a high cost of living makes saving money too difficult a task, owning a home – which was once seen as an obligation or a rite of passage to adulthood – has now become just wishful thinking.

To secure a home, one needs to have in hand a 10% down payment, in addition to a healthy credit score. Lest we forget, there are the other transactional costs such as stamp duty, legal fees and other upfront payments.

For this reason, millennials of today find it impossible to buy their own home — considered the biggest purchase they would have to make in their lifetime — compared with the generations before them, decades ago when property prices were more attainable.

As an example, data from the Residential Prices Quarterly Update 3Q2018 report by the National Property Information Centre (Napic) showed that the prices of homes in Malaysia averaged RM383,648 in the third quarter of 2018 (3Q2018). In Kuala Lumpur, specifically, the average price was RM772,980 (based on a sample size of 1,688 transactions).

 

An alternative financing option

To enable Malaysians, especially the younger generation or those who have just started out in the workforce, to live their dream of owning their own home, various inexpensive, alternative financing schemes have been rolled out.

Recently, S P Setia Bhd, along with Malayan Banking Bhd (Maybank), launched FlexKey, a rent-to-own (RTO) home ownership solution. FlexKey, simply put, is an enhanced version of HouzKEY, the first bank-initiated RTO scheme that was introduced by Maybank and S P Setia in 2017.

 

FlexKey – more flexible home ownership

One of the key drivers behind the introduction of FlexKey, according to S P Setia, is the limited choices home purchasers have. Specifically, the major factor hindering people from buying their own properties is the burden of forking out the 10% down payment.

“We constantly pick up on cues on what is holding people back from deciding to purchase a home,” said S P Setia president and CEO Datuk Khor Chap Jen.

For comparison, under FlexKey, the downpayment criteria mandated under conventional housing loans is removed and replaced with a three-month refundable security deposit. Further, buyers may also pick their preferred unit from a selection of newly-launched homes and not just completed properties as stipulated by HouzKEY.

“The launch of Setia FlexKey certainly comes as a timely attraction for young or first-time homebuyers as it is a smarter alternative to achieve better cash flow considering its low entry cost,” Khor said.

As the monthly rental payments are structured to match the current market rental rate, FlexKey allows first-time buyers to own bigger and better homes priced up to RM1 million.

And to hedge against inflation, FlexKey allows tenants to purchase the homes at the locked-in price, should they decide to own it within the fifth year of occupancy.

It is also worth nothing that with this scheme, there is no need to worry about the progressive payment schedule, which is traditionally effective for under-construction properties. S P Setia explained that instead, the buyer only needs to pay the three-month refundable security deposit, with the remainder of the payments starting only when the keys are handed over to the buyer.

 

Who is eligible and for what

Speaking to the press after the launch of FlexKey, Khor said the scheme is targeted not just at the Bottom 40 (B40) group — the ones most in need of financial assistance to purchase their own housing asset — but the Middle 40 (M40) population as well.

“Besides the B40, we are also targeting the mid-range (M40) group as well. These are people who are still looking for houses,” he said. Recall that in January this year, the National House Buyers’ Association (HBA) had reminded the government to also consider the M40 segment as they are similarly affected by the rising cost of living.

Meanwhile, as with most other housing schemes in the market, FlexKey can only be applied for by first-time homebuyers.

“[Unlike the older generations who already own their own homes], most (first-time homebuyers) are young and mobile. [As they are just starting out in the job market], they tend to change jobs. So they don’t want to be tied to [a commitment] like [a private home] just yet as there is a possibility that they may be transferred to other job locations,” said Khor.

“So if they were to apply for FlexKey, and after two to three years, they decide that their current job is going to be the one they will stick with long-term, then they may convert from rental to actual purchase of the home,” he explained.

For now, the scheme will cover available landed units, including those within two of S P Setia’s townships in Setia Alam and Setia EcoHill 2 in Semenyih. Depending on the response, Khor said, the scheme will be slowly expanded to more townships and “perhaps other product types”.

However, S P Setia stressed that even though certain affordable housing programmes allow homebuyers to choose their preferred funding aid, FlexKey is not applicable for any such scheme.

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