Rising rental rates and low mortgage rates are driving people down the real estate ownership road much sooner than they had originally planned. Other individuals prefer to settle back and wait until the Malaysian real estate market makes a full recovery, despite incentives, before they buy in. Truth be told, there is no definitive or right answer to the question of whether to lease or purchase a house.
There are several factors that you have to consider as you make a decision. Both options offer you several advantages and disadvantages, and your own financial strength is the strongest factor of them all.
Renting
Even though you cannot build equity, renting offers you more flexibility and freedom, especially if you are doing so every month.
Advantages:
- You do not have to deal with maintenance issues. If a fixture in the apartment breaks or you require an electrician to pop in, getting maintenance is as easy as calling in the building’s manager.
- Easier to move. If you are in a place in your career where you have not settled or there is a possibility that you will have to relocate to a new town in the near future, it is much easier to make the switch rather than choosing to sell.
- No depreciating asset. Property prices stabilize, rise, or fall in the housing market. However, there is no guarantee that your apartment’s value will increase within a specific amount of time.
Disadvantages:
- Monthly payments may increase. Renting rates are periodically on the rise, especially in larger cities. This means that you could be facing another increase in your housing payments as soon as your lease expires.
- No equity. The payments you make monthly offer you a place to live, but do not provide you with that asset that you can finally sell when you are ready.
- No tax benefits. According to an Asia One Business report, homeowners will continue to benefit from various government homeownership incentives, like those stated by AsiaOne Business. Tenants cannot benefit from these incentives.
- Owner approval required for remodeling of any type. Some landlords may be kind enough to offer their tenants some leeway when it comes to painting the residence. However, you will be required to consult them regarding your choice of color. Any changes that have to do with upgrading an appliance will require putting in a request with your landlord or housing complex manager.
Buying
Purchasing is not something for everyone, but it does offer you some enticing emotional and financial advantages.
Advantages:
- Build equity. Conventionally, apartments rise in value anywhere between 4 percent and 6 percent annually. Even in situations where it is not increasing in value, you still build equity as you make your mortgage payments as long as your property maintains value.
- Tax breaks. Homeowners have the added advantage of gaining from Malaysian tax benefits. These deductions go a long way in offsetting the cost of acquiring your housing.
- Stable housing payments. A fixed-rate mortgage offers you the same principal and interest payments for the duration of your loan. However, insurance and taxes may change.
- Home as an investment. If you choose to purchase a unit and lease it out, you will be creating a steady source of income. However, this works if you can cover mortgage from your tenants’ payments. Consequently, any time you are looking for a unit, choose one that will be a profitable asset in future.
- Settle in a community. The commitment towards purchasing a piece of property will make you more involved in your local community since you will be there for years. You get to know your neighbors, join a Residents’ Association (which offers you several advantages as explained by the National House Buyers Association) or even volunteer in local projects that improve life around the community or a local school.
- Freedom to decorate. One of the biggest joys of this option is the freedom to change your immediate environment to suit your lifestyle. However, if you live in within a homeowners’ association, you will enjoy less freedom when it comes to redoing the exterior décor, but you can still paint the kitchen luminous yellow if you want.
Disadvantages:
- Maintenance is on you. You will find yourself spending more time and money in keeping your residence in good condition.
- An illiquid asset. If you experience a sudden career change, relocation or circumstances change, you cannot quickly sell your unit and get as much money as you want.
- Pay property taxes. Taxes can easily go up, making your property less affordable.
- Loss of value. There is no guarantee that your unit will increase in value.
Purchasing a new place to live in is a major decision that should not be made lightly. However, rising costs and low mortgage rates can make purchasing a better option. Take your time and consider all the pros and cons of each. Depending on the factors mentioned above, you will likely find that an apartment for rent in KL on PropertyGuru Malaysia may be the best financial decision you can make till you are ready to make the jump into full ownership.
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