Why would people buy property?

There’s just a million different reasons why someone would want to buy a property, it’s because real estate is more than just bricks and mortar. Here’s a few main reason why people would spend 30 years paying for one:

As a roof over the head (home)

If you’re a gal, would you say ‘yes’ when your partner ask you to marry him without a property under his belt? Does it makes sense for a young couple to rent a room after their marriage? As conventional as it gets, above average Malaysians will still prefer having a house first before having plans to start a family. A property somewhat promises a higher rate of her saying ‘yes’.

To build a home, we must first have a house, preferably one of our own. If not, we would need to rent one which leads to the next point.

As an investment

Real estate is one of only asset class where the bank is willing to lend us 90% to invest in. It means we can own one with just 10% of the price. This displays the confidence that our financial constitution have towards this form of asset. Hence, property allows investors to leverage on other people’s time, money, and knowledge to make profits.

2 ways of making money from property: Renting and Flipping. Renting can either be in long form rental where tenants stay in an unit for years or short form where it can be days via the Airbnb platform. Flipping is where investors purchase a property today and selling it 5 years later. That allows them to earn the price difference as ‘generally’ property price always increase across the years.

To hedge against inflation

With the quality of stability, real estate is one of the best long term investment. Instead of keeping your money as cash in the bank, where their value will drop across time (a.k.a inflation), it’s a wiser choice to place some of your wealth in the form of real estate.

In other words, instead of saving RM 1 mil in the form of fixed deposit in the bank, it makes better financial sense to buy a RM 1 mil property. 10 years later, the RM 1 mil cash may only worth 80% of what it’s worth but the RM 1 mil property may worth RM 2 mil in year 2029.

However, this only applies when your wealth is up to a level where it needs to be stored as a portfolio. Work hard guys!!

To flex/show off

Surprisingly, many of us put our life’s worth on how much wealth we have. For the average, having a property in the 20’s allows them to be superior during hangout sessions with their buddies. Then for the ‘atas’ clan, having an unit of Pavillion Suites just adds excitements to their portfolio where they can say:” I have one unit over there!” every time they pass by Pavillion with their friends.

Before it becomes your life’s mission

As the media keeps telling us that our young graduates cannot afford to buy property, it makes total sense as they just got into the working life. To put everyone into perspective, we are still fortunate in comparison to our friendly neighbour in Singapore.

It’s their life’s mission to get a HDB (government housing) and that’s all what they talk about day and night. They even joke about having fake marriages just to qualify themselves for the waiting list to apply for a house. In Hong Kong, graduates will need to work for an average of 38 years before even considering buying a property. (a 450 sqft apartment is RM 2.5mil on average)

In Malaysia, we still have the luxury of having house not as our top priority. Usually it comes after ‘car’, ‘lifestyle’, ‘expenses to impress others’ before a youth realize the importance of getting one. And that is often when they are ready to settle down.

Hence, my advice is to know about property earlier in life allows us to leverage more on time.