Pros and cons of owning vs renting a home in Malaysia

Homes are so important because of the shelter they offer us, from things which will actually kill us, as well as things which we just need to take a break from. Our homes are our very own personal space and we would want it to be the place we feel safest and most comfortable in, regardless of whether you’re a homeowner or tenant.

While the traditional perception has always been that home ownership is better, arguments are surfacing to challenge the truth in this. That’s why whether you are actively looking to make new living arrangements or just want to feel better about your current housing situation, here are the pros and cons of buying a home in Malaysia versus renting:

Owning a home - Pros:

1. Greater privacy

It's your home. Nobody else gets to tell you how things should be and you won’t have to deal with messy or OCD housemates either. You can be as neat and tidy or as dirty and messy as you want!

2. Freedom & control

You can furnish your house however you want You can buy your preferred furniture and home decor and nobody can say anything about it! Additionally, if and when something breaks down, you don’t have to wait on anybody to get fixes done, you can either fix it yourself instantly or call someone. You have complete control!

3. A good investment and hedge against inflation

If you’ve done your research before buying, you’ll find that owning the right home can also be an incredible asset that saves you money, increases in value and provides a nest egg for the future. Whether you plan to live in it or sell it off when the price is right, there’s benefits to owning your home. If you plan to live in it, at least you won’t have to continuously spend money on rent. If you plan to sell it off when the price is right, you can make a tidy profit. Even if the sale price isn’t that high, you’d technically be losing money that you’ve saved in the bank if the inflation rate is higher than your interest rate.

4. You get to avoid unreasonable landlords

Some landlords are great! Easy going and pretty chin chai. While others can be extremely inconsiderate, exploitative and downright rude. Having your own home can help you avoid the stress of dealing with bad landlords as well as unreasonable rent rates. You won’t have to worry about your landlord demanding for your rent or telling you the “right way” to upkeep the place.

Owning a home - Cons:

1. You’ll have to pay a lot of money upfront + hidden charges

Besides the down payment (which many may struggle to pay as it is usually a very large sum), closing costs and moving expenses, you would also need to pay a hefty amount for your monthly installments.

For a standard home loan, the current market rate now is 4.2% to 4.4% p.a. interest. That means you’ll have to pay at least RM1,760 a month for the next 30 years to finance a RM400,000 home. That’s quite a lot of money!

Let’s not forget maintenance and amenities fees, if you decide to buy a condo that is.

Additionally, there are a lot of hidden charges tied to buying a home as well. These expenses are usually not directly related to the transaction but are included later on; much like paying for food and seeing the Service Tax charges until we get the bill.

However, when it comes to buying a home, the hidden charges are much, much higher. Here are some of the miscellaneous fees to look out for:

Source: imoney

2. It’s a huge financial risk

Although the value of property generally increases overtime, the real estate market is more complicated than that (remember the USA housing bubble?), and the value of your house could actually depreciate instead. Also, should the area your property is located in suddenly depreciate in value or if development ceases, that could turn your investment into a liability as well.

Aside from all the costs mentioned in the previous point, you’re also responsible for all maintenance fees and fixes. Ouch.

All these obligations can be quite the financial burden and since buying a home only becomes a good investment in the long run, you’ll have to sacrifice a good part of your financial freedom for a pretty long time.

3. Long-term commitment

As stated above, a home only becomes a good investment after a long period of time; this would mean that you’ll be pressured to stay in a place that you might not like for quite some time. In order to avoid this, you would need to do a crazy amount of research, invest a lot of time and energy into finding out what is the right kind of home and neighbourhood for you. Don’t get stuck in a place you don’t like!

“But if I don’t like the place I bought, I can just sell it off.” Not so fast! With the implementation of Real Property Gains Tax (RPGT), tax will be imposed on property that is disposed of within the first five years of purchase, so you might want to reconsider selling your property within that time frame. Check out the RPGT rates below:

Source: imoney

Renting a home - Pros:

1. Your landlord covers all maintenance / repair costs

Whether the drain is clogged, the electricity keeps tripping, or there’s a water leakage somewhere, none of these are your responsibility. Your landlord is supposed to ensure everything is in tiptop condition. You need only pay your monthly rent and utilities, and that’s it!

2. Lower upfront costs

Your monthly rent will cost less compared to the monthly installment on a house; not to mention that the upfront cost to renting is nowhere near as expensive as the down payment on a house.

3. Lower commitment

The mechanics of renting a place is a lot more basic, as long as you are able to find an available home, contact the landlord, sign the tenancy agreement, pay the deposit fees, and voila, it’s all yours! In addition to that, don’t like the place? No problem! Packing up and leaving your place of stay is a much simpler procedure too. There’s less paper work and legal duties involved, as well as less financial pressure to stay in one place.

Renting a home - Cons:

1. Not getting a return on money spent

Unlike owning a property, every Ringgit you spend on your rent is gone forever. You won’t reap any of the benefits of the property when the value increases overtime. It becomes a monthly expense as opposed to an investment.

Additionally, your landlord won’t be responsible for any of your own items in your place of rent. Should anything happen, it is solely your responsibility as your items are probably not covered by their insurance. This is why a good home insurance plan is crucial, even for a tenant!

2. Missed tax benefits

The tax benefits from buying a home can be substantial but, you won’t get any comparable financial perks from renting your home.

3. There is no specific law governing tenancies in Malaysia

This can result in unpredictable rates. According to The Edge Property, there is no legal framework that protects tenants in Malaysia; and due to things like market inflation and increase in maintenance fees, your rent can suddenly increase, unlike fixed-rate mortgages that are, well, fixed. Also, if the property is situated at a location that has spiked in value, your rent will increase as well.

Additionally, in some cases, landlords take forever to get fixes done despite the discomfort or even danger this might post to tenants. This isn’t only unfair, but wrong as well. Hence, the importance of a Tenancy Agreement. Aside from this, make sure you get the right home insurance plan for added protection as well. It can save you a lot of money, stress and hassle. This applies to landlords too!

So which should I go for?

To conclude, it is evident that buying or even renting a home is no walk in the park. There are undoubtedly several factors to consider before making that seemingly crucial decision.

If you’ve done your research and can afford the payments, then by all means, buy that house! If you don’t plan on staying in one location for long and you don’t want to be heavily and financially committed to your property, just rent a place! Either way, whether you’re a brand new or even long-time homeowner or tenant, always remember to protect your home!

Don’t let the cons of buying and renting scare you! You can still own or rent a place and have peace of mind by doing this one thing:

Simply sign up for the brand new, first of its kind Smart Home Cover insurance plan by Allianz that caters to all!

What makes this plan so unique is that customers have a wide range of home protection coverage to choose from and the flexibility to choose what they want insured.

The Smart Home Cover consists of five components:

What’s more, as homeowners or tenants, you get to tailor-make your own insurance plan and you could even save more on their premium plan too!

With Smart Home Cover, customers can also avoid issues such as not getting enough assistance and being left in the dark by banks. It’s the perfect home insurance plan for anyone!