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Here are the real reasons why Gen Z aren’t buying houses in Malaysia any more.
The conventional wisdom of the 90s and 00s was that real estate is always a valuable asset in one’s investment portfolio.
However, times are changing, and more young adults no longer see a house as an investment with a guaranteed ROI.
As such, many more Gen Zs and even millennials would rather rent than buy nowadays. Here are 5 reasons for the shift in mindset:
1. Gen Z’s entry-level salaries are below average
During the 80s and 90s, the price for houses were in the 5-digit range. Today, we’re looking at a minimum of 6-7 figures, even in less developed areas outside of Klang Valley.
As property prices continue to soar, a typical fresh grad salary meanwhile remains stagnant at RM2,500, a figure that hasn’t changed since the 2010’s.
During such unprecedented times, a whopping 4% increase of fresh graduates are taking jobs at an even lower wage of RM1,000-RM1,500 per month.
“Right now I’m still searching, so I work part-time as an e-hailing driver earning RM1500 a month,” shared Gerald, a Gen Z living in Petaling Jaya.
For most of the younger generation, they have no choice but to find side income until a better opportunity comes along.
2. Gen Z are squeezed by high cost of living
Realistically, what most older gens don’t realise is that property purchases add to an already heavy load.
Even after securing a full-time job, Gen Z must deduct an outsized percentage of their income towards things like bills, PTPTN student loans, food, and transportation.
“After expenses, I’m left with RM 100-200 a month,” shared Fatihah, another Gen Z living in Ampang.
Fresh out of school and trying to build financial stability, Gen Z are starting their first job with a huge amount of commitments already. The last thing they need is an even heavier commitment that further pulls them down the hole.
3. Gen Z are getting married and having kids later in life
Because of that, Gen Z are choosing not to, or rather, are forced to delay marriage and children.
“In the olden days, the life milestones were getting a job, getting married, then having kids as soon as you could. Nowadays, you’d be lucky to have enough balance at the end of the month to save,” shared Amir, a Gen Z working as a consultant in a Big 4 company.
Since having a family is now out of the picture financially, more Gen Z are making personal decisions about housing that are in their own best interests. This means choosing to live with parents, apartment sharing, or room sharing.
4. Gen Z don’t want to be tied down to 30 years of debt
After buying a property, you’ll have to work for the next 30 years to pay off the loan. Being tied down to a property with a high interest rate could even spell a debt trap if you’re unable to make the monthly payments.
“The question is, should I be tied down to the same house that will only get older for the next 30-35 years, or have the freedom to move into a new place any time? I will go for the latter option,” shared Chen Ting, a Gen Z working in Cheras.
With the younger generation being priced out of expensive landed property, their housing options are narrowed down to smaller units at 500sq ft and below. For many, it doesn’t make sense to settle for a pigeonhole-space for the long-term. “It would be like living in Hong Kong, ” added Chen Ting.
5. Gen Z are searching for better work opportunities abroad
With the internet and AI, it’s much easier to find and discover new jobs to take up. Many are considering moving out of Malaysia due to our country’s weak currency.
For renters, getting up and moving to another country for a dream job is more doable. This sense of flexibility is what drives Gen Z to keep their options open.
Though the real estate industry is now offering huge discounts to increase affordability, realistically, the price of home ownership remains out of reach for many.
“Once you do the math, you would realise you’re paying almost 50% on your house for the next 30 years on interest alone. Simply put, we don’t believe properties will be cheaper in the long run,” shared Gerald.
Gerald shared that when you compare dollars to dollars, cents to cents, it’s actually cheaper to rent, all factors considered. Ultimately, almost counter intuitively for older gens, renting seems to be the financially safer option among the younger generation.
What do you think?
Let us know in the comments!
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For more stories like this, read: How much should you save before buying a car in Malaysia?
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