Malaysia Budget 2015 - Property Market Assistance or Distortion?

Government by definition is inefficient. Anything being done needs a lot of processes, time and political influence. The more government intervene, the market become less free to find its own equilibrium. Let us see the latest goodies from the government:

For married couples aged between 25 and 40, and without home whose combined income does not exceed RM10,000:
    a) maximum 35 years loan with funding limit RM500,000
    b) monthly financial assistance of RM200 for first two years
    c) 50% stamp duty exemption on the instrument of transfer and loan agreement
    d) 10% loan guarantee to get full financing including cost of insurance
    e) withdraw from EPF account 2 to top up their monthly installment and related cost

This offer is for first come first served for limited 20,000 houses.

At first glance it is a good proposition from the government. But, it is not fair to those who have to tighten their belt to buy their first house.

Let us hope young couple would take this opportunity to buy a house for an investment rather than forever for their own stay. The proposition seems to make young couples look for a house which they actually cannot afford. The two years financial assistance and 10% loan guarantee will definitely ensure they can buy something they cannot afford.

However, if they were thinking to buy the house for an investment and willing to tighten their belt for the next 5 years, this is a huge opportunity for them to have multiple property investment in the future.

But, if they never plan for the worst, and they cannot pay the monthly installment, it will be a disastrous experience for them. A good investor will always make a plan for the worst scenario. What should they do if their income cannot afford to pay the monthly installment?

Another reason why I said it is inefficient proposition: I managed to help a person with RM2,200 monthly salary to buy a house worth RM430,000 without any government assistance. Duh, are we breeding young couples to be ignorant in financial planning that with a combine income of RM10,000 they cannot buy a house worth RM500,000?! Government should appoint me as their consultant to teach young couples to plan their financial instead of giving them goodies which may not last forever.

So in the future, if these group of people cannot afford to pay their bills, they can go to Parliament to ask for more goodies while the rest of the citizen need to suffer to entertain their request!

Give a man a fish, it may last for a day,

Teach a man how to fish, it may last forever!