Affordability versus accessibility: Understand the difference

People are talking about a scheme where potential buyers need not worry about down payments, bank mortgages or paying high rental rates just to own a property a few years down the road.

They say this will mean homes become more affordable to all Malaysians. Not true.

Assuming these things come to be, then the more correct term for potential home owners would be accessibility, not affordability.

Briefly, it means that everyone has access to buy a property. It does not mean that owning a property will become affordable. In fact, accessibility is not very beneficial for the property market, mostly because of the following reasons.

1. The mortgage crisis of 2008. It is a potential risk when almost everyone can buy a home. Never forget the reason why the 2008 mortgage crisis occurred – it was because everyone was buying property with the intention of flipping it, regardless of whether they could afford to or not. It was sheer greed all around.

Banks meanwhile kept lending money, and landed themselves in hot soup in the end.

Meanwhile, the authorities did not do much to rein in property buyers until it was too late. Today, the Federal Reserve is more vigilant. It has even been criticized by its President.

2. Prices will usually rise faster than usual. If you have to save for a down payment for your property, it will take time and when you buy later on, even if you can afford a slightly higher price, home prices would have only risen slightly. You would have saved a chunk of money and no one was going to get it from you easily.

However, if you have not saved any money and have the opportunity to immediately buy a property, the tendency is to choose a home that is slightly more expensive than what you should buy.

You will find yourself easily agreeing to the property price, without much negotiation simply because you can now buy the said property without any down payment or loan.

This is not good for the market.

3. Situation is unfair to deserving owners. One major reason for the current issue is because people today are spending all their money on things they either like or want, not need.

It is unfair to punish those who skip the RM15 latte and opt for a RM1.50 kopi-O. It’s wrong to punish those who buy unbranded handbags versus others who happily put money down for a RM5,000 handbag.

There are also those who forgo expensive vacations and save their money for a downpayment and more. It is wrong to keep helping those who spend their money on EVERYTHING their hearts desire yet still shout for financial help later.

Everyone must understand these definitions of “affordability”.

1. Affordability means the ability to buy a home slightly smaller, slightly further than what you like, but can afford.

2. Affordability means when someone is willing to save for a few years and then buy a property and later upgrade to something better.

3. Affordability means when developers, the authorities and the banks do their part to ensure the starting price, taxes and even interest rates are skewed a little to help those who really need them.

Affordability is definitely not when everyone can recklessly buy a property without any savings at all. That’s merely accessibility.

credits to:

Free Malaysia Today – Property