KUALA LUMPUR, March 4 — Maybank Islamic Bhd’s (Maybank Islamic) unconventional rent-to-own scheme HouzKEY is aiming to help Malaysians own houses even without a down payment. But who is it targeting?
With HouzKEY’s properties valued at starting prices from RM300,000 to RM1 million and with HouzKEY starting monthly rental rates ranging from RM1,620 to RM4,921.50, unions recently questioned the affordability of the scheme and doubted it would help boost ownership among the low-income and middle-income groups.
But Maybank told Malay Mail that it sees the HouzKEY scheme as helping Malaysians remove a key obstacle to homeownership, namely the initial upfront payment that can come up to 15 per cent — including the down payment or 10 per cent of the property price, miscellaneous costs such as legal fees and stamp duty.
For example, prospective house buyers will have to fork out about RM75,000 or 15 per cent of a RM500,000 property, a hefty sum that some may not have in cash or in savings. Such a sum is also about two to three times higher than the cost for the cheapest range of a brand-new local-brand car, which even then are usually paid for by car buyers in monthly loan instalments over five to nine years.
HouzKEY however does not require the usual down payment which one would have to pay when taking out a housing loan on the property, and also locks in the property purchase price as an Option Purchase Price when one signs up for the scheme.
Under the HouzKEY scheme, participants merely have to pay a refundable three-month rental deposit without coughing up a down payment, and subsequently pay monthly rentals that will go into reducing the property price. After at least a year of renting under HouzKEY, they will have the option of converting to a housing loan to buy the property off from Maybank Islamic at a price that was already fixed when they first signed up for the scheme, with the actual price then to be lower due to the rentals.
Does the middle-income Malaysian need help?
Maybank Islamic started HouzKEY as it observed that the government had many good initiatives on affordable housing particularly for the lower-income group and noticed that the middle-income needed help in affording a house too.
While one may think that those who buy houses priced within the RM500,000 to RM1 million range should already be able to afford the down payment ranging from RM50,000 to RM100,000, Maybank noted that a simulation based on Khazanah Research Institute’s (KRI) report on household savings and its own calculations “shows that even middle income segments are also facing issues to raise the down payment and manage their other obligations as the same time”.
“As such, our customers with a monthly household income of RM10,000 will require 12 years of savings (including withdrawal from EPF Account 2) for the down payment,” Maybank said of a simulation for a RM500,000 property with a RM75,000 down payment and fees, citing the Malaysian household savings rate of 1.4 per cent in the KRI’s 2016 report State of Households II.
Asked how it defined the middle-income group in terms of salary range, Maybank highlighted that the combined household income of HouzKEY applicants and their maximum three guarantors has to be above RM5,000.
When asked if HouzKEY participants who cannot afford down payment will truly be able to afford the property in the future either by renting or buying, Maybank said it “will do its due diligence and assessment on customer to continue on based on current cash flow”.
“Also the Option Purchase Price will always be lower than today’s price, hence it will be better for them when they move to mortgage and start at lower instalments (based on lower financing amount),” it added.
Evolving and expanding
Sally Lye Saw Im, managing director of Maybank’s real estate ventures, said the bank is not limiting its HouzKEY scheme to cater for the middle-income group and noted that it is still an “evolving” scheme.
“We will have more conversations with the government agencies and see what is the feedback on us, is there something what we can help. We are open to everyone, but just that initial thought is based on our study, the middle income group, somehow, the need was not addressed unlike the lower income group,” she told Malay Mail in a recent interview.
While some of the monthly rental rates under HouzKEY may seem steep, Lye highlighted that this itself is a reflection of the current primary housing market where most new projects are mostly priced at RM500,000 or more. A RM500,000 unit would translate into rental rates of about RM2,500 a month under the Houzkey scheme.
Lye said that Maybank Islamic is already looking to expand its property portfolio under HouzKEY by adding in more developers and more properties at different locations — including those with lower price ranges.
HouzKEY started with five developers when first launched last November for Maybank employees and now has listings of 27 projects by 16 developers in 15 locations in the Klang Valley as of January when the scheme was opened to the public. (Out of the 27, 24 of them are already completed and available for application, while three are upcoming projects which have yet to be open for application, including two with the lowest starting rental prices of RM1,620 and RM1,920.)
Financing for lower-income
Lye also pointed out that Maybank has been helping the low-income group to fund their home purchases with housing loans, adding that that the bank has been championing affordable housing schemes such as the 1Malaysia People’s Housing Programme (PR1MA), Rumah Selangorku and the Federal Territories Affordable Housing (Rumawip) project.
“I think it’s not true to say that Maybank is not helping that segment. If you look at Maybank, our mortgage side, we are the one that champion PR1MA, we give step-up financing, even Rumah Selangorku and all that, Maybank has been very supportive,” she said.
Maybank is one of four banks that provide step-up financing to allow eligible PR1MA buyers to take out larger loans.
For now, Maybank Islamic will likely be exploring properties from the private sector, as existing regulations may not yet allow the government’s affordable homes to be offered through the HouzKEY concept.
“So there are a lot of regulations, not just at our end, also at their end. Whether it is doable...nobody knows at this moment,” she said, citing as example the Rumah Selangorku’s and the Rumawip’s criteria that limits applications only to individuals that do not yet own a house in Selangor or Kuala Lumpur respectively.
Maybank Islamic, which is an institution that buys properties before offering them under Houzkey, would not be eligible for such schemes.
Who else benefits from HouzKEY
Lye said Maybank Islamic has three specific groups in mind for HouzKEY, noting: “We are helping the first home buyer, even the upgrader, even the parents — for them (parents) to buy house for their kids, they know the fact that in the future their kids may not be able to buy the house because it’s too expensive.”
So for individuals that are first-home buyers and may not have saved up enough for a down payment, Houzkey’s low entry cost means that they will still be able to afford to buy a house as they only need to pay the monthly rental. They would not have to worry that their salary growth levels are unable to keep up with the property prices by the time they have accumulated savings for a down payment.
Since the HouzKEY scheme allows for up to three immediate family members to be the guarantors, parents will be able to help complement their children’s income when the latter graduate and join the workforce, also locking in the property price until their children are able to build up their finances and have higher salaries that will enable them to pay for the home on their own.
HouzKEY applicants have to have a minimum household income of RM5,000, but the income of family members such as parents can be combined with the applicant to reach this threshold for eligibility.
“A lot of customers complained to us to say their kids have more difficulties to own a house — when they graduate, their income is not enough and they are worried after 10 years, property prices will be even more expensive and beyond their means,” Lye said.
“But the fact that you don’t require a down payment is also a relief to the parents. Imagine there are three kids, everyone requires 15 per cent property price (for down payment), it’s a stress to the parents. So with this scheme, the parents can also help their kids,” she said.
The HouzKEY scheme is also designed to help Malaysians meet the changing housing demands in their life without straining their savings, with Lye noting that house buyers usually buy smaller units initially such as when they are newlyweds and would eventually need to upgrade to a bigger space to accommodate their expanding family.
“But the only way to have a bigger house is to sell the current house to get the capital appreciation so you can buy another house. But sometimes timing can be an issue. You sell the current house where you are going to stay, then you have no house,” she said, noting that Houzkey would also enable such families to save on the 15 per cent initial cost in a typical mortgage to spend on their children’s education or family commitments.
“If you use all your savings for down payment, it’s also a risk to the family,” she said. “You have to use all your savings to buy a house, then how about your kids’ education, how about your own needs? You don’t have anything because you used everything.”
“So with this HouzKEY, we also help the upgraders when they are transitioning to move to a bigger house. At least they don’t have (to be) in a rush to sell their current house...they don’t have to drain all their savings for the down payment. They can keep their savings for family needs or even for their own investment if they have excess,” she said.
As Maybank Islamic usually offers properties that are already completed or nearing completion with just months to go, HouzKEY participants can also move in relatively quicker than if they were to go the traditional route of buying freshly launched properties that will typically be completed three or four years later.
Blocking investors, property speculators
With a minimum five-year leasing contract period, the HouzKEY scheme is designed to keep out property speculators and investors looking to make a quick buck by flipping property.
“Our product is only for owner-occupied, hence we have restrictions. If you currently have more than one housing loan, you cannot apply for our scheme, so this scheme is not meant for investors, but more of you buying for your own stay,” she said.
For those who already have a housing loan for their first house, Maybank Islamic will still allow them to join HouzKEY as they may need to upgrade to accommodate the different needs that they now have.
“But if you already have multiple loans, that shows you are an investor, you are not looking for own stay, so we are not allowing that to happen. Why? Because this is easy credit, we want to contain the market, we do not want to encourage speculators. That’s why we are not allowing legally for you to sublet to anyone,” she said.
The lease agreement prohibits HouzKEY participants from subleasing or renting out their units, which helps ensure that applicants are genuine buyers looking for a place to stay. A property investor would typically have more than one residential unit and often rents out the extra units to use the monthly rentals to offset or fully cover their multiple housing loan installments.
“Legally you are not supposed to (sublease) because the noble objective is actually to help you to buy a house to stay. And also in future when you want to sell the house you can get the capital appreciation, but first, most importantly you have a house to stay,” Lye said.
