Although the new 'My First Home Scheme' has been widely welcomed by the market, questions are being raised on whether it can really help young adults to purchase their first dream home.

According town planner Goh Bok Yen, the scheme would not be of much help as house prices have broken through the ceiling in last two years, especially in Kuala Lumpur and Selangor.

His other worry is young people being burdened with 30-year long housing loans under the scheme, and this soon after leaving school or graduating from universities before starting work.

"If one could secure a job and get promoted all the time, one will be able to sustain the loan repayments. However, if there is a recession and he loses his job, he will then face problems repaying the loan," he said in an interview with Malaysiakini .

'My First Home Scheme' was launched by Prime Minister Najib Abdul Razak three weeks ago to enable young adults with monthly incomes below RM3,000 to purchase their first house.

The scheme offers 100 percent financing from selected financial institutions for houses between RM100,000 and RM220,000 with the repayment period spread over 30 years.

Alternatively, they can fork out a 10 percent down payment which is now guaranteed by government through its link company of Cagamas Bhd under the scheme.

Houses expensive in major cities

However, it is understood that most of the landed properties and condominiums in major cities like Kuala Lumpur, Petaling Jaya, Georgetown, Penang, and Johor Bahru are already priced over RM220,000.

A property agent who requested anonymity said that for RM220,000 in Kuala Lumpur, one can only get an apartment or flat.

"If not, the house buyer will need to search in areas like Pandan Indah, Cheras or even Serdang, Kajang and Rawang."

There is the other option of hunting for lower priced homes in a faraway locations but one need to figure in transportation costs, which rise in proportion to distance.

Even if they are lucky and find a RM220,000 house, the sum will still a huge burden for those monthly earnings below RM3,000.

This is because after deducting all the loans and basic expenses, they will be left with little for their personal needs.

Out of the salary of salary of RM3,000, the net income will be sliced to RM2,614.

After deducting RM1,200 for housing loan, RM500 for car loan and RM108 for the education loan, he will only left with RM806 to cope with basic daily expenses like food, fuel, utilities, Internet access, entertainment and sundry other expenses.

For a single adult without dependants, life is already difficult enough with such an amount, what more for a married adult or those with children. They could easily be mired in financial difficulties.

Even if the government raised the scheme limit to RM300,000 as suggested by certain parties, this will only add to their burden.

For a RM300,000 home, young adults will need to set aside RM1,600 for the housing loan installments or more than half of their gross salary.

According to common financial planning practice, total loan repayments of more than 40 percent is considered untenable.

Public housing and 'rent and buy' option

While the housing boom is inevitable from economic development and land shortage in big cities, Goh lamented that the rise in the average salary has not kept pace over the last 10 years.

"The ratio between salary and house prices has became imbalanced. If 10 years ago, the price was equal to five years of income, now it is 12 years."

He said younger generations are increasingly becoming more dependent on their parents to meet their first home down payment.

Hence, Goh proposed that the government seriously look at the Singapore public housing model and the "rent and buy" model to help young adults.

The island republic, though suffering from an acute shortage of land, its government has successfully developed a public housing programme that meet the housing demands of the low and medium income groups.

The programme allows Singaporeans to purchase flats, dubbed "HDB flats", that are reasonably priced and of decent quality.

Besides that, they are also allowed to withdraw from their Central Provident Funds (CPF), similar to Malaysia's Employee Provident Fund (EPF), to settle down payments and installments, and move to a bigger unit when the family grows.

Goh said the federal government has already has its national housing agency which can develop public housing to serve as transitory accommodation until the young are able to afford their first house.

"Each state also has its own development authority and they own a lot of land."

He also suggested that the government consider the 'rent and buy' option, rather than the 'My First Home Scheme'.

Under this model, the government can rent out the houses to these young adults, with part of it serving as down payment for the purchase of a future home.

"Sometimes, when the young adults just come out to work, they are not sure about their dream home.

"So, if they buy their first home in a rush, they might regret later or be burdened by heavy debts," Goh said.

Commentator Khoo Kay Peng ( left ) concurred with the public housing plan concept, but stressed that certain requirements must be fulfilled and serve the targeted groups.

"We always hear that some penghulu received eight to nine units, while the state officer gets some too. This should not happen."

Be prudent in making decision

Meanwhile, the Credit Counseling and Debt Management Agency under Bank Negara advised the public to exercise prudence in making their purchase decision, although they are supportive of 'My First Home Scheme'.

Its chief executive officer, Mohamed Akwal Sultan, said that public should look at affordability with the usual benchmark being that total loans repayment, including car and house loans, should not exceed 40 percent of monthly income.

"They should also consider other hidden costs, such as legal fees, quit rent and maintenance costs. If they are buying a condominium unit, they should also consider the management fees."

He is confident that the scheme will not raise the rate of non-performing loans (NPL) as the banks will apply a strict screening and checking process to verify the purchasers's financial background.

"NPL normally will not rise because of the first-home buyers, because they will work hard to meet the installments."