It goes without saying that a home is an important part of our lives. It is the place where we can feel at ease after a long day at work or school. Coming home and relaxing in an air-conditioned or fan-chilled room after a warm shower always sound great!
In Brunei, as with other places, owning a home is considered a status symbol. The bigger it is, the more well off you are. True as it may be, a bigger house doesn’t mean a better time when you consider the amount of space not utilised and needing to clean and maintain it.
Many people strive to one day own a home of their own. There is a saying that the “Home is where the heart is”. So if you’re a workaholic would your office be your home? Regardless, is owning a home in Brunei be worth your while? Or would simply renting one do?
Terms you should know
Like other aspects of the financial sector, homes and housing have their own lingo. As troublesome as it is, the words are actually pretty simple!
Mortgage is basically the loan or debt you go into to buy a house. Usually you would apply for a mortgage through a bank.
2. Detached house
This is the house many people aspire to get. It is a standalone house on its own piece of land.
3. Semi-detached house
Smaller, but still spacious. This is 2 house units sticking together but usually the halves are separated by a fence.
4. Terrace house
Long stretch of multiple units linked to one another. Usually the cheapest amongst the house types.
5. Occupation Permit (OP)
Just building a house doesn’t mean you can stay in it immediately. The OP is issued when the relevant government body inspects the location and is satisfied that it checks all the boxes. With it, water and electricity can be supplied to your house. And most importantly, you can live in it.
Buying and Renting a Home
Having a house is probably a good indicator that someone is doing quite well. But it could also mean that a person has horrible money sense and the slight addition of unexpected expenses will put them in the red. More often than not, our society’s bias pushes people to “go large or go… home”. People generally make assumptions of your metaphoric book by its cover and if you let it affect you, logic and common sense goes out the window.
That being said, and like many other things, home ownership may or may not be for you. It all falls down to your goals, not only financially, but personally in the foreseeable future!
What to consider?
You should bear in mind a few important things when you consider buying or renting:
How much money are you willing to sink into a home? Are you the type that wants to pretty it up as much as possible? Or are you ok with the look that is already provided.
Are you willing to go into debt? Or maybe are family members helping you pay off the mortgage too?
ii. Length of stay
Are you planning on staying there, or in Brunei for that matter, for the long term? It’s likely not worth it to go into a 25-year loan if you are only going to stay for 10 years before moving on.
If you are a husband and wife with a baby on the way, it’s probably not wise to get a 5 bedroom house. Extra space cost extra money so if you don’t need it, you could probably save more to put towards furnitures or other things.
If you’re considering buying a house, there are many more aspects to plan for compared to renting such as:
1. How much can you loan?
As mentioned in my article about financing a car, there is a thing in Brunei called the TDSR i.e. the Total Debt Service Ratio. This is a regulation set by the Authoriti Monetari Brunei Darussalam (AMBD). Basically you are only allowed loans with repayments up to 60% of your monthly salary in totality.
To push down your monthly payments, you may need to save up for longer so that you would not need to borrow as much.
2. Surprise expenses
This is an advice many gave but I really had to get my feet wet to understand it. The cost truly goes way beyond just paying for the house itself. You will need to pay more for:
- Legal fees i.e. lawyer, taxes, insurance
Legal fees alone requires you to pay at least BND15,000 extra. So plan out your budget and strategy before committing to buy. It’s always great to have a budget as it shows you how much you can spend and keep surprise costs down.
Pros and Cons of Buying a Home
- “Your own” place.
- Potential rental property in the future.
- Asset to leave behind for your family.
- Freedom to renovate as you please.
- Feeling of security.
- Only Bruneian citizens may purchase.
- Extremely high costs.
- Likely need to get a loan and therefore go into debt.
- Maintenance costs.
- Stuck in one geographic location.
- Very difficult to transfer property to your name in Brunei.
Unlike buying a house, renting is much simpler and removes a lot of the hassles. Just as long as you pay attention to:
A proper rental is contractual: stating how long you’ll stay, how much you should pay for rent and so on. Read it properly before you sign. Ensure you agree to all the terms before signing; if not, negotiate to change and then sign the new contract.
2. Condition of house
It is good practice to inspect the house beforehand to ensure everything is in order. You wouldn’t want to move in and find something needs fixing and be charged to you, right?
Pros and Cons of Renting a Home
- Cheap. Usually only needing 1 or 2 months’ deposit at most.
- Ease of moving to another house or country.
- No debt.
- Simple process; less paperwork.
- Some properties are fully furnished.
- Lack of stability. The owner may need you to move out when the contract ends or at any other time.
- No asset under your name.
- Likely required to revert back to “original” house if you renovated it.
- Deposit may be required to be used by owner for repairs.
- Risk of bad landlords.
So you’re saying buying a house is an investment?
Actually, no. Your house which you stay in as your home is by and large, a liability. When you make a conscious choice to put your money somewhere so that it will grow, that would be an investment. Because you’ll be utilising the house personally, you probably won’t make money from it. More likely than not, you’ll be just paying off your mortgage until one day when you decide to rent it out.
There are also many reasons why real estate in Brunei isn’t efficient, let alone lucrative.
1. Transfer of property ownership is difficult
Not only known locally, even internationally it is well known that transfer of ownership is tedious. An extract reads:
The country is currently ranked 135 out of 190 economies for Registering Property in the World Bank’s Doing Business Report, this is because every transfer of ownership in Brunei Darussalam requires the approval of “His Majesty in Council” which is a council of officials representing the Sultan. This process can be lengthy and at times opaque.
From personal experience, you would probably have to wait YEARS before the property you purchased gets transferred to your name. This is considering you’re going at it “by the book” with no string-pulling.
2. Oversupply and lack of demand
Many people are developing their lands into houses and malls. This is awesome except for one problem: there’s only so many people in Brunei. With our economy in depression and lack of foreign investments coming in so far, who’s gonna buy or rent these? All the shops we see opening up are cube shops (hiss) and cafes. And even these usually do not last long.
3. Low rents
This is also a result from No.2. As far as the market is concerned, there are ample houses for you to choose from. And the rent can be very low as well! Single room rents can be as low as BND200 but these usually have bare minimum amenities if any. With more supply than demand, owners are forced to lower their asking price to stay competitive. However, those with good reputation and quality might still be charging prime rates; which is fair and expected.
So if you’re planning to rent out your house, get ready to fight for tenants that are good and can afford it.
4. Housing price bubble
Let’s be realistic, there are too many houses but the prices have been growing steadily over the years! Before, BND300,000 could get you a nice detached house but nowadays it’d probably net you a semi-detached house! It goes against logic that with oversupply, the price still increases.
Personally, I think there’s potential for the real estate market to crash because of inflated prices. But most likely the Government would intervene in some way. Only time will tell.
So… don’t buy a house?
Uh… Still no. If you think buying a house in Brunei is what you truly want and are willing to shoulder the highest amount of debt known to the country, then sure. As mentioned earlier, there are many developments to choose from and like shopping, it’s best if you looked around before settling.
Recently, there have been many apartments cropping up too and in my experience, they are easier to maintain compared to a whole house. That’s one more option for you to choose from!
In a nutshell
A home doesn’t necessarily require it to be owned by you. A rental home can be a better choice if you don’t want to go into debt or you’re considering to move in the future. Owning a home has its perks too, though. There’s a feeling of security when you come home to your own place; one that’s quite different from coming home to your rented house.
All in all, your choice should be determined firstly by what you want and secondly by your financial capability. Your goals may be different and therefore adjusted accordingly. I bought a house because one of my life goals was to provide a home for my family. It’s quite a simple goal but it’s amazing to be able to accomplish it nonetheless.
Finally, we should break free from caring about what other people think. Success never was and will never be measured by how grandiose your house and material possessions are. If you’re unsure of the future, just take the safer route first. Rent until you know what you truly want so that you won’t regret buying when you weren’t ready.
“If you haven’t found it yet, keep looking. Don’t settle. As with all matters of the heart, you’ll know when you find it.”
— Steve Jobs