I found myself pondering the same question this morning while reviewing market information for my client. He purchased a terraced link house in Petaling Jaya over 10 years ago, prompting me to delve into the details. The calculated returns were underwhelming, so my answer to the question: Is buying a house a viable investment option? My answer is a “Not really” (though you may have a different perspective, and I respect that).
Buying house for own stay is special
Let me clarify: buying a house as an investment vs for personal use are two entirely different endeavors. We start our family, raise our children, and enjoy our living moments here; nothing is comparable, and it is a non-negotiable way of spending our money for our well-being. Yes, of course, I 100% agree!
To complicate matters further, investing in real estate for capital appreciation versus generating rental income is another distinct realm altogether. For the sake of comparison, I’ll omit the former—buying a house for personal use—and focus purely on the monetary perspective.
To avoid disclosing my client’s specific information, I’ve chosen a comparable area in Petaling Jaya: Mutiara Damansara. This area shares similar characteristics, such as being a sought-after location, freehold, double-storey intermediate link house, approximately 15 years old, gated and guarded, and purchased around the same time. The calculated returns for both areas (my client’s property and the Mutiara Damansara comparison) are nearly identical, aligning with my initial expectations—no surprises here.
The Calculation
Mutiara Damansara 2 Storey Terrace House
Land area: 1,539 sq. ft.
Transaction from JPPH (2012): RM 950,000
Location: Jalan PJU 7/8F
Below is a table I compiled using data from JPPH.
The average price is derived by averaging the selling prices for 2023–2024 (same land area, intermediate unit, same or nearby road).
For this analysis, I’m not using Return on Investment (ROI). Instead, I’m calculating the gross Compound Annual Growth Rate (CAGR) over the years using the available numbers.
The formula is:
Using the financial calculator:
- FV = future value ($1,403,000)
- PV = present value ($950,000)
- n = number of years (13) – if the house is selling now @ 2025
The Verdict: Buying a house as an investment
The yearly compound interest rate is approximately 3.05%, slightly better than a fixed deposit (FD).
The purpose of this post is not to spark debate but to reflect on the actual returns of buying a house as an investment relative to other asset classes. The 3.05% CAGR is a gross figure, excluding repair and maintenance costs, security fees, yearly taxes, and insurance. When added together, these expenses can be quite substantial and further reduce the return.
For context, the CAGR for similar asset classes over the same period (2012–2025, as of 22 April 2025):
- Fixed Deposit (FD): ~ around 2.6% (12-month tenure)
- Gold: ~ 4.8%
- EPF: ~ At least 5.5%
- S&P 500: ~ 9.95%
Final though: buying a house as an investment
Let me be clear about one critical element in real estate investment in general – Leveraging: investing in real estate remains a solid strategy, especially when leveraging borrowing power (e.g., paying 10% down and borrowing 90%). This approach allows buyers to afford properties beyond their immediate means. Earning rental income to cover most, if not all, of the loan installments (or at least the interest portion) is another advantage. However, managing maintenance costs carefully is crucial and super important, as they can be substantial and significantly impact overall returns.
Disclaimer: This is not investment advice but merely my personal opinion on the subject.
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