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Housing Bubble in Malaysia
What is Economics Bubble??
 Situation in which asset prices appear to be based
on inconsistent view about the future
 Trade in high volume at prices that are different
with the intrinsic values or fundamental value
Different Types of Bubbles
 Market Bubble (Housing Bubble)
 Commodity Bubble
 Occur when the price of commodity increase
 Stock Market Bubble
 Occur when the value of stocks & shares increase
rapidly
 Credit Bubble
 Rapid growth in consumer and business credit to
finance higher consumer spending
History of
Economic Bubbles
1.Tulip Mania (1600s-1637)
2.Stock Market and Housing Bubble in U.S
(2006)
3.Dot-com Bubble (1990s-2000)
Social Psychology Theories
 The Greater Fool theory
 Over-optimistic , Buy and Sell higher price
 Herding theory
 Mimic the actions of a larger group
 Extrapolation theory
 Projecting historical data into future on the same basis
 Moral Hazard theory
 Risk return relationship altered
 Agency problem emerge
Effects of Bubbles
 Stock Market Bubble
 Loss of confidence & Reduce spending
 Housing Bubble
 Decrease in consumer spending
 Recession
 Commodity Bubble (Gold/Oil price)
 Uncertainty
Good or Bad ??
United Stated Housing Bubble
One of the Main Reason :
Collapse of the Dot-Com Bubble
• Stock market fell, Real estate become the
primary market for the speculators
Impact on U.S. Housing Bubble  Employment
yes
What causes the housing $ ↑ ??
When 2006, terrace house in city area (KL) worth RM290,000
When 2014, the same house worth over a million !
Shortage Of Land
Klang valley & Penang – limited land ( but is the
development state, so a lot buyer want to own
property in this 2 states. )
Speculative buyers
National House Buyers Association (HBA) secretary-
general Chang Kim Loong : “Low Real Property Gains
Tax (RPGT) has been a reason which has fuelled false
demand and excessive speculation.”
• Promoted by the Government of Malaysia to allow
foreigners who fulfill certain criteria, to stay in Malaysia
for as long as possible on a multiple-entry social visit
pass.
• The Social Visit Pass is initially for a period of ten (10)
years, and is renewable.
• Attract a lot foreigner : Korea & China Buyer
• China is the biggest beneficiary for this program.
• Malaysia still haven’t set any housing policy for
foreigner buyer like SG & HK.
• Foreigner buyer requirement :
• Housing $ 500,000above
• Need to open a fixed deposit account of RM300,000 (
below 50years old); RM150,000 ( above 50years old).
Etc.
Government want to prevent the housing bubble by this way:
• Supply and demand
1Malaysia Development Bhd (1MDB)
• 1Malaysia People Housing Programme (PR1MA)
• Which is charged with the task of building affordable quality
homes, must be doubled and intensified.
• 20,000 units of PR1MA homes made available to middle-
income earners across the country.
• Housing Project for the Hardcore Poor (PPRT)
• aimed at building affordable homes which are then rented to
the poor at very affordable rates.
In Budget 2014
announcement,
• Curbing Speculation
• Increase in Real Property Gains Tax (RPGT) rate
• Increase 10% to 15%
• 5% of RPGT introduced- holding period > five years.
(holding period count begin the date of completed the
sell & purchase agreement)
• Change the behavior of investor, although cant solve
the housing crisis, but can reduce market instability.
• Stamp duty imposed to buyers ( 2nd , 3rd …house ↑)
Malaysia housing bubble will burst?
Future?
Depends on others
factors!
Now?
Won’t burst
Why did Malaysia housing bubble
won’t burst so soon?
PEAK
2013
This is because :
China investor !
Actually they wish to buy property in
Singapore and HK.
BUT…
SG > curbing the speculation >
property speculation tax to foreigner!
10 % in 2011 ↑ 15% 2013
HK - stamp duty on certain real
properties has been doubled to 8.5% to
cool off the property market.
If loosen, the china investor will go
back to SG and HK.
The end
Q&aPresented by :
Goh Chun Hong
Woo Chia Yuen

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Housing Bubble in Malaysia

  • 2. What is Economics Bubble??  Situation in which asset prices appear to be based on inconsistent view about the future  Trade in high volume at prices that are different with the intrinsic values or fundamental value
  • 3. Different Types of Bubbles  Market Bubble (Housing Bubble)  Commodity Bubble  Occur when the price of commodity increase  Stock Market Bubble  Occur when the value of stocks & shares increase rapidly  Credit Bubble  Rapid growth in consumer and business credit to finance higher consumer spending
  • 4. History of Economic Bubbles 1.Tulip Mania (1600s-1637) 2.Stock Market and Housing Bubble in U.S (2006) 3.Dot-com Bubble (1990s-2000)
  • 5. Social Psychology Theories  The Greater Fool theory  Over-optimistic , Buy and Sell higher price  Herding theory  Mimic the actions of a larger group  Extrapolation theory  Projecting historical data into future on the same basis  Moral Hazard theory  Risk return relationship altered  Agency problem emerge
  • 6. Effects of Bubbles  Stock Market Bubble  Loss of confidence & Reduce spending  Housing Bubble  Decrease in consumer spending  Recession  Commodity Bubble (Gold/Oil price)  Uncertainty Good or Bad ??
  • 8. One of the Main Reason : Collapse of the Dot-Com Bubble • Stock market fell, Real estate become the primary market for the speculators
  • 9. Impact on U.S. Housing Bubble  Employment
  • 10. yes What causes the housing $ ↑ ?? When 2006, terrace house in city area (KL) worth RM290,000 When 2014, the same house worth over a million !
  • 11. Shortage Of Land Klang valley & Penang – limited land ( but is the development state, so a lot buyer want to own property in this 2 states. ) Speculative buyers National House Buyers Association (HBA) secretary- general Chang Kim Loong : “Low Real Property Gains Tax (RPGT) has been a reason which has fuelled false demand and excessive speculation.”
  • 12. • Promoted by the Government of Malaysia to allow foreigners who fulfill certain criteria, to stay in Malaysia for as long as possible on a multiple-entry social visit pass. • The Social Visit Pass is initially for a period of ten (10) years, and is renewable.
  • 13. • Attract a lot foreigner : Korea & China Buyer • China is the biggest beneficiary for this program. • Malaysia still haven’t set any housing policy for foreigner buyer like SG & HK. • Foreigner buyer requirement : • Housing $ 500,000above • Need to open a fixed deposit account of RM300,000 ( below 50years old); RM150,000 ( above 50years old). Etc.
  • 14. Government want to prevent the housing bubble by this way: • Supply and demand 1Malaysia Development Bhd (1MDB) • 1Malaysia People Housing Programme (PR1MA) • Which is charged with the task of building affordable quality homes, must be doubled and intensified. • 20,000 units of PR1MA homes made available to middle- income earners across the country. • Housing Project for the Hardcore Poor (PPRT) • aimed at building affordable homes which are then rented to the poor at very affordable rates. In Budget 2014 announcement,
  • 15. • Curbing Speculation • Increase in Real Property Gains Tax (RPGT) rate • Increase 10% to 15% • 5% of RPGT introduced- holding period > five years. (holding period count begin the date of completed the sell & purchase agreement) • Change the behavior of investor, although cant solve the housing crisis, but can reduce market instability. • Stamp duty imposed to buyers ( 2nd , 3rd …house ↑)
  • 16. Malaysia housing bubble will burst? Future? Depends on others factors! Now? Won’t burst
  • 17. Why did Malaysia housing bubble won’t burst so soon? PEAK 2013
  • 18. This is because : China investor ! Actually they wish to buy property in Singapore and HK. BUT… SG > curbing the speculation > property speculation tax to foreigner! 10 % in 2011 ↑ 15% 2013 HK - stamp duty on certain real properties has been doubled to 8.5% to cool off the property market. If loosen, the china investor will go back to SG and HK.
  • 19. The end Q&aPresented by : Goh Chun Hong Woo Chia Yuen