Has Malaysia’s housing bubble burst in 2013?

 

 Propwall.my's inargural Propwall CORE attracts crowds of participants aiming to gain more insights on property market.


Propwall.my’s inargural Propwall CORE attracts crowds of participants aiming to gain more insights on property market.

While many are worried that the property market is going on a downward trend, some pundits see better times ahead.

Past president of the Malaysian Institute of Estate Agents (MIEA) Siva Shanker said the phenomenon of property cycle meant the downward trend will not last forever, and the market will eventually recover from its slump.

“We are not at the end of the bell curve, the normal conclusion is for the market to go up, barring any unforeseen circumstances,” he said in the recent inaugural Propwall CoRE (Consumer and Real Estate Negotiator) held at Menara Star.

The event is a monthly series event by Propwall.my that aims to provide a platform for consumers and real estate negotiators to connect and exchange information.

However, Shanker did not expect a quick rebound, stating that investment in property market is a long term venture rather than a “flip and deal”. In his opinion, the market will be slowly inching up in year 2018 and 2019, and see a real boom after year 2020.

 Propwall.my head of sales Thew Phang Chun presents token of appreciation to Siva Shanker.


Propwall.my head of sales Thew Phang Chun presents token of appreciation to Siva Shanker.

Citing data from National Property Information Centre (Napic) and PPC International Research, he said Malaysia’s property market has experienced a huge hit for the past few years, although it posed different impact on transaction volume and value.

According to Shanker, with the introduction of responsible lending guidelines by Bank Negara Malaysia in 2012 and various market cooling measures, the transaction volume for the whole property market in Malaysia for 2012 and 2013 has fallen from previous years. While it rebounded on 2014, the market suffered another slump in 2015 due to various external factors, including the 1MDB scandal that has shaken market confidence.

Past president of the Malaysian Institute of Estate Agents (MIEA) Siva Shanker

Past president of the Malaysian Institute of Estate Agents (MIEA) Siva Shanker

“However, from 2012 to 2014, the transaction value recorded a positive grow despite the drop in transaction amount.

Shankar said the government imposed more stringent guidelines on housing market in 2013, as the measures taken in 2012 reduced the transaction amount but not the house prices.

“For real estate, the drop of transaction volume from 427,520 to 381,130, which amounted to a 11% drop, signalled real problem, but the market still recorded higher transaction value.

“It was in 2015, that both transaction value and volume dropped. In terms of transaction volume, it has fallen from 384,060 to 362,105 from 2014 to 2015, while the value fell from RM162bil to RM149bil, which amounted to approximately 6% and 8% drop respectively,”

“This is the first time since 1997 that Malaysia’s property market registered a negative growth value.

He said while the transaction volume has dropped when BNM introduced the guidelines in 2012, the total transaction value kept going up, indicating house price was booming, but that was not the case in 2015.

Property transaction

“Why is the drop in housing value scary? If a middle class buys RM1mil house and loses 10% of its value, the person will lose RM100,000 and that will be the entire life savings,” he said.

With only data from 1H 2016 available, he projected that the market last year was hit even harder.

However, he said when one follows the data, the housing bubble has already burst in 2013, meaning the market will see better times ahead.

He added that Malaysia’s economy is in a relatively stable state, and with the predicted end of the downward trend of the property cycle, investors who adopt a long term outlook and have holding power, will stand to profit in the long term.

Shankar’s number showed the amount of loan approval has dropped by 14.6%, while the ratio of loan approvals are at 50.2%.

This could indicate another set of problems. The different rate of drop in loan approval value and loan approval rate indicate that most likely loan with higher values are approved, which could mean the rejected loans are mostly for mid or lower range housing products.

Ho Chin Soon Research chief executive officer Ishmael Ho

Ho Chin Soon Research chief executive officer Ishmael Ho

Meanwhile, Ho Chin Soon Research chief executive officer Ishmael Ho said despite the gloomy view held by some media reports, there were some developers who remained optimistic on this year’s outlook.

He also said that with all the talks on mismatch of demand and supply, developers have been adjusting their strategy to launch more affordable products.

“With the expected launch of MRT Sungai Buloh-Kajang phase at mid-2017, the mass market in Kajang and Cheras will be opened up,” he said.

According to Ho, one of the interesting phenomenon in Malaysia’s property market is following the influx of Chinese investors, Chinese developers and contractors, now Chinese interior designers are also coming into Malaysia.

Propwall.my head of sales Thew Phang Chun said Propwall CoRE’s goal is to empower property buyers and real estate agents with information and ideas through inviting bright minds in the property industry to share their insights.

To learn more, call 03-7967 1388 (ext 1861/1950) or email support@propwall.com.

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