Type of Bubble Housing Bubble in malaysia Causes Recommendation The bubble will not burst!

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 ??

7. United Stated Housing Bubble

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