This document discusses economic bubbles, providing examples and theories. It focuses on the United States and Malaysian housing bubbles. Different types of bubbles are defined, including market, commodity, stock, and credit bubbles. The document outlines the history of bubbles like the tulip mania and dot-com bubble. Social psychology theories for bubbles are explained, and the effects of bubbles discussed. The US housing bubble and its causes are analyzed, along with the impact on employment. Malaysia's housing bubble is also examined, outlining factors like foreign investment and government efforts to manage supply and demand.

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