This article analyzes the current state of the Malaysian housing market, addressing concerns about whether it's currently flat or on the verge of a bubble. We'll explore the definitions of a "flat" market and a "bubble," examine government housing policies, and assess the likelihood of a bubble forming in the Malaysian context.
Defining a "Flat" Housing Market
A "flat" housing market indicates a supply-demand imbalance. Typically, this means the supply exceeds the demand. Currently in Malaysia, supply is estimated at 60% and demand at 40%. A truly "flat" market might look more like an 80% supply and 20% demand scenario. Such an imbalance would usually prompt the government to implement strong housing policies, as we will discuss later.
Understanding Housing Market Bubbles
A housing market bubble occurs when asset value exceeds its actual value. In essence, the real value is lost due to increased speculation.
- Example: If a property is genuinely worth RM5, but speculation drives the price up to RM10, the real value becomes distorted, creating a bubble.
Bubbles are often fueled by speculation and a detachment from real-world value.
Characteristics of a Housing Bubble
Several factors contribute to the formation and consequences of a housing bubble:
- Speculation Without Demand: A large influx of investment occurs without genuine demand, artificially inflating prices. People invest heavily without considering intrinsic value.
- Market Price Out of Control: The market price increases uncontrollably due to speculation, further detaching prices from real value.
- Value Collapse and Lack of Trade: After the price reaches unsustainable heights, the market corrects, leading to a significant drop in value and a lack of trading activity, or liquidity.
This sequence mirrors historical financial crises, like the Hong Kong stock market in 1999 and the early stages of POM1.
Malaysia's Current Status
As of now, Malaysia's housing market doesn't exhibit all the characteristics of a bubble. While there's been some price appreciation, it's been gradual rather than a rapid surge followed by a collapse and a trading halt. This suggests that a bubble hasn't formed yet.
Government Housing Policies in Malaysia
The Malaysian government has implemented several policies aimed at managing the housing market and preventing bubbles:
-
Real Property Gains Tax (RPGT): This tax applies to profits from selling property within five years of purchase. It discourages short-term speculation.
-
Affordable Housing Initiatives: The government provides avenues for Malaysians to purchase lower-priced properties with specific regulations.
-
Controlling New Development: The government regulates the production of new buildings by requiring approvals and assessing the need for new developments in areas with existing properties.
-
Foreign Investment Thresholds: Foreigners investing in KL must purchase properties exceeding RM1 million, and in Selangor, the threshold is RM2 million.
-
Tightening Mortgage Approvals: Banks are more stringent in approving mortgages compared to the past, limiting excessive borrowing.
-
Discouraging Group Purchases: The government is discouraging group purchases of real estate to manage developer selling a lot of real estate at a time to a single buyer.
These policies aim to stabilize the market, curb speculation, and ensure sustainable growth.
Conclusion
Based on the current data and government policies, the Malaysian housing market does not currently appear to be in a bubble. The government's active role in regulating the market makes the formation of a bubble in the future less likely. While the future is uncertain, present conditions suggest a relatively stable market environment.