MALAYSIAN PROPERTY

BUBBLE
LECTURER’S NAME : EN MOHD HAFIZ BIN MOHD
SABERI
GROUP MEMBERS :
ALIN HANIS BINTI ZULKIFLI

UMI AMIRAH BINTI RAZALI

NUR SYAFIQAH BINTI NAZNI

 HISTORY

Beginning in 1998, the real price of houses

began to rise at an accelerating and historically
unprecedented rate. This price trend turned
into an asset bubble which houses were bought
at prices that made sense only if houses prices
continued to rise.
 INTRODUCTION

 A run-up in housing prices fueled by demand,

speculation and the belief that recent history is an
infallible forecast of the future.
 Housing bubbles usually start with an increase in
demand in the face of limited supply which takes a
relatively long period of time to replenish and
increase.
 Speculators enter the market, believing that profits
can be made through short-term buying and selling.
This further drives demand. At some point, demand
decreases or stagnates at the same time supply
increases, resulting in a sharp drop in prices – and
the bubble bursts.”
 WHAT IS PROPERTY BUBBLE?

 I t is a type of economic bubble that occurs periodically

in local or global real estate markets.

 It is characterized by rapid increases in valuations of

real property until they reach unsustainable levels,
followed by a reduction in price levels.

 Rise like air balloon is growing.

 Situation in which asset prices appear to be based on

inconsistent view about the future.
WHEN DOES PROPERTY BUBBLE
OCCUR?

High
demand
of
housing
Increases
Everyone of housing
wants to
own a price like air
house balloon
growing

Investors
Limited
start to
supply of
make a
land
profit
 WHAT WILL HAPPEN WHEN
PROPERTY BUBBLE BURST?

Since the bank wants to get the maximum profit, the bank will give
loans to anyone regardless of background credit of customers.

Until a level customers are unable to repay their loans.

Bank customers will not be able to repay

their debts.

Bank will not be able to

withdraw their loans.
 HOW DOES PROPERTY BUBBLE
AFFECT ECONOMICS?

2. Housing
• Loss of Bubble • Uncertainty good
confidence or bad
towards spending • Decrease on
on property consumer
spending
• Recession
1. Stock 3. Commodity
Market Bubble Bubble
 WHY DO PROPERTY PRICES KEEP
CLIMBING AND DOES IT MEAN A
PROPERTY BUBBLE?

ECONOMIC
INFLATION CRISIS Price drops generally
Inflation is the from owners who
condition where have lost their
prices rise year by sources of income
year. and cannot pay back
the bank loans.

EXAMPLE: At 8%
inflation, if you paid
RM100 for goods
today, you will pay
RM108 for the same
goods next year.
 EXAMPLE OF PROPERTY BUBBLE

 Mainly in high developed cities, since more buildings

are built, causing the value of land to increase.
EXAMPLE OF PROPERTY BUBBLE
(CONT’D)
EXAMPLE OF PROPERTY BUBBLE
(CONT’D)
 SOLUTION TO PROPERTY BUBBLE

1 Malaysia People Housing Program (PR1MA)

- A middle-income households in key urban
centers, ranging from RM100,000-RM400,000
- Opens to all Malaysians who are 21 years
and above with a minimum monthly income of
RM2,500
Housing Project for the Hardcore Poor- (PPRT)
- A government program for resettlement of
slum dwellings and meet the needs of low-
income earners.
 SOLUTION TO PROPERTY BUBBLE
(CONT’D)
Improvise stricter guidelines on loans
The eligibility for applying loan at banks should
be strict. For example, the banker must take
account of the borrower’s background, job status
etc.
 CONCLUSION

Property prices have taken an unhealthy climb

due to speculation and cheap credit.
 Comparing the Housing Price Index (HPI) to
inflation over the last 11 years, it is evident that
residential property prices have grown at a rate
faster than inflation.
 THE END

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