The Economy and the Housing Market. By: Dr. Zulkiply Omar Senior Research Fellow Malaysian Institute of Economic Research (MIER)

Transcription

1 The Economy and the Housing Market By: Dr. Zulkiply Omar Senior Research Fellow Malaysian Institute of Economic Research (MIER)

2 The Malaysian Economy Add a footer 2

3 The World Economy GDP Growth (% y-o-y) Projections World Advanced Economies Emerging Market and Developing Economies World Trade Volume (goods and services) Source: International Monetary Fund (IMF), World Economic Outlook July

4 The Malaysian Economy: Real GDP by Expenditure Components at Constant 2010 prices % year-on-year Q17 2Q17 3Q17 4Q Q18 2Q18 Private Consumption Public Consumption Gross Fixed Capital Formation Private Investment Public Investment (0.5) 3.2 (5.0) 4.1 (1.4) 0.1 (1.0) (9.8) Domestic Demand Net Exports of Goods & Services 1.7 (15.3) (1.9) Exports of Goods & Services Imports of Goods & Services (2.0) 2.1 Real GDP Source: DOSM 4

5 Industrial Production Index (Manufacturing) % change y-o-y Manufacturing Export-oriented industries Domestic-oriented industries Source: Department of Statistics Malaysia (DOSM) 5

6 International Trade RM Million 16,000 % change y-o-y ,000 12,000 10,000 8,000 6,000 4,000 2, (10.0) 0 (20.0) Trade Balance (LHS) Export (RHS) Import (RHS) Source: Department of Statistics Malaysia (DOSM) 6

7 PMI: Export Order Surveys & World Trade Volumes Source: Capital Economics 7

8 Source: Bank Negara Malaysia (BNM) Malaysia: Balance of Payments (RM million) Net 1Q17 2Q17 3Q17 4Q Q18 2Q * : Current Account 4,786 8,772 12,800 13,916 40,275 14,977 3,909 32,940 (% of GNI) Goods 25,010 26,027 31,672 34, ,766 35,681 26, ,374 Services (6,171) (4,849) (4,823) (6,972) (22,815) (5,846) (6,180) (22,689) Primary Income (10,147) (8,168) (9,631) (8,408) (36,354) (10,192) (11,230) (41,023) Secondary Income (3,905) (4,238) (4,418) (4,761) (17,322) (4,666) (4,736) (17,723) Capital Account 17 (1) (20) (23) (27) (25) (37) - Financial Account (8,313) 8,986 (2,837) 5,965 3,800 15,236 9,151 - Direct Investment 9,209 (7,147) 8,772 5,300 16,134 10,704 (715) - Abroad (8,028) (15,810) (2,964) 1,894 (24,907) (1,276) (3,558) - In Malaysia 17,237 8,663 11,736 3,405 41,041 11,980 2,843 - Portfolio Investment (32,374) 17,513 (9,094) 11,639 (12,316) (2,638) (38,272) - Financial Derivatives 646 (286) 983 (1,452) (109) 753 (213) - Other Investment 14,206 (1,094) (3,498) (9,523) 92 6,417 48,352 - Error & Omissions 1,333 (7,474) (3,759) (17,739) (27,639) (11,997) (13,912) - Overall Balance (2,178) 10,283 6,184 2,119 16,409 18,191 (888.1) - International Reserves (USD) Retained import (months) Res./S-term external debt (times) Department of Statistics Malaysia (DOSM) * Ministry Of Finance (MOF), Economic Report 2017/2018 8

9 The Economy: Summary : The world economy is expected to grow at slower pace as global demand is moderating Global trade flows slowing down High oil prices bad news for energy importing economies US-China trade war knock-on effect Financial market volatility short-term capital outflows from EMDEs due to policy normalization in developed countries Strong USD exchange rate Over relying on private consumption of domestic demand 9

10 Housing Market Add a footer 10

11 Imperfect : market Oversupply Housing Market: The Issues Price downward stickiness Supply-demand mismatch Is price really high? 11

12 Prices vs hold Income, (RM) State Mean Price Mean hold Income CAGR (%) CAGR (%) Malaysia 184, , ,025 6, Johor 137, , ,835 6, Kedah 115, , ,667 4, Kelantan 113, , ,536 4, Melaka 122, , ,184 6, Negeri Sembilan 123, , ,540 5, Pahang 132, , ,279 5, Perak 112, , ,407 5, Perlis 99, , ,809 4, Pulau Pinang 209, , ,617 6, Selangor 263, , ,962 9, Terengganu 129, , ,017 5, W.P. Kuala Lumpur 388, , ,488 11, Sabah 284, , ,102 5, Sarawak 243, , ,581 5, Source: Malaysian Price Index (MHPI), NAPIC Department of Statistics Malaysia (DOSM) Note: 1 Data as in 2016 due to limitation of data 12

13 Elasticity of Housing Demand State Elasticity Price Income Malaysia Johor Kedah Kelantan Melaka Negeri Sembilan Pahang Perak Perlis Pulau Pinang Selangor Terengganu W.P. Kuala Lumpur Sabah Sarawak Source: Malaysian Price Index (MHPI), NAPIC Department of Statistics Malaysia (DOSM) Note: 1 Data as in 2016 due to limitation of data 13

14 Elasticity of Housing Demand : Price elasticity of demand: percentage change in quantity demanded given one percent change in price: negatively related At the national level is not elastic Income elasticity of demand: percentage change in quantity demanded given one percent change in income: positively related Wrong sign: income increase, quantity demanded decreases Reflection of the market rather than consumer behaviour It relates to the affordability issue 14

15 Affordability Measure : The house-price-to-income multiple: the ratio between median house price and median annual household income, also known as the median multiple Median multiple = Median house price Median annual household income Rule of thumb: median multiple of 3.0 times or less is considered a very good marker for housing affordability 15

16 Price-to-Income Ratio Based on Income Classes, 2017 State Bottom 40% Middle 40% Top 20% Malaysia Johor Kedah Kelantan Melaka Negeri Sembilan Pahang Pulau Pinang Perak Perlis Selangor Terengganu W.P. Kuala Lumpur W.P. Labuan W.P. Putrajaya Sabah Sarawak Source: Property Market Report, NAPIC Department of Statistics Malaysia (DOSM) Note: Income class data as in 2016 due to limitation of data 16

17 Types of Residential and Price Range Cluster Condominium Detached Semidetached Townhouse Terrace Low-cost Terrace Flat Low-cost Flat 17

18 Median Prices, 2017 Types W.P. Kuala Lumpur Selangor Cluster 230, ,000 Condominium/ Apartment 578, ,000 Detached 2,900, ,500 Flat 200, ,000 Low-Cost Flat 158, ,000 Low-Cost 320, ,000 Semi-Detached 2,500, ,000 Terraced 800, ,750 Town s 746, ,000 Source: The Residential Prices, NAPIC 18

19 Price-to-Income Ratio by Type of Residential and Income Classes, 2017 Types Cluster Condominium /Apartment Detached W.P. Kuala Lumpur Flat Low-Cost Flat Low-Cost Semi- Detached Terraced Town s Bottom 40% Middle 40% Top 20% Types Cluster Condominium /Apartment Detached Flat Selangor Low-Cost Flat Low-Cost Semi- Detached Terraced Bottom 40% Middle 40% Top 20% Town s Source: Property Market Report, NAPIC Department of Statistics Malaysia (DOSM) Note: Income class data as in 2016 due to limitation of data 19

20 Conclusion affordability is the income issue rather than price Therefore, addressing cost or/and prices is not a total solution The housing market is not perfect competition and it will never be Therefore, the affordability issue cannot be totally addressed through market solution 20

21 THANK YOU