Democratising Property Investments
What I wish to share today 1. Property sector outlook 2. How theedgeproperty.com can help you make better property investment decisions
Property Sector Outlook The property market, in terms of transactions, has been sluggish for well over a year. Cooling measures was put in place effective from Jan 2014. Positively, prices have not fallen but have continued to rise. Malaysian Home Price Index average prices increased 7% in 2014, a deceleration from 9.6% in 2013, 12.2% in 2012, 10% in 2011 and 8.2% in 2010
Property Sector Outlook Ingredients for a structural property downturn were already well in place before the Budget 2014 measures. Home prices have run ahead of wage growth, especially in urban areas, where growth has been strongest, while the middle class is seeing their disposable income curbed by higher inflation, rising costs and now the GST. Malaysians are already very highly geared, especially on property. Our household debt to GDP ratio of over 87% is the second highest in Asia. Going forward, this means less ability to borrow or spend. The big question is: if the property outlook is negative, how bad will it be? Was there a bubble and as a result, will there be a crash? Will prices also fall, after the huge decline in transactions?
Malaysia House Price Index Last 5 years Malaysia House Price Index (Mar 2000 - Dec 2014) Malaysia House Price Index (LHS) Index YoY Growth (RHS) % 220 14 200 12 180 Home Price Average home prices increased 57% between end-2009 and end-2014 Home prices doubled in prime areas within the Klang Valley, Penang and Iskandar Johor. Outpaced total income growth of 31% in the same period. 10 8 160 > Income 6 140 120 *Source: 100 Bloomberg ; Dec-2014 figures are preliminary 4 2 0 Price shot up sharply last 5 years
Home Price vs Income Growth Between 2000 and 2009 Home price vs income growth 180% 160% 140% 120% 100% 80% 60% 40% 20% 0% 2000 to 2009 2010 to 2014 Home price growth Income growth 2000 to 2014 Home Price < Income Average home prices rose by just 39%, below real inflation and wage growth rates. In that same time, the average Malaysian s income actually doubled. Since 2000 Average home prices up by RM295,345. Income per capita up by RM35,002. 113% to 160% to Price gains over the past 5 years not bubbly, but more of a catch-up process. And over the longer term, prices have still slightly lagged income growth, but are close to an equilibrium level.
Housing Supply What caused the earlier lag in prices? (2000-2009) Supply Total Incoming Housing Supply YoY Growth (June '01 - Dec '14) % Housing supply grew by just over 6% per year from 2002 to 2007 Supply was absorbed by purchasers buying on cheap credit Banks redirected more loans towards households from corporates following the Asian financial crisis. 30 25 20 15 10 5 0-5 -10 *Source: CEIC **Dec 2014 figures are preliminary
Growth in Incoming Housing Supply Total Incoming Housing Supply (June '00 - Dec '14) Units '000 Total Kuala Lumpur Selangor Post US sub-prime crisis in 2008-09, developers cut back on launches. Housing supply growth rates halved for several years. Supply cuts, combined with the earlier lagging price growth, low interest rates, ample credit and higher wages caused prices to rise sharply. Others 700,000 600,000 500,000 400,000 300,000 200,000 100,000 0 *Source: CEIC **Dec 2014 figures are preliminary Going forward, however, incoming supply is growing strongly again after the recent boom, and this will put pressure on prices again.
Affordability and Financing Malaysia Home Affordability (Mar '00 - Dec '14) (House Price/GNI per capita) Number of years it takes to buy an average home is now at about 8.4 years. Near the highest levels since mid2005 The ratio since 2000 been between 10.6 years in 2001 and 6.3 years in 2008. Urban-rural divide is very wide. Average house price in the country was RM295,345 BUT the average for Kuala Lumpur was RM676,620 and Selangor was RM441,383. 11.0 10.0 9.0 8.0 7.0 6.0 *Source: NAPIC, BNM **Dec-2014 figures are preliminary To buy a home in Kuala Lumpur, one has to earn 2.3 times more than the national average, and you will probably end up with a home half the size.
Household Debt Household Debt to GDP ('02 - '14) Household Debt to GDP (LHS) % 90 Annual growth household debt (RHS) Household debt-to-gdp ratio in Malaysia standing at 87%, at the end of 2014. Ratio accelerated sharply over the last six years, from 60% at the end of 2008. % 17 15 80 13 11 70 9 7 60 5 37591379563832238687390523941739783401484051340878412444160941974 *Source: BNM
Residential Loan Disbursed and Approved Residential loan disbursed YoY % Growth (Jan '07 - Jan '15) % 60 50 40 30 Build-up of debt followed robust loan growth for residential mortgages, which has been growing at double-digit figures until very recently. Esp DIBS! 20 10 0-10 -20 *Source: BNM Banks major driver of property market - financing provided the liquidity to absorb excess supply in the earlier part of this decade, and then helped raise prices.
Residential Loan Applied Residential loan applied YoY % Growth (Jan '07 - Jan '15) Banks and consumers now more cautious. Ability to lend and borrow is getting more challenging. Liquidity to fuel the housing market will also be more constrained. Mortgage applications and approvals growth both declining sharply. Coupled with increasing supply and the other factors, foresee that the property market will be dampened in the near term. % 120 100 80 60 40 20 0-20 -40 *Source: BNM Residential loan approved YoY % Growth (Jan '07 - Jan '15) % 120 100 80 60 40 20 0-20 -40 *Source: BNM
A major wildcard to the above negative prognosis? A possible faster reversal for a more positive property outlook is interest rates. Instead of rising domestic interest rates, it is now more likely that interest rates will fall before the end of 2015. Why? Falling interest rates worldwide with an ongoing currency war is the prevalent global strategy. Countries are devaluing their currencies to boost economic growth through exports. Gives room for Malaysia to also reduce domestic interest rates to boost exports without too negative an effect on the Ringgit.
A lower mortgage rate, higher export earnings, more employment and higher wages will all be very positive for the property sector. To further promote economic growth, curbs on domestic borrowings and foreign purchasers will have to be relaxed. Are there pockets of opportunities even as the outlook for the industry and the economy as a whole are negative? When the tide rises, everyone gets lifted. But the smart investors are the ones that are capable of finding the opportunities even as the tide recedes.
How theedgeproperty.com can help you
Tools at theedgeproperty.com Bird s eye view of property prices What is HOT Captured on 21 April 2015 View by State Property type Price per psf Absolute price Volume Ability to zoom in & out
Tools at theedgeproperty.com Location search to view price information for a selected area or streets Captured on 21 April 2015 Search by Project name/building Street
Theedgeproperty.com Analyst s research, property news Featured properties from developers Proprietary & partners news
Finding out the right price for the property Search for project Ability to fine tune search by time period & unit size Indicative average price Indicative asking rental rate/yield
Tools at theedgeproperty.com
Transacted sales information & asking rental of selected property
Learn all about the amenities in the surrounding area
Learn all about the properties in the surrounding area Customise selection by Distance Transacted price (min, ave, max) Asking rental (min, ave, max) Asking rental yield Location of nearby properties in relation to selected property
Interactive Edge Fair Value algorithm to obtain sales/rental prices Search for any property to obtain indicative sales/rental value Based on historical transaction data and adjusted listing data
Create your own list of properties or locations to track Create your own Watchlist based on: Project name/type Select radius Unit size Absolute price PSF price Watchlist will notify you via email when a property which meets your criteria is transacted/listed
Multiple ways to view listings Listings are linked to fair valuation and analytics Allow consumers to further research and view info for projects
What s next and why? What s Next The Edge Property will expand to Thailand, Indonesia & Hong Kong by Q4 15 The Edge Markets v2.0 will be launched The Edge Markets will expand to Thailand, Indonesia & Hong Kong by Q3 15 The Edge Unit Trusts will be launched in Q3 15 Why? We believe democratizing investments is a worthwhile objective. Our goal is to level the playing field and to help investors make better decisions with tools and information Give a man a fish and you feed him for a day; teach a man to fish and you feed him for a lifetime. Maimonides