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

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Malaysia House Price Index (Mar 2000 - Dec 2014)

Malaysia House Price Index (LHS) YoY Growth (RHS)

Index %

*Source: Bloomberg ; Dec-2014 figures are preliminary

 Last 5 years

• Home Price > Income

• 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.

 

Price shot up sharply last 5 years

Home Price vs Income Growth

2000 to 2009 2010 to 2014 2000 to 20140%

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Home price vs income growth

Home price growth Income growth

Between 2000 and 2009

• 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 113% to RM295,345. • Income per capita up by 160% to

RM35,002.

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

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Total Incoming Housing Supply YoY Growth (June '01 - Dec '14)

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*Source: CEIC**Dec 2014 figures are preliminary

• 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.

 

What caused the earlier lag in prices? (2000 - 2009) Supply  

Growth in Incoming Housing Supply

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Total Incoming Housing Supply (June '00 - Dec '14)

Total Kuala Lumpur Selangor OthersUnits '000

*Source: CEIC**Dec 2014 figures are preliminary

• 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.

 

 Going forward, however, incoming supply is growing strongly again after the recent boom, and this will put pressure on prices again.

Affordability and Financing

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Malaysia Home Affordability (Mar '00 - Dec '14)(House Price/GNI per capita)

*Source: NAPIC, BNM **Dec-2014 figures are preliminary

• Number of years it takes to buy an average home – is now at about 8.4 years.

• Near the highest levels since mid-2005

• 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.

  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

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Household Debt to GDP ('02 - '14)Household Debt to GDP (LHS) Annual growth household debt (RHS)

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*Source: BNM

• 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.

Residential Loan Disbursed and Approved

 • Build-up of debt followed robust

loan growth for residential mortgages, which has been growing at double-digit figures until very recently. Esp DIBS !

• 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.

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Residential loan disbursed YoY % Growth (Jan '07 - Jan '15)

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*Source: BNM

Residential Loan Applied

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Residential loan applied YoY % Growth (Jan '07 - Jan '15)

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*Source: BNM

• 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. -40

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Residential loan approved YoY % Growth (Jan '07 - Jan '15)

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*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

View by • State• Property type• Price per psf• Absolute price• Volume

Ability to zoom in & out

Captured on 21 April 2015

Tools at theedgeproperty.com

Location search to view price information for a selected area or streets

Search by

• Project name/building

• Street

Captured on 21 April 2015

Analyst’s research, property news

Proprietary & partners’ news

Featured properties from developers

Theedgeproperty.com

Finding out the right price for the property

Search for project

• Indicative average price• Indicative asking rental

rate/yield

Ability to fine tune search by time period & unit size

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

Watchlist will notify you via email when a property which meets your criteria is transacted/listed

Create your own Watchlist based on:

• Project name/type• Select radius• Unit size• Absolute price• PSF price

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