Download - INSPIRING CREATIVE AND INNOVATIVE MINDS
THE SIGNIFICANCE OF RESIDENTIAL PROPERTY IN MALAYSIAN PROPERTY
SECTOR
Muhammad Najib Mohamed RazaliHishamuddin Mohd Ali
Department of Property ManagementFaculty of Geoinformation Science and
EngineeringUNIVERSITI TEKNOLOGI MALAYSIA
Email : [email protected]; [email protected]
INSPIRING CREATIVE AND INNOVATIVE MINDS1
The Content
• Introduction• Methodology• Findings• Conclusions
INSPIRING CREATIVE AND INNOVATIVE MINDS2
Introduction
• Residential property in Malaysia constitutes more than 50 per cent of the total number of property transactions.
• Furthermore, residential property market in Malaysia has been experiencing rapid growth due to the growth of population and economic since 1990.
INSPIRING CREATIVE AND INNOVATIVE MINDS3
Introduction
INSPIRING CREATIVE AND INNOVATIVE MINDS
N
GDP (billion) 386.6
GDP growth 5.1%
GDP- PPP 15 300
GDP Sectors
Agriculture 9.7%
Industry 44.6%
Services 45.7%
Labour Force (million) 11.2
Unemployment 3.7%
Table 1: Economic and Financial Profile of Malaysia: 2008
4
Introduction
INSPIRING CREATIVE AND INNOVATIVE MINDS
Table 1: Economic and Financial Profile of Malaysia: 2008 (cont’d)
Household Income
Lowest 10% 1.4%
Highest 10% 39.2%
Investment (gross fixed) 20.7% of GDP
Inflation rate 5.8%
Property Transaction Volume (Billion) 3.7
Business Competitiveness Index 23
Corruption Perception Index 43
5
Introduction
INSPIRING CREATIVE AND INNOVATIVE MINDS
Table 1: Economic and Financial Profile of Malaysia: 2008 (cont’d)
World Competitiveness Index
Economic Performance 8
Government Efficiency 19
Business Efficiency 14
Infrastructure 25
Asia Pacific 7
Overall 19
Real Estate Transparency Index 23
Source: WEF (2008), RCA (2008), Transparency International (2008), CIA (2008) and JLL (2008)
6
Introduction
INSPIRING CREATIVE AND INNOVATIVE MINDS
Table 2: JLL Global Real Estate Transparency Index: 2008
Source: WEF (2008), RCA (2008), Transparency International (2008), CIA (2008) and JLL (2008)
High Transparent Transparent Semi Transparent Low Transparent Opaque
Canada Ireland Chile Kuwait Belarus
Australia Hong Kong Latvia Turkey Sudan
USA Singapore Russia Colombia Cambodia
New Zealand Germany Estonia Peru Peru
UK Finland Slovakia Uruguay Uruguay
Netherlands Denmark Dubai China Venezuela
France Spain Greece
Sweden Austria Bulgaria
Belgium Norway
Italy
Switzerland
South Africa
Portugal
Malaysia
7
Methodology
• Data were obtained mainly from National Property Information Centre (NAPIC), Ministry of Finance Malaysia from 1999 to 2008. The Malaysian property sectors assessed were:
– total property– residential property types : terraced, high rise, detached,
semi detached– residential property size– residential property main area : All state
INSPIRING CREATIVE AND INNOVATIVE MINDS8
Methodology
• Annual return and risk level analysis as well as correlation analysis were carried out to assess the performance for residential property in Malaysia for the period 1999 to 2008. Rank correlation analysis was also used to compare annual return index and risk level index of each performance analysis namely:
– Property sector performance– Residential property sector performance– Property sector performance: state
INSPIRING CREATIVE AND INNOVATIVE MINDS9
Methodology
INSPIRING CREATIVE AND INNOVATIVE MINDS
Table 3: Property Sector Performance in Malaysia 2001-2008
*Value in USD Million
Source: National Property Information Centre (2008)
10
Year Residential Commercial Industrial Agricultural Development Land Others Total
Volume Value % Volume Value % Volume Value % Volume Value % Volume Value % Volume Value % Volume Value
2001 176 208 6343 57 15 862 1836 17 6 098 1234 11 36 659 660 6 7 577 949 9 230 17 0.1 242 634 11039
2002 162 269 6039 55 17 048 1841 17 6 010 1097 10 37 071 923 8 8 755 1112 10 241 29 0.2 231 394 11041
2003 164 723 6575 53 18 663 2093 17 6 490 1133 9 43 506 1057 9 9 531 1523 12 463 28 0.2 243 376 12410
2004 195 243 8550 50 24 212 3129 18 7 818 1667 10 53 906 1564 9 11 650 2373 14 383 29 0.2 293 212 17132
2005 181 762 8116 50 24 151 3323 20 7 143 1430 9 51 868 1415 9 11 376 1916 12 208 29 1 276 508 16223
2006 176 277 8276 49 24 211 3193 19 6 973 1706 10 50 723 1595 9 11 152 2297 14 264 19 0.1 269 600 17010
2007 199 482 10426 48 27 900 3174 14 7 919 2023 9 60 155 1654 8 13 971 3354 15 28 3 0.01 309 455 22041
2008 216 703 11802 49 31 747 4672 20 8 126 2256 9 68 954 2432 10 14 703 4116 17 13 1 0 340 246 23812
Methodology
INSPIRING CREATIVE AND INNOVATIVE MINDS
Figure 1: Sector Performance in Malaysia: 2001- 2008
11
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2001 2002 2003 2004 2005 2006 2007 2008
Others
Development Land
Agricultural
Industrial
Commercial
Residential
Methodology
INSPIRING CREATIVE AND INNOVATIVE MINDS
Figure 2: Residential Property Performance: 2001-2008
12
0
50000
100000
150000
200000
250000
20012002200320042005200620072008
0
2000
4000
6000
8000
10000
12000
14000
Volume
Value ( USD '000)
Findings
INSPIRING CREATIVE AND INNOVATIVE MINDS
Table 4: Property Sector Performance 1999- 2008: Risk Adjusted
13
Residential Type
Average Annual Return
(%)
Ranking Annual Risk
(%)
Ranking Risk/ Return Ratio
Total 4.25 2.32 0.55Residential 7.20 1 3.43 3 0.47Commercial 6.10 2 8.24 5 1.35Agricultural 2.32 6 12.42 6 5.35Industrial 5.42 3 3.20 2 0.59Development Land
4.47 4 4.24 4 0.95
Other 3.28 5 1.23 1 0.38
Findings
INSPIRING CREATIVE AND INNOVATIVE MINDS
Table 5: Residential Property Performance Analysis 1999- 2008
14
Residential Type
Average Annual Return
(%)
Ranking Annual Risk(%)
Ranking Risk/ Return Ratio
All Houses 7.20 3.43
Terraced 3.21 3 3.23 4 1.00
High-rise 2.64 4 6.23 1 2.36
Detached 6.21 1 5.12 2 0.82
Semi- detached 3.57 2 3.35 3 0.93
Findings
INSPIRING CREATIVE AND INNOVATIVE MINDS
Table 6: Residential Property Performance: State
15
State Average Annual Return
(%)
Ranking Annual Risk(%)
Ranking Risk/Return Ratio
Perlis 5.54 5 12.28 14 2.22Kedah 5.52 6 7.23 7 1.31Penang 4.42 9 4.42 4 1.00Perak 5.12 7 5.23 5 1.02Selangor 3.21 11 3.21 1 1.00Kuala Lumpur 6.21 4 4.25 3 0.68Negri Sembilan 2.98 12 3.28 2 1.10
Malacca 3.54 10 7.20 8 2.03Johor 0.20 14 7.10 9 35.50Pahang 7.23 2 7.70 11 1.07Terengganu 7.20 3 10.20 13 1.42Kelantan 2.89 13 7.02 10 2.43Sabah 8.20 1 8.20 12 1.00Sarawak 5.43 7 6.28 6 1.16
Findings
INSPIRING CREATIVE AND INNOVATIVE MINDS
Table 7: Residential Type Correlation Matrix: 1999 - 2008
16
Terraced High Rise Detached Semi Detached
Terraced 1.00
High- rise 0.20 1.00
Detached 0.62 0.34 1.00
Semi- detached 0.51 0.42 0.82 1.00
Findings
INSPIRING CREATIVE AND INNOVATIVE MINDS
Table 8: Correlation Matrix between States in Malaysia
17
Perlis Kedah Penang Perak Selangor KL Negeri Sembilan
Malacca Johor Pahang Terengganu Kelantan Sabah Sarawak
Perlis 1.00
Kedah 0.42 1.00
Penang 0.32 0.42 1.00
Perak 0.34 0.23 0.45 1.00
Selangor 0.52 0.70 0.86* 0.42 1.00
Kuala Lumpur
0.20 0.29 0.52 0.42 0.86* 1.00
Negri Sembilan
0.23 0.10 0.23 0.22 0.51 0.86* 1.00
Malacca 0.12 0.21 0.42 0.26 0.58 0.87 0.51 1.00
Johor 0.15 0.28 0.52 0.42 0.76 0.87 0.42 0.65 1.00
Pahang 0.16 0.32 0.51 0.51 0.87* 0.78 0.32 0.42 0.55 1.00
Terengganu 0.16 0.27 0.22 0.48 0.48 0.51 0.34 0.18 0.21 0.52 1.00
Kelantan 0.12 0.28 0.13 0.56 0.18 0.52 0.39 0.23 0.36 0.32 0.67 1.00
Sabah 0.10 0.12 0.17 0.22 0.44 0.50 0.21 0.21 0.21 0.12 0.14 0.21 1.00
Sarawak 0.21 0.22 0.17 0.42 0.32 0.45 0.25 0.22 0.12 0.14 0.17 0.29 0.51 1.00
Findings
INSPIRING CREATIVE AND INNOVATIVE MINDS
Table 8: Correlation Matrix between States in Malaysia
18
Perlis Kedah Penang Perak Selangor KL Negeri Sembilan
Malacca Johor Pahang Terengganu Kelantan Sabah Sarawak
Perlis 1.00
Kedah 0.42 1.00
Penang 0.32 0.42 1.00
Perak 0.34 0.23 0.45 1.00
Selangor 0.52 0.70 0.86* 0.42 1.00
Kuala Lumpur
0.20 0.29 0.52 0.42 0.86* 1.00
Negri Sembilan
0.23 0.10 0.23 0.22 0.51 0.86* 1.00
Malacca 0.12 0.21 0.42 0.26 0.58 0.87 0.51 1.00
Johor 0.15 0.28 0.52 0.42 0.76 0.87 0.42 0.65 1.00
Pahang 0.16 0.32 0.51 0.51 0.87* 0.78 0.32 0.42 0.55 1.00
Terengganu 0.16 0.27 0.22 0.48 0.48 0.51 0.34 0.18 0.21 0.52 1.00
Kelantan 0.12 0.28 0.13 0.56 0.18 0.52 0.39 0.23 0.36 0.32 0.67 1.00
Sabah 0.10 0.12 0.17 0.22 0.44 0.50 0.21 0.21 0.21 0.12 0.14 0.21 1.00
Sarawak 0.21 0.22 0.17 0.42 0.32 0.45 0.25 0.22 0.12 0.14 0.17 0.29 0.51 1.00
Findings
INSPIRING CREATIVE AND INNOVATIVE MINDS
Table 9: Correlation Matrix for Property Sector Performance in Malaysia
19
Total Property
Residential Commercial Industrial Agricultural Development Land
Others
Total Property
1.00
Residential 0.83* 1.00
Commercial 0.73* 0.56 1.00
Industrial 0.45 0.48 0.51 1.00
Agricultural 0.23 0.32 0.34 0.51 1.00
Development Land
0.51 0.55* 0.45 0.62* 0.32 1.00
Others 0.32 0.23 0.22 0.45 0.44 0.51 1.00
* Significant correlation (p < 5 per cent)
Findings
INSPIRING CREATIVE AND INNOVATIVE MINDS
Table 10: Rank Correlation 1999 - 2008
20
Index Spearman’s
coefficient (Rs)
Property Sector Performance -0.543
Residential Property Performance -0.200
Residential Property Sector Performance- State
-0.314
Conclusions
• The analyses in this paper have shown residential property make a significant contribution to property market sector in Malaysia. From the year 2001 to 2008, it gives more than 48% of value of total property market property market value with 51% average market. While commercial property have seen good performance with average 18% growth over 1999 to 2008 periods.
INSPIRING CREATIVE AND INNOVATIVE MINDS21
Conclusions
• From a diversification context, it has shown that residential property give benefits to certain property sector; commercial and land development land. In term of residential property type, terrace house made known as the most favourite type of housing project among investors. This is shown by the highest annual return and most importantly among the lowest risk level. The analysis also analyse the residential property sector performance among each states in Malaysia. This will give importance guideline for investors to decide the location to invest specifically on residential property. Additionally, comparison has been made between annual return and risk level index to examine the correlation between these two indexes. It has shown only residential property performance have correlation in these two indexes.
INSPIRING CREATIVE AND INNOVATIVE MINDS22
Conclusions
• Finally, given the various point of view type of analyses of residential property market in Malaysia, residential property in Malaysia is believe will continue to give a significant contribution to property sector. As demographic in Malaysia have seen positive growth over the year, it will give better impact to residential property. Given the importance of residential property in Malaysia, there are further research issues need to be considered. First, the house price analysis over the same period for each type of houses. Secondly, it can be narrowed to each state of Malaysia and compare to other type of property portfolio. Risk adjusted performance analysis technique also could be use in further research to assess in depth significance analysis on residential property in Malaysia.
INSPIRING CREATIVE AND INNOVATIVE MINDS23
Thank you!
Muhammad Najib Mohamed RazaliHishamuddin Mohd Ali
Department of Property ManagementFaculty of Geoinformation Science and
EngineeringUNIVERSITI TEKNOLOGI MALAYSIAEmail : [email protected] ;
[email protected]: +607-5530880 / +6019-7176463
INSPIRING CREATIVE AND INNOVATIVE MINDS24