Tuesday, April 11, 2017

Chart of the Week: Malaysian House Price Inflation

There’s inflation, there’s food inflation, but then there’s house price inflation (quarterly index numbers; 2000=100):


Technical Notes:

  1. Inflation numbers from the Department of Statistics Malaysia
  2. Malaysia House Price Index from NAPIC


  1. QE effect, wasn't it? Yet most Malaysians believe that property price can grow to the sky.

  2. That's so out of whack. Can we have an analysis of such runaway inflation? Why is there an inflection around 2010?

    1. @Roger

      A few things:

      1. Loan interest rates fell sharply during the global recession in 2008-2009, and stayed low;

      2. Sharply higher household formation rates, as the Malaysian baby boom generation (those born after 1980) started becoming old enough and saved enough to start looking for homes;

      3. Sharply lower supply, due to higher development charges. Developers responded by shifting to smaller, higher value/higher margin developments, but that caused supply to drop roughly by 40% per annum, with most of the actual incoming supply in the wrong market segment

      It's a "perfect storm" kind of thing

    2. The higher development charges is news to me. Do you have any papers/data that I can refer to understand the issue?

      I understand that state governments and local authorities are using development charges to raise revenue, but surely this must be balanced against the need to encourage supply of lower-priced houses.

      I feel that the government's (be it state or federal) tax-collection drive is just being a dampener on the economy and private consumption in general. You should study the impact of that.

    3. @Roger

      For Malaysia, no. There's a quite a few studies on other markets though. Here's a good article:


      I've studied and talked to quite a few people about the Malaysian market, but for various reasons, I can't write about it. Let's just say the impact is very large.

    4. From what I gather, the compliance cost in some states can be as high as RM450psf. Hence, its explained surged in property prices in those states amid high land price.