Saturday, June 25, 2011

Worldwide House Price Trend (2006–2010)

This is the worldwide house prices trend in the past 5 years which includes USA, Japan, Britain, China, Australia, Singapore and Hong Kong. Too bad, there is no data for Malaysia but you can kind of guess that  Malaysia should be somewhere  below China and follow the similar uptrend like China. Let’s check it out the graph below:


The house price fell in USA was due to the subprime mortgage crisis in 2006. The house price drops by ~35% after this crisis and has never been recovered until today. By the way, this trend is also similar to Ireland which is not shown in this graph (I don’t want to make the graph too crowded) . As for Japan, the house price has never been recovered after the Japanese asset price bubble from 1986 to 1991. Surprisingly if you look at the house price trend in Britain, it was that badly affected by the subprime mortgage crisis if compare to USA. 

The house price for the rest of countries especially for Asia (except for Japan – i.e. China, Hong Kong, Singapore) and Australia, is moving uptrend. The slight downtrend in 2008 – 2009 was probably due to the stock market crash during that time.  After the stock market crash, investors start moving their target to real estate or property. That is probably the reason why you see the house price has been increasing dramatically after 2009 until today.

When is the next bubble burst?

You can kind of expected the house price in the western countries will probably stay flat in the coming years. But what really interesting here is the property market in Asia. Will it be keep going up or is it already at peak? Bloomberg reported Hong Kong is the world’s most expensive place to buy home. 65 million apartments in China are said to be empty creating “Ghost Cities”. Are these obvious enough to tell the property bubble is going to burst soon?

Well, I do not know but if you ask me about Malaysia, I think generally most of the investors in Malaysia have the strong holding power and this makes me think the property bubble bust is unlikely to happen in Malaysia. Could I be wrong? Another very interesting discussion is the property price in Penang and KL seems to have huge gap as compared to the other states or cities within Malaysia. Can the bubble burst only happen within certain states or cities (e.g. Penang and KL)?

So, what do you think? Do you think property bubble burst is forming in your country? What is the next trend?


Alvin said...

same here. everyone believes that property bubble will burst in malaysia. i think at least 8 out of 10 people think so. for me, i doubt that will happen. yes, it'll drop, esp in certain areas where demand is lower than supply such as MK and Putrajaya area. but other than that, should b relatively flat or even might go up a bit, thanks to the smart developers we have in malaysia. they are pretty good at promoting and selling their stuff. :)

so the beliefs that property bubble is going to burst in malaysia.......i believe it's more of a HOPE than a BELIEF. But then again, I could be wrong.

ChampDog said...

Where is MK? :)

Is it really 8 out of 10? or 2 out of 10? I have no idea.

I don't know whether it will burst or not but if you compared to our neighbor countries, I think they have the higher chance to burst.

Having said so, I don't know effect of if let's say China burst, what will happen to property market in Malaysia? Will it get worst or get better?

I think as long as the developers keep building new houses, the property prices will still raise until one day, they stop or slow down in building more houses.

Well from a personal finance perspective, you still need to take into the worst case condition (which is it will burst) before you make the decision to buy a house.

Kris said...

US property is really still tanking. Currently on average they are losing like 30% of the original value.

I read in a singapore newspaper column, that there is a 29 year old Singaporean that is snapping up property in the United States and renting them back to cover , earning like 10-14%

But not sure how & what is the easiest way to buy property in the US..

ChampDog said...

US people now lose confident in real estate. They rather rent a house after the property crisis. The mindset has changed. They don't mind to rent for whole life anymore.

Why? Investing in KK not enough? Want to sapu US too? I think I don't qualify to even think about it. lol! :)

Kris said...

Owning a house is a traditional American dream. Looks like losing >30% equity of their property really pissed people off to abandon their mortgages.

Nolar..I am not a millionaire. But heard that there is alot of good deals in the US. Semi detached houses selling like USD80K.

P.S I think you are more wealthier than me..haha

ChampDog said...

USD 80K for semi-D sound cheap but if not mistaken, I heard from an US colleague, there are other monthly or yearly fees that you need to pay for owning a house in US (e.g. taxes and etc.)

I can't be sure the exact thing but when I told my US colleague how much we pay for the land office and the town port every year, she was surprisingly shocked how cheap it is.

Anonymous said...

I am sure Malaysia properties will burst soon. Let me tell you why. Today average Malaysian in KL earn 3.5K per month and resale properties in KL selling 10% more then valuation price, mean if a property valuation is 300K, owner want to sale 330K and bank can only loan up 90% of valuation price, mean 270K bank loan and buy have to take 60K cash to pay for down payment. If a person earn 3.5K a month how long it take to save 60K? Demand getting less and less then properties price will drop.

ChampDog said...

Don't forget this person will get raise every year and his income will get higher. D Don't forget about also investors from oversea.

Burst will be unlikely in my opinion. I think it will be corrected. Probably drop <5% and stay flat for 2 to 3 years and then climb up again.

Let's wait for 2012 and see what happens. Maybe the economy crashes badly, the property market will burst. That's the only likely possible reason that I can think of property burst in Malaysia.

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