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THE SIGNIFICANCE OF RESIDENTIAL PROPERTY IN MALAYSIAN PROPERTY SECTOR Muhammad Najib Mohamed Razali Hishamuddin Mohd Ali Department of Property Management.

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Presentation on theme: "THE SIGNIFICANCE OF RESIDENTIAL PROPERTY IN MALAYSIAN PROPERTY SECTOR Muhammad Najib Mohamed Razali Hishamuddin Mohd Ali Department of Property Management."— Presentation transcript:

1 THE SIGNIFICANCE OF RESIDENTIAL PROPERTY IN MALAYSIAN PROPERTY SECTOR Muhammad Najib Mohamed Razali Hishamuddin Mohd Ali Department of Property Management Faculty of Geoinformation Science and Engineering UNIVERSITI TEKNOLOGI MALAYSIA Email : hishamuddin@utm.my; mnajibmr@utm.my INSPIRING CREATIVE AND INNOVATIVE MINDS 1

2 The Content Introduction Methodology Findings Conclusions INSPIRING CREATIVE AND INNOVATIVE MINDS 2

3 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 MINDS 3

4 Introduction INSPIRING CREATIVE AND INNOVATIVE MINDS N GDP (billion)386.6 GDP growth5.1% GDP- PPP15 300 GDP Sectors Agriculture9.7% Industry44.6% Services45.7% Labour Force (million)11.2 Unemployment3.7% Table 1: Economic and Financial Profile of Malaysia: 2008 4

5 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 rate5.8% Property Transaction Volume (Billion)3.7 Business Competitiveness Index23 Corruption Perception Index43 5

6 Introduction INSPIRING CREATIVE AND INNOVATIVE MINDS Table 1: Economic and Financial Profile of Malaysia: 2008 (cont’d) World Competitiveness Index Economic Performance8 Government Efficiency19 Business Efficiency14 Infrastructure25 Asia Pacific7 Overall19 Real Estate Transparency Index23 Source: WEF (2008), RCA (2008), Transparency International (2008), CIA (2008) and JLL (2008) 6

7 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 TransparentTransparentSemi TransparentLow TransparentOpaque CanadaIrelandChileKuwaitBelarus AustraliaHong KongLatviaTurkeySudan USASingaporeRussiaColombiaCambodia New ZealandGermanyEstoniaPeru UKFinlandSlovakiaUruguay NetherlandsDenmarkDubaiChinaVenezuela FranceSpainGreece SwedenAustriaBulgaria BelgiumNorway Italy Switzerland South Africa Portugal Malaysia 7

8 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 MINDS 8

9 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 MINDS 9

10 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 YearResidentialCommercialIndustrialAgriculturalDevelopment LandOthersTotal VolumeValue%VolumeValue%VolumeValue%VolumeValue%VolumeValue%VolumeValue%VolumeValue 2001176 20863435715 8621836176 09812341136 65966067 5779499230170.1242 63411039 2002162 26960395517 0481841176 01010971037 07192388 755111210241290.2231 39411041 2003164 72365755318 6632093176 4901133943 506105799 531152312463280.2243 37612410 2004195 24385505024 2123129187 81816671053 9061564911 650237314383290.2293 21217132 2005181 76281165024 1513323207 1431430951 8681415911 376191612208291276 50816223 2006176 27782764924 2113193196 97317061050 7231595911 152229714264190.1269 60017010 2007199 482104264827 9003174147 9192023960 1551654813 9713354152830.01309 45522041 2008216 703118024931 7474672208 1262256968 95424321014 7034116171310340 24623812

11 Methodology INSPIRING CREATIVE AND INNOVATIVE MINDS Figure 1: Sector Performance in Malaysia: 2001- 2008 11

12 Methodology INSPIRING CREATIVE AND INNOVATIVE MINDS Figure 2: Residential Property Performance: 2001-2008 12

13 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 Total4.252.32 0.55 Residential7.2013.433 0.47 Commercial6.1028.245 1.35 Agricultural2.32612.426 5.35 Industrial5.4233.202 0.59 Development Land 4.4744.2440.95 Other3.2851.231 0.38

14 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 Houses7.203.43 Terraced3.2133.2341.00 High-rise2.6446.2312.36 Detached6.2115.1220.82 Semi- detached3.5723.3530.93

15 Findings INSPIRING CREATIVE AND INNOVATIVE MINDS Table 6: Residential Property Performance: State 15 State Average Annual Return (%) Ranking Annual Risk (%) Ranking Risk/Return Ratio Perlis5.54512.2814 2.22 Kedah5.5267.237 1.31 Penang4.429 4 1.00 Perak5.1275.235 1.02 Selangor3.21113.211 1.00 Kuala Lumpur6.2144.253 0.68 Negri Sembilan2.98123.2821.10 Malacca3.54107.208 2.03 Johor0.20147.109 35.50 Pahang7.2327.7011 1.07 Terengganu7.20310.2013 1.42 Kelantan2.89137.0210 2.43 Sabah8.201 12 1.00 Sarawak5.4376.286 1.16

16 Findings INSPIRING CREATIVE AND INNOVATIVE MINDS Table 7: Residential Type Correlation Matrix: 1999 - 2008 16 TerracedHigh RiseDetachedSemi Detached Terraced1.00 High- rise0.201.00 Detached0.620.341.00 Semi- detached0.510.420.821.00

17 Findings INSPIRING CREATIVE AND INNOVATIVE MINDS Table 8: Correlation Matrix between States in Malaysia 17 PerlisKedahPenangPerakSelangorKL Negeri Sembilan MalaccaJohorPahangTerengganuKelantanSabahSarawak Perlis1.00 Kedah0.421.00 Penang0.320.421.00 Perak0.340.230.451.00 Selangor0.520.700.86*0.421.00 Kuala Lumpur 0.200.290.520.420.86*1.00 Negri Sembilan 0.230.100.230.220.510.86*1.00 Malacca0.120.210.420.260.580.870.511.00 Johor0.150.280.520.420.760.870.420.651.00 Pahang0.160.320.51 0.87*0.780.320.420.551.00 Terengganu0.160.270.220.48 0.510.340.180.210.521.00 Kelantan0.120.280.130.560.180.520.390.230.360.320.671.00 Sabah0.100.120.170.220.440.500.21 0.120.140.211.00 Sarawak0.210.220.170.420.320.450.250.220.120.140.170.290.511.00

18 Findings INSPIRING CREATIVE AND INNOVATIVE MINDS Table 8: Correlation Matrix between States in Malaysia 18 PerlisKedahPenangPerakSelangorKL Negeri Sembilan MalaccaJohorPahangTerengganuKelantanSabahSarawak Perlis1.00 Kedah0.421.00 Penang0.320.421.00 Perak0.340.230.451.00 Selangor0.520.700.86*0.421.00 Kuala Lumpur 0.200.290.520.420.86*1.00 Negri Sembilan 0.230.100.230.220.510.86*1.00 Malacca0.120.210.420.260.580.870.511.00 Johor0.150.280.520.420.760.870.420.651.00 Pahang0.160.320.51 0.87*0.780.320.420.551.00 Terengganu0.160.270.220.48 0.510.340.180.210.521.00 Kelantan0.120.280.130.560.180.520.390.230.360.320.671.00 Sabah0.100.120.170.220.440.500.21 0.120.140.211.00 Sarawak0.210.220.170.420.320.450.250.220.120.140.170.290.511.00

19 Findings INSPIRING CREATIVE AND INNOVATIVE MINDS Table 9: Correlation Matrix for Property Sector Performance in Malaysia 19 Total Property ResidentialCommercialIndustrialAgricultural Development Land Others Total Property 1.00 Residential 0.83*1.00 Commercial 0.73*0.561.00 Industrial 0.450.480.511.00 Agricultural 0.230.320.340.511.00 Development Land 0.510.55*0.450.62*0.321.00 Others 0.320.230.220.450.440.511.00 * Significant correlation (p < 5 per cent)

20 Findings INSPIRING CREATIVE AND INNOVATIVE MINDS Table 10: Rank Correlation 1999 - 2008 20 Index Spearman’s coefficient (R s ) Property Sector Performance-0.543 Residential Property Performance-0.200 Residential Property Sector Performance- State -0.314

21 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 MINDS 21

22 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 MINDS 22

23 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 MINDS 23

24 Thank you! Muhammad Najib Mohamed Razali Hishamuddin Mohd Ali Department of Property Management Faculty of Geoinformation Science and Engineering UNIVERSITI TEKNOLOGI MALAYSIA Email : hishamuddin@utm.my ; mnajibmr@utm.myhishamuddin@utm.mymnajibmr@utm.my Ph: +607-5530880 / +6019-7176463 INSPIRING CREATIVE AND INNOVATIVE MINDS 24

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