Property Bubble In Malaysia ?

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In 2008, Giovanni Cozzi (a University of London’s department of economics PhD candidate) has warned that there could be a property bubble in certain parts of Kuala Lumpur because banks had been over-lending to the sector.

Last month, the Star reported that although the local housing market has not reached an unrealistically high like in Hong Kong, Shanghai and Singapore, prices of landed houses in some popular areas in the Klang Valley, Penang and Johor have appreciated by 10% to 30% over the past 6 to 8 months. Because of this, Bank Negara is keeping a close watch on the mortgage loan market to ensure that banks do not aggressively lend in this sector which will cause a bubble.

Under Budget 2010, the RPGT (Real Property Gains Tax) was reintroduced in January this year (albeit modestly) presumably to control property speculation. All property sold within the first 5 years of purchase will now attract a 5% tax.

Although Malaysian property prices are almost hitting the roof, housing developers, bankers and "real estate experts" are still telling us that there is no fear of the property bubble here. They say that the Malaysian housing market is sustainable and that the current buying trend is backed by sound economic fundamentals and genuine purchasers.

In an article in iProperty, Donald Han, the Managing Director of Cushman & Wakefield Singapore said that a litmus test to see if a market is indeed in a bubble is whether the rental can support the price one is paying for the mortgage of the property.

What do you think ? is a property bubble forming in Malaysia ?

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