Property bubble building up but not alarming

AmInvestment Bank Group director of retail funds says he sees a small bubble in the property market, but it's no where near big yet

There is a property bubble building up in Malaysia and the region but it is nowhere near alarming levels as the main indicators are still at comfortable levels, AmInvestment Bank Group said.

"As an investor, I love bubbles because that's where the money is. At this juncture, I see a small bubble in the property market, it's no where near big yet and I'm not seeing any property bubble bursting soon," AmInvestment Bank Group director of retail funds Ng Chze How said.

"For that to take place, I think you need to see a few factors taking place. Firstly, you need to see very high overall borrowings and leveraging, which is currently not happening. Secondly, is to look at the non-performing loans (NPLs). Across this region, the NPLs are still very healthy. Thirdly, you need to look at the liquidity in the market. There's so much liquidity, so much cash sitting in the system."

Ng was speaking to the media after the launch of the country's first Asia Pacific REITs unit trust fund by AmMutual here yesterday.

The unit trust funds will be solely investing in REITs in Asia.

For a start, it is looking at Australia, Hong Kong, Singapore, besides a minimal exposure in Malaysia. The fund will be managed by Funds Management Division (FMD) of AmInvestment Bank Group.

"When we are creating this fund, we want it to be riskier than bonds but safer than equities. This fund does that. It offers investors opportunities to diversify away from stocks and bonds and thus, reducing investors' overall portfolio risks," said FMD chief executive officer Datin Maznah Mahbob.

She added that investors will receive high dividend yields from investing in REITs as the fund is structured to distribute a high percentage of its profit to shareholders.

Over the past five years, the performance of REITs in Asia had outperformed global REITs by more than three times. During the period, REITs in Asia grew 46.2 per cent, while REITs globally grew 14.4 per cent.

"We are comfortable with Asian properties, in line with the region's continued growth, which will lead to an increasing demand for commercial occupancy rates in Asia, which are averaging to above 90 per cent.

"For certain countries in Asia Pacific, we are seeing an uptrend in rental rates for both offices and the retail sector, which will bode well for unitholders of REITs as this translates to higher income distribution," said Andrew Wong, chief investment officer of equity, asset allocation, and fund management.

The approved fund size is 200 million units with an initial offer price of 50 sen per unit. The initial offer period ends this Sunday, and its minimum investment being RM1,000 for Malaysian residents and the minimum additional investment for Malaysian residents is RM500.

The fund is distributed by all AmBank branches, AmBank Agency sales force, AmPriority Banking, AmPrivate Banking and Hong Leong Bank. - By Goh Thean Eu (Business Times)


August 3, 2011 at 12:31 PMObserver

Yesterday in the article (Property bubble burst unlikely in Malaysia) you said "I don't see a property burst (happening) in the next six months, one year or two years down. In less than 24 hours, now you say the bubble is building up. In 6 months time, if factories started to cut manpower & production, you will be telling the bubble is hidden somewhere. You get the money because there is where you make the money from the building up bubble and let majority of Malaysian suffer. I agreed with what Kuching said absolutely

August 3, 2011 at 12:46 PMObserver

You may say Oh! it not hidden somewhere, very sorry no one can see how big the bubble is .....

August 3, 2011 at 1:48 PMcondomana

Dear Observer,

As much as I hate to say this, I want to give an analogy of blowing up a bubble or rather, a balloon.

When you blow a balloon, it gets bigger, bigger and bigger as you keep blowing (aka bubble building up). But it is hard to know when the balloon is going to pop, unless you have perfect information regarding the balloon tensile strength, temperature, inner & outer air pressure, the velocity of air going into the balloon etc.

But of course you know it will definitely pop.

So from a technical sense, it may not be wrong to say that "I don't see a property burst (happening) in the next six months, one year or two years down....." and go on to say "the bubble is building up.".

On another note, has anyone given any thoughts about "For a start, it is looking at Australia, Hong Kong, Singapore, besides a minimal exposure in Malaysia".

August 3, 2011 at 5:06 PMkucing

One thing I would like to opine on this fallacy that "Malaysia's property market is still cheaper than Hong Kong, SIngapore, Australia etc"

Yes, cheaper ! you know why ? Because Malaysia is a f*cking lousy corrupt 3rd world country, that's why it is cheaper !!

Let state those recent incidents happened in Penang :-

1. Post office clerks "curi" or "gasak" money meant for payment of water, electricity and various bills by foreigners

2. Robbers burgled and robbed the expatriates' home numeorus times and could even told them :-"I will come back again !"

3. Lousy and inefficient adminstration in various government department and you need to wait for f*cking hours to get your things done in government department (everything is slow motion here !)

4. Traffic police stopped you and ask for "duit kopi" and if you are not used to corruption lives, you better don't live here !

How do you expect those MM2H residents not thinking of leaving Penang or Penang attracting more foreign residents if those things are not going to improve ?

I rather compare Malaysia to Vietnam than to SIngapore, Hong Kong etc.
Vietnam has experienced property bubble due to exposure to foreign ownership. When the bubble burst recently, their property price have dropped more than 50% and are still licking thier wounds until today !

I read millions of high-income group people are quequeing up to apply for Singaporean citizenship / PR (as SIngapore can boast crime free, clean city, systematic, good public transport and super efficient) whereas we have millions of cheap labours from Indonesian, Bangladesh readily be converted as Malaysian Muslim citizen.

I just state the fact, and it is for you smart investor to decide :-

Is Malaysia property price cheap comparing to Singapore ?

August 3, 2011 at 5:27 PMObserver

Dear Condomana
Thanks for the good analogy

Dear Kucing
Sorry to mis-type your name in the above. These people always use the same reason we are still the cheapest island compared to Sng, HK, Jpn etc but ignore all important other factors.

August 3, 2011 at 8:25 PMAnonymous

When these folks say no big.
I think very about to pop. Give 1-2 years.

August 3, 2011 at 11:35 PMjeremy tan

There is certainly a bubble in the property sector, there will be a correction perhaps in the near future but from my personal point of view i don't think this housing bubble will bring the entire economy down in flames when it pops.

No doubt Penang cannot be compared with the top cities of the world. However, it did manage to make it to the top 10 most livable city in the world.

No doubt Malaysia is a f*ck up country. Furthermore reason why Penang will shine. It is like finding a diamond among stones.

Singapore itself is the biggest bubble in the making. They are just fueling it every year with influx of liquidity and FDIs to support its growth. The only reason why it is successful is because of the people running the show. Yes, the brain drain. We lack smart intellectuals and educated people.

Singapore has taught the world something very valuable. Quality prevails over quantity.

It is about time Malaysia start investing in people. Yes, i am talking about human capital here.

August 5, 2011 at 12:11 PMJames


BN or Pakatan.. all are doing same mistakes.
Middle class income group are the worst affected.
I suggest for a rally to urge the authority to come up with a solution to prevent property price rising and standardizing the pricing for properties,thus preventing property price rising due to speculators.
Look at the price for properties around Penang Island for the past 2 -3 years... it's unbelievable, but people are still buying.
No one questioning all these developers with their high price.
No one questioning the authority for allowing these developers selling at extremely high price.

If all of us can unite against these opportunistic developers & greedy speculators and those bunch of opportunistic VIPs/ politicians/ millionars controlling properties in Penang Island... we can organise a rally..something like "bersih rally" i guess.. to voice our concerns.

We should act now against them..
we should show our firm concerns now before these developers starts their projects in bayan baru/ bayan lepas area soon.

where is the low medium costs projects from these developers in these areas?
when medium or low income group could afford to buy property within RM300K?
Do you think these developers going to bulid medium or low cost projects in these areas?

are we going to be silent and buy at properties at their projected price?

we should voice our concern in great unity spirit through a rally !!!