Malaysia’s Future Property Supply Still Elevated

The Malaysian House Price Index (HPI) stood at 195.7 points in the third quarter of 2019, showed the National Property Information Centre (NAPIC) data issued last month.

While the figure is 0.2% higher on a year-on-year basis, the index actually dropped 1% quarter-on-quarter.

In fact, Q3 2019’s performance is the weakest since the first quarter of 2020, which is the base year for the present index.

This means that the index is not only expanding at its slowest pace, its quarter-on-quarter drop shows that property prices, on average, are declining – which is good news for buyers, but not for property owners, particularly investors, reported The Star.

This also means that the overhang situation has improved. NAPIC data showed that the total number of overhang properties in Malaysia stood at 31,092 units or worth RM18.77 billion. While the figure is up 3.2% year-on-year, it is lower than what was recorded over the last three quarters, when the number of overhang units hit its peak in Q1 2019 at 32,936 units.

The value of total overhang units, on the other hand, remained elevated at RM18.77 billion, even as it is down 3.9% year-on-year and it is the lowest in five quarters.

It is believed that last year’s Home Ownership Campaign helped, to a certain extent, clear the stock level.

Johor, Perak and Selangor emerged as the top three locations that registered the highest number of overhang units, accounting for 17.6%, 16.5% and 15.7%, respectively.

Properties priced below RM500,000 continue to account for the majority at around 62% of the overhang, while those priced RM1 million and above make up 12.6% in terms of number of units.

Interestingly, the market has done relatively well as the 31,092 overhang units account for 25.7% of those not sold from the 120,909 units launched up to Q3 2019.

The sales statistics of sold properties continue to be robust with high rise, which account for around 54% of total launches, recording sales of 77.9%, while terrace homes, which account for around 32%, posted sales of 72%.

While the overhang category offers some hope that all is not bad, further analysis of properties launched but are still under construction is alarming as the incoming overhang appears to be significant if not cleared once they are ready for vacant possession or within the nine-period of delivery.

NAPIC data showed that 179,027 units were launched as at Q3 2019, of which only 56.3% were sold. Thus, 43.7% or 78,191 units were left behind.

Meanwhile, statistics for the commercial property market are worrying.

Total overhang units within the market jumped 39.7% as at end-Q3 2019, in terms of number of units to 24,820 units compared to the 17,769 overhang units as at end-2018.

In terms of value, such units had a total worth of around RM19.81 billion, up 42.4% from the RM13.91 billion posted as at end-2018.

Hence, if the SoHo and service apartment overhang of 18,916 units under the commercial market is to be added to the residential market data, it would result to more than 50,000 units of unsold completed properties worth approximately RM34 billion.

With this, developers are urged to stop building unwanted properties before the overhang situation becomes a bigger problem for the economy as a whole.

For a start, the local councils should take heed of the present market situation and stop handing out new development orders to property firms. Developers, on the other hand, should be mindful of the challenging market, particularly within the high rise commercial and residential segments.

Source: PropertyGuru