The housing dilemma in the country needs to be resolved soon, says a market expert.
Housing affordability in Malaysia has deteriorated over the years with soaring property prices in key cities. Property prices started escalating from 2009/2010 and remain high today.
Malaysians are grappling with sluggish wage growth and high cost of living that makes them shy away from buying a property.
What the market needs is steady economic growth, a fresh housing policy, higher wage and incentives to get buyers back into action.
There is currently an oversupply of high-rise units, mainly serviced apartments, small office, home offices (soho) and small office, versatile offices (sovo) and the take-up has been slow despite all the discounts and incentives offered by the developers.
According to the National Property Information Centre (Napic), the number of unsold homes reached 31,092 units at the end of September 2019, compared with 30,115 units in the previous corresponding period.
The value of unsold residential units dropped to RM18.77 billion in the third quarter of 2019 compared with RM19.54 billion a year earlier.
Unsold completed residential units, including serviced apartments and sohos have been on the rise since 2014. Over a five-year period between 2014 and 2018, the number of unsold completed residentials grew 281 per cent from 11,816 units to over 45,000 units by the end of 2018. Value-wise, the increase was a massive 635 per cent, growing from RM4 billion at the end of 2014 to RM29.7 billion by the end of 2018, Napic records showed.
PropertyGuru Malaysia country manager Sheldon Fernandez said unsold completed residential units in Malaysia will impact developers' cashflows and thus their ability to build more saleable units in the future.
Given the multiplier effect the property industry has on the economy at large, adverse conditions here may impact prospects elsewhere, he told NST Property.
Fernandez said that while some quarters have downplayed the significance of the residential overhang itself, it should be kept in mind that these unsold units will impact the industry as a whole.
"The residential overhang as reported by Napic has declined in its rate of growth by about eight per cent with each successive half over the past two years. Going by these trends, it would indeed take about six years for overhang units to be absorbed by the market.
"However, this pattern of decline may have been due to initiatives and incentives such as 2019’s Home Ownership Campaign (HOC) serving as catalytic factors to drive uptake of unsold units.
"The conclusion of the HOC and the absence of strong provisions for property in Budget 2020 may have an impact on these positive trends, though the industry saw a breath of fresh air with Bank Negara Malaysia’s recent OPR cut," he said.
According to Napic's data, there were 99,222 transactions worth RM34.65 billion in the first half of 2019, an increase of 6.1 per cent in volume and 9.5 per cent in value.
Fernandez said efforts such as the government’s support for RTO schemes may have muted effects at best for the overhang, due to delays in purchasing decisions by participants.
As such, it remains to be seen whether even five or six years would be enough to address the oversupply of residential units on the market, he said.
Mismatch a key issue
Real Estate & Housing Developers' Association (REHDA) Malaysia patron and past President (2006 – 2010) Datuk Ng Seing Liong said the key problem the local property market is facing is a mismatch of the type of property that people need.
"We are still short of the right type of houses. There are some developers that continue to build wrong properties at the wrong places," he said.
Ng said there's also a mismatch of affordability and financing availability.
Meanwhile, Fernandez said feasibility studies can decrease the likelihood of unsold units for developers.
"For example, existing demand for areas and property types, as well as pricing factors, can be examined. Our own PropertyGuru Consumer Sentiment Survey, for example, found that the majority (61 per cent) of Malaysians considered properties between RM300,000 to RM400,000 as affordable in the first half of 2019.
"Terrace homes, private condominiums, and semi-detached homes led demand over this time period as well, he said.