PROPERTY overhang has been a long outstanding issue in the Malaysian real estate industry, but the situation took a turn for the worse due to the onslaught of the COVID-19 pandemic. In fact, the number of overhang properties is expected to remain high this year, say experts.
According to Rahim & Co International Sdn Bhd’s Property Market Review 2020/2021, three states, namely Johor, Selangor and Kuala Lumpur recorded the highest numbers of overhang properties at 23,072 units, 8,791 units and 7,863 units respectively. They are followed by Perak (4,015 units) and Penang (3,969 units).
As the largest segment of the country’s property market, the residential sector witnessed a decline in the first nine months of 2020 by 14.3% in volume and 4.8% in value in spite of a better year-on-year performance in 3Q2020 when Malaysia entered the recovery MCO phase.
In addition, overhang numbers grew by 14.8% to 57,390 units worth RM42.49 billion of dwelling units (residential, serviced apartment and SOHO combined). While this may be due to the pandemic’s effect, the persisting overhang is evident of a problem that is yet to be tackled effectively.
Meanwhile, Rahim & Co director of research Sulaiman Akhmady Mohd Saheh said that places with the best chance of reducing overhang properties are Selangor and Kuala Lumpur for properties within city areas where there is strong demand by buyers (local market) if prices are adjusted.
In addition, developers are giving more discounts on top of the existing incentives via the Home Ownership Campaign (HOC) to clear these units.
Nevertheless, it is also worth pointing out that the amount of overhang residential properties is due to affordability and loan financing challenges for Malaysians. And then, there’s the demand-supply imbalance in the market as developers tend to gravitate towards the higher margins for luxury and high-end launches.
As a result, home seekers cannot afford properties or the loans that are required to purchase them, and these are all further aggravated due to the pandemic.
However, there is no doubt that plenty of thought and effort have been put into addressing this issue. From attractive incentives offered by developers to stimulus packages from the government, much has been done, although an effective solution to the problem is still nowhere in sight.
Until that happens, there is still much to be done, and as long as the pandemic remains a cause of concern, the Government, along with the relevant stakeholders, should not rest on their laurels. This is to avoid the property and construction industries from being left behind once the country’s economy heads for a full recovery. – March 11, 2021