GLOBALLY, MALAYSIA HAS RECEIVED PRAISE FOR THE RESILIENCE AND STABILITY OF OUR PROPERTY MARKET, BUT UNCONVINCED LOCALS REMAIN CONCERNED ABOUT PERSISTENT GLUT
The Malaysian property market has indeed weathered a seemingly endless storm over the past few years, navigating through a number global and local economic hurdles (as well as political ones) with its hull still intact.
Nevertheless, while this has brought some positive attention from global market watchers, local industry experts – and property buyers – bemoan the prolonged bearish economy, persistently rising prices and worrisome glut of unsold properties.
While some lay blame on the ongoing strict financing regime adopted by financial institutions, others point out that the property overhang is a storm of our own making; a result of rampant building practices and poor planning.
The National Property Information Centre (Napic) recently published data showing a total of RM19.54 billion worth of unsold properties to date. Napic said that by the third quarter of 2018, the country saw an increase of 30,115 unsold units, compared with 20,304 unsold units in the same period the previous year.
Among those pointing out the strange dynamics of continued rising prices despite an increasing number of unsold properties is National House Buyers Association (HBA) secretary-general Chang Kim Loong, who has long championed the rights of buyers and a sustainable property environment for Malaysians.
Chang believes that the number of unsold properties would continue to rise if homes are sold at prices that people cannot afford.
Late last year he told regional news agency, Asian Correspondent, that developers would first have to urgently revisit the definition of “affordable”, because part of the problem is they widely consider this to be in the RM500,000 cost region. He disagrees, saying that this does not accurately reflect the “actual affordability” of regular Malaysians.
Chang said that almost half of Malaysian workers still earn about RM2,000 or below a month. While these numbers have been moving in a more positive direction since 2010, there is still a sharp mismatch between income strength and the price of homes.
“The situation of unsold properties or ‘overhang’ is only going to get worse if developers continue to build properties which are beyond the income levels of the majority of our people. It’s just not affordable,” he said.
Other market watchers agree, suggesting that an ideal cost for affordable homes should be in the RM150,000 to RM300,000 bracket. They also suggest that in dealing with the glut, developers should begin to offer “real” discounts rather than those marked under the shroud of “free legal fees”, “free stamp duty” or cash back guarantees. This is because a sustained overhang situation would ultimately hurt developers themselves.
Industry expert and regular market commentator Ernest Cheong said that the number of unsold units would only rise if prices kept increasing, and the lack of transactions could mean 50% of developer would ultimately face bankruptcy in the next few years if they fail to service their loans with banks.
This was exactly the situation in the late 1990s when a large number of developers were put out of business for the same reason.
Cheong also said that many developers were obsessed with building upmarket homes when the economy was better, pursuing larger margins, and ignored the warnings offered by both market analysts and government institutions several years ago about overzealous focus on this market segment (and by extension, insufficient attention on other segments).
Now there are too many unsold properties that people simply can’t afford, and no immediate solution in sight.
Despite this, some property professionals remain hopeful that the situation will gradually improve, in some part because of a clearer economic picture and people-centric policies that has come as a result change in government.
Construction engineering company Melati Ehsan Holdings Bhd (MEHB) expects to see an increase in property and construction activity in 2019 because of policies that are now focused on the lower income home-seeking group.
“For the property development segment, developers remain cautiously optimistic on the current market situation and we expect that there will be a period of adjustment and consolidation to clear existing property stock before an uptrend can be seen,” MEHB chairman Tan Sri Yap Suan Chee recently told Bernama.
“The present challenging conditions in the property segment are due mainly to the mismatch of housing demand and supply in the market. However, we expect positive interest from potential buyers especially in the Klang Valley when it comes to affordable pricing projects or mid-range products,” he said.
Meanwhile, the Pakatan Harapan (PH) government has made it clear that building conducive housing for poor and low-income earners will continue to be its priority.
Last week, deputy minister of Housing and Local Government Datuk Raja Kamarul Bahrin Shah Raja Ahmad Baharuddin Shah said the government was targeting the construction of 500,000 units in the next five years for the group.
“Social impact assessment will be conducted before a housing project is implemented to ensure quality of the houses and that the residential areas are safe and conducive. Affordable land will be acquired and open tender system will be used for construction projects so that house prices are regulated,” he said.
The prospect of more affordable properties coming into the market bodes well for many long-suffering home seekers in the low- and mid-income groups, but the question that remains is… what do we do with an oversupply of the ones we can’t afford?