MOST MARKET WATCHERS POINT FINGER AT PREVALENT STRINGENT FINANCING REGIME FOR CURRENT OVERHANG SITUATION
All is not well for apartments and SoHos on the property landscape and unflattering official numbers are telling us exactly why.
The National Property Information Centre’s (Napic) report on the property overhang for the first quarter of the year reveal that there is an alarming 34,532 completed unsold units in the market, worth RM22.26 billion – and a large percentage of this attributable to unsold serviced apartment and SoHo units.
Explaining that these were cumulative figures from previous years, this nonetheless represents an increase of 55.72% in the number of unsold units compared to a year ago, when unsold units totalled 22,175.
Driving the numbers up, Napic said, was an increasing number of unsold serviced apartments and SoHos (about two-thirds of the entire unsold stock), which are built on land zoned as commercial but have a residential element to them.
In ringgit value, the report said that there has been a rise of 67.82%, from RM13.27 billion a year ago to RM22.26bil as at March 31, 2018.
A key point of concern is that properties that are deemed to be affordably priced between RM300,000 and RM400,000 have seen about 33% of launched units being left on the shelf.
Tellingly, for the first quarter of this year, the number of SoHos and serviced apartments numbered about 48,000, with about 25,000 units located in Johor alone.
It is interesting to note that the states with the largest number of serviced apartments and SoHos – Johor, Kuala Lumpur and Selangor – have unsold stock of 29.12%, 13.53% and 17.86%, respectively. However, Penang has unsold stock of 33.12%.
Also, Melaka is building more serviced apartments, but of 1,520 units launched in the first quarter of this year, only 130 units were unsold.
A number of industry watchers have weighed in, pointing out that the overhang could be due to two crucial factors: unaffordable property prices and locations that were less-than-ideal.
PPC International managing director Datuk Siders Sittampalam recently told The Star that there is latent demand in the market, but prices are just too high for those who are currently actively looking, especially in the existing tough financing environment.
Unless Bank Negara Malaysia eases up on the prevailing stringent financing regime and various cooling measures, there will be little change in our overhang situation, he said.
“Some properties may be built in less-than-ideal locations… they may be too far away to live in or may not have the suitable amenities like proper public transport,” Siders added.
Meanwhile, Knight Frank Malaysia managing director Sarkunan Subramaniam said that while the overhang situation in the country was high, we shouldn’t rush to brand it as “alarming”.
He, among others, have pointed out that the red flag should only be raised if we begin to see projects being abandoned or developers going bust. However, affirmative action should be taken soon to avoid soon to avoid such occurrences.
Sarkunan believes that improvement in the economy would eventually help spur the local property market, and the level of transparency being shown by the new Malaysian government, will likely see the economy and property situation improve by next year.
However, he too pointed out that the time is right for the central bank to make adjustments to the lending policy.
“Non-performing loan rates haven’t increased by much, and people are still holding on to their assets… that is a good sign,” he said.
Last November, Bank Negara said the number of unsold residential properties was at a decade high, with a majority of the units in the RM250,000-and-above price range.
From the central bank’s perspective, the main issues are the distribution of household incomes and distribution of houses in the market, which it says has contributed to the high overhang.
Previously, Bank Negara estimated that average Malaysians can afford houses priced RM250,000 and below. By contrast, most of the launches in 2017 were priced beyond RM250,000 and almost half (49.8%) were priced over RM400,000. A further 25.4% of them were above RM500,000.