Malaysia’s Property Overhang Situation To Remain Stable

July 27, 2021

Malaysia’s Property Overhang Situation To Remain Stable

Malaysia’s property overhang situation is expected to remain stable amidst efforts by developers to clear unsold completed properties at a reasonable price, said industry players.

CCO & Associates (KL) Sdn Bhd ED Chan Wai Seen believes new launches will not significantly contribute to the overhang situation.

“Due to the uncertainties in the country’s economy and increasing unemployment, we do not disregard the possibility that property overhang may increase,” he told The Malaysian Reserve (TMR).

“However, we do not expect it to be significant because most developers have responded well to the change in the market trend since 2015.”

Where Is The Biggest Property Overhang In Malaysia? Find Out Here.

Chan expects the property market’s performance to continue to be affected by the hike in COVID-19 cases as well as the various lockdown restrictions imposed by the government, reported TMR.

The property market’s performance for the second quarter of 2021 (Q2 2021) is expected to be its worst due to the enforcement of Movement Control Order (MCO 3.0), he added.

Nonetheless, Chan foresees pent-up demand once the government lifts the MCO.

“Most prospective buyers are owner-occupiers that capitalise on the low interest rate and incentives offered under Home Ownership Campaign or by the developers,” he said.

“The young population or first-time house buyers will drive the demand for properties.”

In Q1 2021, the property market posted 80,694 transactions, with a total value of RM36.12 billion.

Dr Carmelo Ferlito, CEO of Centre for Market Education, revealed that the average transaction value in Q1 2021 stood at RM447,600, up 6.5% from Q4 2020 and 14.1% from Q1 2020.

All property categories posted a hike in average transaction value in Q1 2021 compared to the same period last year.

“This is happening despite very moderate price dynamics, in which the Malaysian House Price Index in 2020 recorded a slight growth of 0.6% when compared to 2019, the smallest increase in the past 10 years,” he told TMR.

“This confirms what we have said in previous occasions, which is that after the 2012 to 2013 peak prices were moving toward stabilisation.”

He expects the trend to stay until the next cycle inversion.

Despite a stable tendency towards price stabilisation within the property market, Ferlito said a final remark has to be spent on the rising inflationary tensions that are emerging in our economy.

He underscored that the prices of raw materials significantly increased internationally, while expansionary fiscal and monetary policies flooded the economy with liquidity that nobody can actually use.

With this, property developers may soon face increasing costs as well as a lower demand despite the stabilisation in prices.

“At the same time, the excess liquidity may turn a post-COVID boom into a malinvestment crisis, if not properly handled now,” he said.

“The property market will evolve into these confusing policies and economic environments. And it may further suffer if the situation is not properly addressed.”


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