IF there is one lesson that can be learnt from the property market reports released by the National Property Information Centre (Napic) of the Valuation and Property Services Department last week is this: please don't build too many affordable housing especially in the same location.
Market watchers like me have been cautioning against launching too many affordable residential units but developers continued jumping onto the “affordable” bandwagon.
Now see what happens.
According to the Property Market Report 2002, Property Overhang Q4 2002 and reports for the residential, commercial, in- dustrial and leisure stocks for the fourth quarter of 2002 released by Second Finance Minister Datuk Jamaludin Jarjis on April 7, the total overhang value in the country stood at RM29.15bil for Q4 2002 (up by 4% compared to the third quarter).
All sectors recorded increases except for shopping complexes. (Overhang is defined as unsold after nine months of launch).
Last year, a total of 150,406 new residential units were launched for sale in the market, of which 82,198 units were sold, achieving an average sales performance of only 54.7%.
The residential sector recorded the highest increase in absolute number and value of overhang units. The number of unsold residential units rose by 10.1% and values rose by 14.4%. However, 38.9% of the residential overhang was “hardcore properties” that had remained unsold for more than 24 months.
As expected, the majority of houses that had remained unsold for more than 24 months were those priced between RM50,001 and RM100,000. Properties in this price range formed 40.8% (9,469 units) of the overhang stock of more than 24 months. Selangor ranked the highest (2,620 units) followed by Negri Sembilan (1,695 units) and Johor (1,607 units).
The second highest in number (4,257) of houses that remained unsold for 24 months was also from the affordable housing units priced between RM100,001 and RM150,000. Johor had the most number in this category (1,126 units) followed by Perak (661 units) and Kedah (592 units).
Even developers are finding difficulty selling low-cost houses where most states recorded increases in unsold units except for Malacca and Selangor. However, most states recorded falls in the number of unsold low-cost flats with the exception of Negri Sembilan, Johor, Penang, Perak and Pahang.
Generally, properties that were priced above RM200,000 recorded higher overhang rates compared with properties priced below RM200,000. Highest overhang rate of 26.4% was recorded for houses in the range of RM200,001 to RM250,000 followed by those priced more than RM250,000 at 24.2%
Developers are finding it in- creasingly competitive selling affordable housing units, including those in prime locations that are becoming quite saturated. They have to resort to creative marketing strategies to attract buyers. With the current global uncertainties and SARS outbreak there are people who prefer to rent and hold cash.
However, Real Estate and Housing Developers' Association Malaysia (Rehda) president Datuk Jeffrey Ng Tiong Lip is more optimistic about the overhang issue when he told the 14th National Real Estate Convention recently: “It is neither possible nor realistic to achieve a 100% sell-out rate for all projects nationwide. At Rehda, we are in the process of assessing what is the acceptable level of overhang the industry could tolerate and for this purpose, we are working closely with Napic and other relevant authorities, including the Housing and Local Government Ministry and Bank Negara. With strong underlying fundamentals, demand for residential properties is expected to remain intact, provided they are in good location, of high quality and within the right price brackets.”
Ng said the majority of the unsold units remained unsold due to reasons like poor location, un- sold bumiputra lots, lack of facilities and unattractive products.
He said these were the property market’s equivalent of “NPLs” and would pose very little competition to newly-launched properties.
As the report stated, Te- rengganu recorded the highest increase in overhang residential units (84.3%) from 178 units in Q3 2002 to 328 units in Q4 2002. By number, Johor had the most unsold units (16,872 units) followed by Selangor (9,640 units) and Negri Sembilan (6,263 units). The bulk of the unsold stock in Johor comprised two- to three-storey terraced (31%), single-storey terraced (17.7%) and condominium/apartment (22.5%) units.
By type, terraced and high-rise residential units, dominated the total overhang because of the large number of units launched. Terraced houses represented 40.8% of the total residential overhang with two and three-storey terraced units making up 24.1% and single-storey terraced 16.7%. High-rise units contributed 38.7% of the total unsold stock with condominium/apartment at 23.7%, flats 7.6% and low-cost flats 7.4%.
Developments that are innovative, in good locations, with reputable developers, have done well.
For example, the Kuala Lumpur City View in Cheras being developed by Brunsfield Group has performed very well for both its commercial and residential units.
Developers who go for a niche market and giving their best have also fared well. An example is Bolton Bhd's Lavender Heights development in Senawang, Negri Sembilan. Lavender Heights was launched in 1999 and the first offering of 288 bungalow lots were snapped up. The bungalows have since been completed and handed over to the purchasers.
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