AS dusk falls over the Klang Valley, it is easy to spot unoccupied units in the towering blocks which remain in pitch darkness.
Many of these units have been sold, but remain unoccupied. The owners may have tried to rent or to re-sell them.
This is a recurring theme in the property investment market, when over-investment or speculative purchase by investors hoping to make a quick disposal for capital gains do not materialise. This situation is not unique to Malaysia. It is happening in China, in parts of the US, Britain and other global capitals.
In the case of Malaysia, this situation comes at a time when domestic economic conditions have turned weaker, coupled with trying external environment, which have dampened buyers’ sentiment amid worries about job security, says Socio-Economic Research Centre executive director Lee Heng Guie in an email.
Analysing a slew of data from the National Property Information Centre, Lee says between 2012 and 2015, the incoming supply of residential units expanded by 10.7% per annum in 2012-15 and continued to grow by 8.2% in 2016.
Hence, this has exerted downward pressure on prices and rental as demand took on a slower pace in a cautious and weak environment. This is evident in the condominium market. Most of these incoming supply comprises stratified high-rise residentials.
Incoming supply refers to housing starts, work-in-progress and those which have not been issued with certificates of fitness. It is an accumulative total and includes delayed units, where there has been no movement or construction activities for more than three years from the date the development was approved.
The overall property market slowdown has resulted in the rising number of homes hammered out in the auction market, says Lee.
Properties are long-term investments and the ability to hold is important. “The weak holders and investors, facing financial difficulties to service their mortgage repayment due to low rental income, or were unable to sell in an oversupply market, may be subject to foreclosure by the banks. And so the property enters the auction market,” says Lee.
Data from online auctions listings platform Auctionguru.com showed that the number of auctioned residential properties rose 14.4% to 6,225 cases in the first quarter of 2017, compared to 5,442 cases a year ago, says Lee.
In terms of value, it jumped 31.4% to RM1.8bil in the first quarter of 2017 from RM1.37bil in the same period a year ago.
Achieving a balance is no mean feat.
The balance, says Lee, between housing availability and the demand for housing, including improving affordability requires targeted policy intervention at different levels – in the market-oriented planning, development control and demand.
Market misjudgments and the imperfection of market information create an oversupply.
The availability of easy credit also fuels excessive speculative investment demand, driving house prices beyond the economic fundamental. As such, we have to go back to basic and economic arguments to intervene in the supply and demand market dynamics, says Lee.
Rebalancing the housing market