Is the worst over for property?

  • Property
  • Saturday, 21 Apr 2018

Property overhang: According to JPPH, the volume of overhang in the residential property segment grew by 67.2 to 24,738 units last year, compared with 2016.

JPPH report points to better things to come for the sector

THE Valuation and Property Services Department’s (JPPH) Property Market Report 2017, launched earlier this week, has revealed that things are finally starting to look up for the local property market.

While transactions have improved by 4% in the first two months of the year compared with the same period a year ago, the overhang situation is still a perennial problem for the Malaysian property market.

According to JPPH, the volume of overhang in the residential property segment grew by 67.2% to 24,738 units last year, compared with 2016.

The growing concern on the overhang situation received wide coverage in recent months, which led to the issuance of future development freeze on luxury properties worth more than RM1mil in major cities.

“These overhang numbers, which only accounted for those in the residential sector (excluding service apartments and small office / home office units) were the highest to be ever recorded,” says JPPH’s Property Market Report 2017.

Overhang is defined as the unsold units that have been completed, yet remained unsold for more than nine months after its launch.

By state, Johor saw the highest number of overhangs in the country last year, accounting for 17.7% (or 4,376 units) of the total.

“Penang and Kedah were second and third highest respectively with 15.8% (3,916 units) and 15.3% (3,783 units) respectively of the national overhang. In Johor, the majority of the overhang comprised condominium/ apartment units, which were mainly priced at RM500,000 to RM1mil,” says the Property Market Report.

Last November, Bank Negara said that 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.

However, in spite of the overhang situation in the country, some industry experts still believe that the local residential property market is facing an undersupply of housing stock.

At the 11th Malaysian Property Summit 2018 in January, CBRE|WTW managing director Foo Gee Jen observed that a mismatch of price, location and products has led to this conundrum.

“Based on the population growth rate of 1.3% of 32 million people as of 2016, the annual growth is around 390,000. Based on the average household of four people, we need about 97,500 units per year.

“But annual completions are only at 78,216 units,” Foo said at the summit.

According to him, Bank Negara estimates that average Malaysians can afford houses priced RM250,000 and below.

“But 78.7% of new launches in the first half of 2017 were priced beyond RM250,000,” he says, adding that almost half of the launches (49.8%) comprised units priced over RM400,000, and 25.4% of them were above RM500,000.

“Over the past 13 years, household incomes in Malaysia have generally moved in tandem with house prices.

“But, the main concerns are on distribution of household incomes and distribution of houses in the market.”

This, he says, has contributed to the high level of overhang in the country.

According to Khazanah Research Institute’s “Making Housing Affordable” report, as at 2014, overall house prices in Malaysia are 4.4 times the median income. Zeroing in on the states, the price of a house in Kuala Lumpur is 5.4 times the median income.

In Penang, it is 5.2 times, Johor 4.2 times and Selangor 4.

In an interview with StarBizWeek last September, Khazanah research director Dr Suraya Ismail said Johor, at 4.2 times, is seriously unaffordable.

Selangor and Negri Sembilan are considered moderately unaffordable, while Melaka is still considered affordable.

Suraya says property developers are definitely capable of offering affordable homes.

“Prior to 2008, the private sector had launched a lot of residential units within the RM250,000 price range.

“But from 2008 onwards, they have instead been focusing too much on units priced over RM500,000. We need to revert to the pre-2008 period.”

She says many developers are hesitant of offering affordable homes, as it is a segment with low profit margins, adding however that this should not be a deterrent for local developers to develop affordable homes.

According to the JPPH property market report, the residential property market recorded 194,684 transactions worth RM68.47bil in 2017, which were 4.1% lower in volume compared with 2016, but they increased by a marginal 4.4% in value.

By price range, demand continued to be in the RM200,000 and below price points, accounting for nearly 45% of the residential market volume.

Last year saw 77,570 units of new launches, higher than those recorded in 2015 (58,411 units) and 2016 (52,713 units).

Kuala Lumpur recorded the highest number of launches in the country with more than 22,000 units. Its sales performance was at a low 19.5%, followed by Selangor with 13,522 units and Johor, 7,926 units.

Commercial property

According to the JPPH property market report, the shops sub-sector recorded an overhang value increase of 16.3% to RM3.3bil, as more than 62% of these overhang units were in the RM750,000 and above category.

“The unsold under construction and not constructed reduced further by 14.5% and 53.6% to 5,889 units and 332 units respectively.

“By state, Johor topped the list with 26.7% (1,214 units) of the national shops overhang, followed by Malacca and Kedah with a respective share of 13.9% (631 units) and 9.9% (450 units) of the total.

“In Johor, 35% of the overhang comprised shops priced RM1mil and above.”

The retail sub-segment’s performance was stable at 81.3% in 2017 compared with 81.4% in 2016, recording an annual take-up of more than 6.78 million sq ft.

Kuala Lumpur, Selangor, Johor and Penang saw a significant take-up rate as their newly completed shopping complexes secured commendable occupancy.

Johor was leading with nearly 2.82 million sq ft followed by Selangor (1.17 million sq ft), Kuala Lumpur (1.01 million sq ft) and Penang (778,833 sq ft).

Kuala Lumpur experienced a marginal decline in occupancy rate to 85.3% (2016: 86.8%).

The occupancy rate in Johor and Penang improved 79.9% (2016: 73%) and 72.6% (2016: 69.9%), while Selangor stabilised at 85.4%.

The purpose-built office building segment recorded a slightly better performance last year than in 2016.

The overall occupancy rate stood at 83.3% (2016: 82.3%) with a high take-up of more than 8.29 million sq ft (2016: 3.07 million sq ft).

Kuala Lumpur ranked first with more than 4.09 million sq ft, followed by Selangor (1.84 million sq ft), Sabah (935,437 sq ft) and Putrajaya (719,621 sq ft), supported by the high occupancy rate in newly completed buildings.

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