Full study on overhang situation proposed

Real Estate and Housing Developers’ Association (Rehda) Malaysia president Datuk Soam Heng Choon: “Converting the overhang units into affordable housing and getting the government to buy them over is a good exercise, but you have to be mindful that it will involve the taxpayers’ money as well."

KUALA LUMPUR: The Real Estate and Housing Developers’ Association (Rehda) is proposing that a thorough study be undertaken on overhang units in the country, before making a decision on whether to salvage or write them off completely.

It was proposed at the 14th Malaysian Property Summit 2021 last week that the government consider purchasing and repurposing the overhang properties in matured areas and turn them into affordable housing.

However, at a virtual briefing yesterday, Rehda president Datuk Soam Heng Choon said such a move would not tackle the root of the problem.

“Converting the overhang units into affordable housing and getting the government to buy them over is a good exercise, but you have to be mindful that it will involve the taxpayers’ money as well.

“If the projects are not in good locations, should the taxpayers’ money be wasted? I think we have to do an in-depth study as to where and why the property is left unsold; and what action can be taken.”

Soam added, however, that it would be justified if the properties are in good locations and there is good demand for them.

“In this situation, then the taxpayers’ money can be used to buy these overhang units.

“But for higher-end units, such as those located within the KLCC area, how can you turn them into affordable units?”

Soam also addressed the call for the use of the “build-then-sell” (BTS) system, which many believe will eradicate various industry problems.

“The BTS and sell-then-build (STB) systems exist side by side in Malaysia. The STB system is the current model that we are undertaking; while the secondary market uses the BTS system.”

Soam noted that many overhang and unsold units are a product of the BTS system.

“When groups proposed that the BTS system is the preferred method, the government responded that only four developers in Malaysia can undertake this. The reason for this is that for developers to do this, they need to have a huge balance sheet and cash flow.”

Soam cautioned that if this were to happen, volume will reduce drastically and prices will increase substantially.

“That is because a developer would then not want to sell until it’s completed and if there is a lot of demand, it will push up prices.

“Here, it’s up to the developer to decide to sell at whatever price that they want.”

According to Rehda’s latest property market survey, which comprised 180 participants from all over Peninsular Malaysia, 82% of respondents reported having less than 30% of unsold residential units in the first half of 2021. Of this, 43% comprised units priced between RM250,001 and RM700,000.

Meanwhile, 58% of the respondents reported that they had unsold completed residential units over the last one to three years, with end-financing loan rejection, unreleased bumiputra units and mismatched pricing cited as the top-three reasons.

Respondents experiencing end-financing issues stood at 88%, mainly because of ineligibility due to buyers’ income.

According to the National Property Information Centre, a total of 31,112 overhang units worth RM20.09bil was recorded in the first half of 2021. This was an increase of 5.2% and 6.2% in volume and value, respectively, against the preceding half.

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