High residential property overhang still a concern


PETALING JAYA: Although the property sector has picked up with the reopening of the economy, there remains downside risks that could dampen activities, moving forward

One of the most glaring issues is the residential overhang situation. It showed some improvement in the second quarter (2Q22) compared with 1Q22 but remained elevated.

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According to data released by the National Property Information Centre, the residential overhang units eased to 34,092 units in 2Q22 from 35,592 units in 1Q22.

The decline in residential overhang units in 2Q22 could be attributed to the reopening of the economy.

The residential overhang units increased to above 35,000 units in 4Q21 due to disruption to economic activity from several lockdowns in the country.

Johor has the highest number of residential overhang units of 6,040, followed by Penang (5,508 units) and Selangor (5,156 units).

MIDF Research said while the residential overhang is showing signs of easing, the property market may still be partly dragged by the lingering high overhang issues as residential overhang units remain high in 2Q22, staying above 30,000 units.

The research house, which is maintaining a “neutral” call on the sector, said: “We see loans for purchase of property in August this year to be in line with our expectation of marginal recovery for the sector.

“Our top pick for the sector is Mah Sing Group Bhd as we see better earnings outlook for the group due to higher progress billing of its projects in the Klang Valley while new sales outlook will be supported by its quick turnaround strategy.

“We also like IOI Properties Group Bhd as its earnings outlook is expected to be supported by earnings recovery of the investment properties division and the leisure and hospitality segments,” it added.

Maybank Investment Bank Research said in a note the upside and downside risks to its calls for the property sector include the stronger-than-expected property sales.

This will be driven by better economic outlook, policy risks, easing of lending measures by banks, political risk, higher-than-expected liquidated ascertained damages compensation following the latest ruling by the Federal Court and rising building material costs and labour issues.

In terms of loan applications, based on the data by Bank Negara, total loans applied for the purchase of property increased to RM53.4bil (growth of 4.5% month-on-month or m-o-m) in August this year after a decline of 12.5% in July 2022.

Loan applications data remains stable in August, indicating that demand for property was unfazed by the overnight policy rate hike as the demand was supported by the reopening of the economy.

On a yearly basis, loan applications for the purchase of property in August surged by 66.1% year-on-year (y-o-y) due to low base in August 2021, which was dragged by the lockdown.

Meanwhile, total loans approved for the purchase of property increased marginally to RM23.3bil or 2.4% m-o-m in August 2022, reversing the decline of 9% m-o-m in July 2022.

The uptick in loan approval was mainly due to higher property loan applications in August.

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