The sticky stats of overhang properties

THERE has been some concern over the recently released statistics by the National Property Information Centre (Napic) for the first half of 2025 (1H25), which saw an increase in unsold completed properties, commonly referred to as overhang properties.

In the residential segment – which in our analysis includes service apartments from the commercial segment as well – total overhang properties rose to 44,794 units worth some RM30.87bil as at the end of 1H25, up from 42,713 units valued at RM29.64bil as at the end of last year, representing an increase of 4.1% in volume and 4.9% in value.

Measured against 1H24, the number of overhang properties increased by 2.3% year-on-year (y-o-y), but total overhang value fell by 2.1% y-o-y.

The increase in overhang properties in 1H25 was mainly from the residential segment, which grew to 26,911 units valued at RM16.44bil, against 23,149 units worth RM13.94bil at the end of 2024 – an increase of 16.3% in volume and 17.9% in value.

When compared with 1H24, the total overhang in the residential segment jumped by 18.9% and 15.4% in total volume and value, respectively.

In the service apartment segment, the overhang showed a positive trend with total overhang dropping to 17,883 units valued at RM14.43bil at the end of 1H25, down from 19,564 units worth RM15.7bil – a drop of 8.6% in volume – and 8.1% in value.

Compared to a year ago, both total volume and value fell further, dropping by 15.5% and 17.4%, respectively.

A year earlier, the overhang in the service apartment segment stood at 21,158 units worth RM17.47bil.

In essence, 3,275 units worth just over RM3bil have been removed from the overhang status, which is a clear positive for the property market.

As expected, the overhang properties remained skewed towards condominiums/apartments from the residential segment and service apartments from the commercial segment, accounting for almost 75% of the total overhang.

In terms of location, much of the overhang remains in the state of Johor, with 12,532 units and accounting for 28% of the market’s total overhang. In Johor, just over 74% of the overhang units are service apartments.

Hence, despite the clearing out of completed properties and strong market demand driven by economic factors brought about by the Johor-Singapore Special Economic Zone, the service apartment segment in Johor remains challenging.

In addition, there is another market segment within the commercial sector that is of concern, the rise of the small-office-home-office (SoHo) sub-segment.

Overhang in this sub-segment rose to 2,452 units worth RM1.38bil at the end of 1H25, up 51.1% in volume and 28.2% in value y-o-y from 1,623 units valued at RM1.08bil.

While the overhang statistics are not yet alarming, unsold under construction residential properties surged 6.7% to 65,033 units at the end of 1H25, up from 60,934 units at the end of 2024.

For service apartments, unsold under construction leapfrogged to 41,644 units in 1H25 from 30,279 units at the end of 2024, up 37.5%!

According to Napic’s report, there are almost 450,000 existing serviced apartment units in the market, with more than 160,000 units in incoming supply and almost 130,000 units planned.

Combined, this incoming and planned supply makes up almost 65% of the current existing stock.

While the data are forward-looking, the extent to which these planned units will enter the market remains to be seen.

Ageing analysis

Interestingly, Napic has also provided an update on the status of unsold completed or overhang properties based on ageing analysis.

To recap, a property is deemed to be part of the overhang statistics if a property development project is completed but units remain unsold more than nine months after the project is launched.

Prior to completion, the unsold properties will fall under two categories: “unsold not constructed” or “unsold under construction”.

If they remain unsold after the certificate of completion and compliance (CCC) is issued, the properties move into the unsold completed category.

Clearly, there is a greater need to understand Malaysia’s property overhang situation.

More than two-thirds of the completed unsold properties have been on the market for more than five years.

In the service apartment segment, the situation is even more dire as 84.5% of the units have remained unsold for over five years.

Time to redefine overhang properties.

Based on Napic’s statistics, properties unsold for more than five years are likely to remain in the overhang figures indefinitely.

Developers holding these units have probably already written down their inventory costs via impairments or even completely written them off.

Hence, it is recommended that Napic should stop providing statistics for properties older than five years that remain unsold.

Instead, a more detailed analysis should be provided in the form of an ageing analysis, categorising properties by time on the market: less than a year, one to two years, two to three years, and three to five years after the CCC was issued.

This should be further broken down in terms of the property values, precise district locations, and even naming the development projects or developers.

Such granular data would give the market a clearer understanding of the overhang situation, enabling investors,

buyers and stakeholders to make more informed decisions with respect to future and planned supply.

With the Urban Renewal Bill tabled in Parliament and the proposal for Malaysia to shift from a sell-then-build to a build-then-sell model, having accurate and detailed data is of utmost importance.

Next week, this column will dive deeper into these two key proposals that could reshape the property market.