Secondary market transactions now dominate local housing sector

KAJANG: The Malaysian property sector is now dominated by transactions in the secondary market, which make up 80% of deals, denoting the maturing level of the property market, said Valuation and Property Services Department director-general of valuation and property services Dr Rahah Ismail.
“The property market is driven by the housing industry but, currently, there is this changing landscape in the housing industry. It is dominated by the secondary market. As we move, we become more developed and we have more housing stock,” she told reporters at the launch of the Property Market Report 2016 yesterday.
In the past, Rahah said, the primary market made up 60% of the housing segment while the secondary market made up 40% but the situation is reversed today with about 80% of transactions being in the secondary market.
Currently, there are five million houses in stock with about 800,000 houses in the pipeline. Combined with some 600,000 houses in planned supply, the total housing supply comes to about 6.4 million units.
Based on that, Rahah said, there is adequate supply. Thus, she added, developers need to understand the composition of the market when planning new launches and respond to current needs, for example, affordable housing for first-time home buyers.
According to the report, the property market continued to soften last year with declines in transaction volume and value. Over 320,000 transactions worth RM145.41 billion were recorded, reflecting a 11.5% drop in volume and a 3% drop in value against 2015.
The residential sub-sector continued to drive the overall market with 63.4% contribution in volume and 45.1% in value, recording 203,000 transactions worth RM65.6 billion. Transaction volume fell 13.9% while transaction value declined 10.7%.
Affordable houses continued to be in demand with over 65% of residential transactions in the price range of RM300,000 and below.
The number of new launches fell 9.8% to nearly 53,000 units from 58,000 units in 2015, while sales performance was also lower at 31.4%, compared with 42.1% in 2015.
The slow market absorption led to an increase in overhang. Unsold completed units rose to 14,792 units worth RM8.6 billion compared with 10,285 units worth RM5 billion in 2015. About 42% of these unsold units are priced at more than RM500,000 each.
Unsold units that are under construction and have not been constructed rose, by 29.3% and 44.7% respectively. The soft market led developers to reduce or delay launches, with new starts declining 15.1% to 121,000 units from 143,000 units in 2015.
Rahah said the housing market will correct itself with recovery expected to begin slowly and gradually by year-end.
Deputy Finance Minister I Datuk Wira Othman Aziz, who launched the report, said the government has to balance the needs of consumers with the role of banks, and while strict lending guidelines are in place to curb speculation, he does not expect the central bank to further tighten guidelines.
On the Forest City project in Johor developed by China’s Country Garden Holdings, Othman said there is a risk of delay but the developer must adjust to China’s policy on capital controls.
He said the government does not have plans to provide more incentives to the developer and is not aware of any requests for incentives.