Residential property overhang worsens

KAJANG: The overhang status of residential properties in Malaysia worsened in the first half of 2018 (1H 2018), with 29,227 units worth RM17.24 billion, reflecting a year-on-year increase of 18.1% and 10.2% in volume and value respectively.
According to the Property Market Report for First Half 2018 published by the Valuation and Property Services Department (JPPH), the majority of overhang properties were condominiums and apartments priced between RM500,000 and RM1 million.
“Condominiums and apartments contributed the most to the overhang status with 11,602 units representing 39.7% of the total overhang,” said JPPH director-general Nordin Daharom.
Speaking to reporters at the launch of the report today, Nordin said Johor remained the state with the highest number of overhang units with 5,988 units or 20.5% of the total overhang. The overhang in Johor stood at 3,803 units a year ago.
This is followed by Selangor at 4,694 units and Penang at 3,958 units. A year ago, the overhang in these two states stood at 3,664 units and 2,041 units respectively. Kuala Lumpur’s residential overhang stood at 2,350 units compared with 746 units a year ago.
For small office home office (Soho) and serviced apartments, the overhang jumped by 84.4% to 12,771 units from 6,927 units a year ago while industrial properties saw a 2.2% increase in overhang units to 1,021 units from 999 units a year ago.
Shops were the only sub-sector that saw an improvement in overhang status with a 4.4% reduction in overhang to 4,348 units from 4,546 units a year ago.
The residential sub-sector continued to drive the overall market with 62.8% market share and 46.7% in value. However, this sub-sector recorded a 0.8% drop in volume to 94,202 units from 94,969 units a year ago while value fell 3.6% to RM31.66 billion from RM32.48 billion a year ago.
The number of new residential launches declined 7.1% to 37,723 units from 40,615 units a year ago while sales performance was low at 19.2% compared with 22.4% a year ago.
The house price index rose to 189.5 points in the second quarter of 2018 from 186.3 points a year ago, with the average price rising 1.7% to RM408,774 from RM401,905 a year ago.
Overall, the property market recorded a 2.4% drop in volume of transactions to 149,889 units from 153,526 units a year ago, while value of transactions fell 0.1% to RM67.74 billion from RM67.83 billion a year ago.
In terms of loans, applications and approvals for residential properties fell 3.1% and 0.2% respectively year-on-year. However, loan applications and approvals for non-residential properties increased by 14.2% and 6.6% respectively.
Note that commercial and industrial were the only two sub-sectors that bucked the trend, with 3.5% and 3.8% increase in volume of transactions respectively during the period.
Despite the improvement in the commercial sub-sector, Nordin noted that the occupancy rate of the office and retail sectors fell to 82.8% and 79.9% respectively, from 83.3% and 79.9% respectively a year ago.
As at end-June, existing office space stood at 21.62 million sq m from 2,502 buildings while incoming supply stood at 68 buildings with 2.48 million sq m of space.
“I must emphasise that both issues, residential overhang and commercial space vacancy are pertinent issues that must be addressed by all parties, particularly local authorities and property developers. Both must exercise due diligence before arriving at development decision to avoid oversupply situation,” said Nordin.
Based on preliminary data from the third quarter of 2018, he said the property market is expected to stabilise in the second half of the year, with minimal movement of less than 1%.