Rahim & Co: Don't be overly concerned with the overhang

While the property overhang in Malaysia has been on an upward trend, it is not an "economic calamity", according to property consultancy Rahim & Co International Sdn Bhd as it expects the number to be reduced over the next few years.

Executive chairman Tan Sri Abdul Rahim Abdul Rahman said there are 50,008 residential overhang units including pure residential houses, serviced apartments and Small Office Home Offices (SoHos) worth some RM34 billion in the country as at the third quarter of last year (3Q2019).

Johor has the highest number of overhang units at 18,517 followed by Selangor with 7,226 units and Kuala Lumpur with 5,170.

“In my opinion, it is not an economic calamity and we should not be overly concerned to the extent of having to set up a special body just to acquire these units given that developers are now reducing their prices [to try and sell them off],” he explained.

He added that the overhang was a result of a lack of proper research before new projects are developed.

“Developers lacked proper research on the demand, pricing and cost structure before they embarked on new projects,” said Abdul Rahim, adding that gone were the days when there was an undersupply of housing stock.

He also hopes that the government will not bail out any developer who faces problems due to their unsold stock.

Meanwhile, he expects the property market to remain challenging this year with a moderate recovery.

“But it is not all doom and gloom because of the 50,000 overhang units. The outlook for the property sector is expected to be segmented according to asset classes and opportunities are still out there for those who seek,” he concluded.

Residential overhang remains a concern

JPPH statistics showed the market have taken an upward turn with a positive growth of 6.4% year-on-year as at the third quarter 2019, an improvement from 2018’s 0.6% growth.

Value transactions held steady with a growth of 2.1%, bridging third quarter 2019’s overall number of 243,358 transactions to be worth RM102.9bil.

In reflecting back on the past decade, market downturn was at its worst between 2013 to 2017 with percentage drops ranging between 6% to 12% for Malaysia’s total market activities.

Being the largest market sector, the existing supply of residential units for Malaysia stood at about 5.69 million units by third quarter after an increase of more than 142,000 units year-on-year.

Unsold units remain a hot issue with the latest statistics as at third quarter revealing a total of 31,092 residential overhang units worth RM18.96 bil.

Looking at the overall dwelling-type properties which includes serviced apartments and SOHO units to the pure residential units, the total overhang number amounts to 50,008 overhang units wirth RM34bil sitting idle in the market.

Johor holds the highest count of overhang units at 18,517 units followed by Selangor at 7,226 units and Kuala Lumpur at 5,170 units.

In an effort to spur the property market whilst reducing the overhang burden, the Housing Ownership Campaign (HOC) 2019 ran for the whole year and had requested in 31,415 housing units worth RM23.3bil sold.