Value of overhang units in the primary residential market up 80% y-o-y

KUALA LUMPUR (Feb 23): Some RM8.27 billion worth of completed homes on the primary market have gone unsold as of the third quarter of 2016 (3Q2016).

This marks an 80% rise in the residental overhang value compared with RM4.6 billion a year ago.

“This huge rise in value is mainly contributed by properties in the RM500,001 to RM1 million segment which saw an increase in value of 141% from RM956 million in 3Q2015 to RM2.3 billion in 3Q2016,” revealed Valuation and Property Services Department director general Dr Rahah Ismail.

For properties above RM1 million, the total value of overhang units rose by 87.7%, from RM2.04 billion in 3Q2015 to RM3.83 billion in 3Q2016,” Rahah added.

She said this when giving an overview of the Malaysian property market to participants at the 10th Malaysian Property Summit 2017 organised by the Association of Valuers, Property Managers, Estate Agents and Property Consultants in the Private Sector Malaysia (PEPS), today.

Meanwhile, in terms of volume, overhang units rose by 46%, from 9,747 units in 3Q2015 to 14,193 units in 3Q2016. There were 62,812 completed units as at 3Q2016, up 37.6% on a y-o-y basis.

“Even though there was an increase in both unsold completed units and completed units, the ratio of the unsold completed units to completed units remains in the normal range of about 21%-22% similar to previous years,” Rahah noted.

Condos and apartments (1,238 units) make up the highest number of overhang units followed by flats (283 units), terraced homes (218 units), cluster homes (129 units), semi-detached homes (118 units), detached homes (68 units) and townhouses (15 units).

She also noted that the sales performance of properties (ratio of properties sold within nine months to new launches) in the primary market has worsened to 27.4% for the period of 1Q2016 to 3Q2016 as opposed to 41.9% for the period of 1Q2015 to 3Q2015.

“Only properties in the price range of RM200,001 to RM250,000 saw an increase in sales by a huge margin from the others signifying that there is still a strong demand and opportunities for affordable properties in this tough market condition,” said Rahah.

Homes below RM300,000 took up about 69.6% of the secondary market share during the period between 1Q2016 and 3Q2016 in terms of volume while the same segment of properties took up about 46.5% of the primary market share.

Currently, secondary market properties make up about 82% of the total property market.

“You can see that the secondary market is still holding strong,” said Rahah.

Meanwhile, PEPS president Foo Gee Jen, who was also present at the event, noted that the property market is currently stable, with a 5.3% annual price rise in the Malaysian Housing Price Index in 3Q2016 (preliminary figure) although it saw a dip as opposed to a year ago at 7.4% y-o-y.

“People are always asking when the market will recover, but in actual fact the property market is actually stable. Of course, it is not like those times when there were double-digit growth but I feel that this is a more sustainable growth. Prices of homes are holding. The growth needs to be in tandem with the growth in salaries of the population as well. If it keeps growing at double digits, how can people afford to buy houses when their salaries do not increase at the same rate?” said Foo.

Summit organising chairman Elvin Fernandez noted that the residential market will not collapse so easily as it is made up of many individual and genuine buyers.

“These buyers are unlike investors. The small amount of speculators will unlikely impact the property market that much so as to cause a major drop in prices,” he noted.