Highlights of 2017 property market report, outlook

Deputy Finance Minister Datuk Lee Chee Leong with Valuation and Property Services Department director-general Nordin Daharom (left) at the launch of the Property Market Report for H1 2017 in Putrajaya on Monday. MOHD SAHAR MISNI/The Star

Deputy Finance Minister Datuk Lee Chee Leong with Valuation and Property Services Department director-general Nordin Daharom (left) at the launch of the Property Market Report for H1 2017 in Putrajaya on Monday. MOHD SAHAR MISNI/The Star

KUALA LUMPUR: The Valuation and Property Services Department, which is part of the Finance Ministry, threw out some interesting nuggets on Monday, Nov 13 in Putrajaya.

The platform was the launch of the Property Market Report for H1 2017.

Finance Minister Deputy Finance Minister Datuk Lee Chee Leong graced the event followed by a Preliminary Property Market Brief 2017 by National Property Information Centre director Khuzaimah Abdullah.

Below are highlights of Lee and Khuzaimah’s analysis of the property sector for the first half of 2017

Overhang balloons to RM12.26bil

The number of unsold, but completed units, known as an overhang, hit a high of RM12.26bil as at the 1H2017. This is a rise from RM8.56bil a year ago, representing a rise of 40% (1H2015: RM4.92bil).

This overhang is rising across all states with the worse being Kedah (4,363 units), Johor (3,803) , Selangor (3,664), Perak (2,136) and Penang (2,041).

Most of the unsold units comprise high-rise units in the RM500,001 to RM1mil category because so many were launched the last several years. Units RM1mil and above also suffer this same dilemma.

In terms of value, RM3.44bil worth of high-rise were unsold while up to RM5.07bil in the RM1mil and above segment are still looking for owners.

These unsold units represent a huge holding cost to developers. The function of a developer is to build properties and their aim is to sell as fast as possible. Once a unit is sold, they get their progressive payments.

If units remain unsold by the time the project is completed means they are left holding the baby. Total unsold units reached 20,876 compared to 14,792 units a year ago.

2018 expected to be soft

We are just about six weeks away for 2018. Going forward, the horizon seems rather bleak. Residentials continue to make up about 60% of transactions by volume, by value 48.4%.

The positive side is the degree of price increase is not as exorbitant — prices are moderating.

The Malaysian House Price Index (MHPI) up to 1H2017 continued to rise at a moderating trend with the MHPI at 184.1 points (2010: base year), up by 5.6% on annual basis.

Although market activity recorded negative growth, the rate of contraction has decreased. This means the market is gradually adjusting to the changing landscape.

Sales of new launches RM1mil and above

Up to 30% of new launches priced more than RM1mil were formally sold within six months of launch with the sales and purchase agreements (S&Ps) signed as at the first half of 2017 (1H2017).

This may be due to a rush for this segment because effective Jan 1, 2018, stamp duty for housing RM1mil and above will rise from 3% to 4%.

“We suspect there was a rush for this segment before Jan 1, 2018,” said Khuzaimah. This 30% rise is a spike compared to the 2.8% for the RM1mil segment a year ago.

In a way, this rise to 30% for the first half of 2017 is significant because in the first half of 2015, properties within this price range had a take-up rate of 36.3% with formalised S&Ps.

Properties RM400,000 and above continue to take up a large proportion of new launches in the country. They took up 49.8% of total units launched in the 1H2017 compared to 18.4% for properties between RM250,001 and RM300,000, and 10.5% for those priced between 300,001 and RM400,000.

And the most saleable?

Those between RM400,001 and RM500,000. Total units launched for this segment totalled 6,926, of which 2,001 units were formally sold.

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