The residential overhang in the local property market from 2014 to 2018 Q1



The issue of supply-demand imbalance in the property market has been highlighted since 2015, and the number of overhang and unsold residential properties in the nation have worsened every year.

In the first quarter of 2018 (1Q 2018), the unsold residential units stood at 100,459 units, increasing from 99,246 as at 2017, according to the Napic Stock and Status Residential Q1 2018 report.

The numbers include unsold residential properties that have been completed (overhang), under-construction and officially launched but yet to be constructed in the market.


What does the “residential overhang” means?

Residential units which remained unsold nine months after receiving the Certificate of Completion and Compliance (CCC) and Temporary Certificate of Fitness for Occupation (CFO) are put into the overhang basket, as defined by NAPIC.

In other words, these are residential properties which were completed and ready-to-use but remained unsold after nine months.


source: Napic

The amount of residential supply overhang in Malaysia had further increased in 1Q 2018 to 25,193 units worth RM15.68mil, according to Napic Status Report: Residential Q1 2018.

The residential overhang has tripled within four years, from 8,839 units in 2014, with the fastest pace witnessed between 2016 and 2017, which jumped 67.2% in volume and 82.8% in value, recording 24,738 units with total value up to RM15.64bil.

The number of overhang is still growing, albeit at a slower pace, recording a 1.8% quarterly growth in 1Q 2018 compared to 24,738 units in 4Q 2017.

In 1Q 2018, high-rise properties such as flat, condominium and apartment make up the majority in the residential overhang, with a total of 10,238 units or 40.6%.

Meanwhile, properties priced from RM500,000 and below accounted for 61.1% (15,378 units) of the total overhang; while Johor and Penang were the states with the highest overhang rates, which recorded 5,002 and 4,092 units respectively.


source: Napic

What defines an unsold residential property?

Unsold residential properties can be divided into two categories based on the stage of construction.

Residential units with building plan approval that has yet to begin construction, but remained unsold nine months after the official launch are defined as unsold not constructed property.

Once the developer begins to construct the house, the units under-construction will be moved to the unsold under-construction property category if it remains unsold more than nine months.

In 1Q 2018, the number of unsold under-construction residential properties declined by 1% to 61,266 units against 61,882 units in Q4 2017. However, the number of properties under the not constructed category rose by 10.9% to 14,000 units in the quarter.

High-rise properties are the largest unsold housing types in Q1 2018, with 46.9% or 28,761 units in the under-construction category and 74.6% or 10,449 units in the unsold not constructed category.

From a pricing perspective, 51.6% or 7,221 units of the unsold not constructed residential properties are priced below RM100,000. The property under-construction in below RM300,000 also experienced low take-up rates, with 19,825 units remaining unsold nine months after the construction started.


source: Napic


In Bank Negara’s box article titled “Imbalances in the property market,” the factors that hamper the take-up rate of these properties include unattractive location and low transport connectivity. Moreover, non-creditworthy loan applicants and the public preference toward landed properties over the high-rise housing products also lead to the increase of unsold numbers in these housing segments.


Platform to check for the unsold property units

In April 2018, Napic launched the Unsold Property Enquiry System Market (UPESM), a data search platform for the public to search for the number of unsold property units. The search category can be defined by year, state, district, construction stage and housing types.

Napic will monitor and update the data from time to time, based on the feedback from developers or project owners.

“We hope to build closer relationships with property developers on the information sharing. This is crucial in achieving the goal of providing transparent information to the market, such as developers, local authorities and homebuyers for a better decision,” said Napic deputy director of property inventory division Khalid Abdul Mutalib during the Rehda’s Housing in an Era of Change: A New Direction conference.



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