Immediate challenge would be weakened investment appetite among foreign buyers due to pandemic

by FARA AISYAH/ pic by BLOOMBERG

JOHOR, which remains the state with the highest overhang units for residential and commercial properties in 2019, needs another three years to clear most of the unsold properties.

CBRE-WTW (CBRE Group Inc and CH Williams Talhar & Wong Sdn Bhd) MD Foo Gee Jen said the overhang in Johor is by and large found in Iskandar Malaysia, which is known to be among the favourite picks for foreign investors.

“The market has been experiencing a supply gush of serviced apartments since 2012 to 2013. The price tag of these investment-oriented serviced apartments is a mismatch to the affordability of locals.

“It could take three to five years for the market to absorb these unsold units,” he told The Malaysian Reserve.

He said while the property prices in Iskandar Malaysia are still attractive compared to major cities in South-East Asia including neighbouring Singapore, the immediate challenge facing the market would be the weakened investment appetite among foreign buyers in the light of the Covid-19 pandemic.

Johor currently accounts for 18.4% of Malaysia’s overhang residential properties with 5,627 units worth RM4.7 billion, against 6,066 units with a total value of RM3.09 billion in 2018.

The National Property Information Centre’s Property Market Status Report 2019 showed the majority of the overhang homes in Johor were condominium/apartment units mainly priced at RM600,001 to RM700,000.

As for the commercial segment, the southern state holds the largest share of the national overhang at 55.9% or 13,998 units at an unstated value.

The commercial property overhang stood at 25,044 units worth RM20.81 billion in 2019, an increased of 40.9% and 49.6% in volume and value respectively against 17,769 units worth RM13.91 billion in 2018.

Johor was also the main contributor to the serviced apartment overhang, dominating 71.2% or 12,207 units of total 17,142 units worth RM15.04 billion.

VPC Realtors (JB) Sdn Bhd Asia-Pacific property consultant Bruce Lee said the property situation in Johor is slightly different from Kuala Lumpur, Penang or Kota Kinabalu, due to the mega project Iskandar Malaysia.

“Although the overhang property units situation nowadays is not encouraging in Johor, given a period of another three years I personally believe Johor situation will resolve better than the rest as long as the government policy to welcome foreign investment is consistent.

“Generally, the overhang of serviced apartments will remain for the next few years, unless there is a major change of demography and infrastructure, or a sudden paradigm shift of people’s behaviour to live in serviced apartments that are more convenient to commercial amenities and facilities.”

Lee said categorising serviced apartments as commercial properties causes severe misled information on the actual situation of the overall supply and demand of residential property.