Property overhang to remain stable

Most developers are focused on clearing the unsold properties at a reasonable price, says a property valuer


THE overhang situation in the property market is expected to remain stable on aggressive measures undertaken by the developers to dispose of the unsold completed units.

CCO & Associates (KL) Sdn Bhd ED Chan Wai Seen said most developers are focused on clearing the unsold properties at a reasonable price.

Hence, he noted that the new launches do not contribute to the overhang situation significantly.

“Having said that, due to the uncertainties in the country’s economy and increasing unemployment, we do not disregard the possibility that property overhang may increase.

“However, we do not expect it to be significant because most developers have responded well to the change in the market trend since 2015,” he told The Malaysian Reserve (TMR).

Chan added that, the increase in the Covid-19 cases and the various lockdown restrictions in the country will continue to affect the property market performance.

He expects the second quarter (2Q) performance for the property sector will be the worst due to the third implementation of Movement Control Order (MCO 3.0) on unrealised property sales.

Nevertheless, Chan said he does foresee pent-up demand once the MCO is lifted, as soon as Covid-19 cases ease.

“Most prospective buyers are owner-occupiers that capitalise on the low interest rate and incentives offered under Home Ownership Campaign or by the developers.

“The young population or first-time house buyers will drive the demand for properties,” he added.

For the first quarter of 2021 (1Q21), the country’s property market recorded 80,694 transactions for a total value of RM36.12 billion.

Centre for Market Education CEO Dr Carmelo Ferlito said the average value of transactions in 1Q21 was RM447,600, which is an increase of 6.5% from 4Q20 and 14.1% from 1Q20.

He noted that all the property categories recorded an increase in the average value of transactions in 1Q21 when compared to the same quarter of the previous year.

“This is happening despite very moderate price dynamics, in which the Malaysian House Price Index in 2020 recorded a slight growth of 0.6% when compared to 2019, the smallest increase in the past ten years.

“This confirms what we have said in previous occasions, which is that after the 2012 to 2013 peak prices were moving toward stabilisation,” he told TMR.

Ferlito expects this trend is more likely to stay there for a while, until the next cycle inversion.

Ferlito said while there is a stable tendency toward price stabilisation in the property market, a final remark needs to be spent on the growing inflationary tensions which are dramatically emerging in our economy.

He emphasised that raw materials’ prices skyrocketed internationally; similarly, expansionary fiscal and monetary policies have flooded the economy with liquidity that nobody can actually use.

Thus, he said property developers may very soon face rising costs and a lower demand despite price stabilisation.

“At the same time, the excess liquidity may turn a post-Covid boom into a malinvestment crisis, if not properly handled now.

“The property market will evolve into these confused policy and economic environments. And it may further suffer if the situation is not properly addressed,” he noted.

According to the latest Knight Frank Malaysia’s Real Estate Highlights 1H21 report, the overall interest in the residential sector is likely to remain subdued for the remainder of 2021 until the pandemic is brought fully under control.

The report revealed that there were fewer completions and launches in 1H21 as the strict containment measures delayed construction works, project delivery and completion of real estate transactions.

While, in the secondary market, no property viewings and onsite surveys have been allowed since June.

Moving forward, the report noted that the residential market will continue to self-correct amid challenges brought on by the Covid-19 pandemic.

It added that the property market confidence is expected to return gradually by early 2022 as buyers and financiers are all on cautiously optimistic mode.