Persistent overhang
More needs to be done to ease the situation
“I would suggest first of all that we start measuring overhang a bit differently, by giving more time between the launch and the declaration of overhang.” 5armelo Ferlito
MALAYSIA’S property overhang levels continued its uptrend on a yearon-year basis in the first half of 2022, implying that there are still lingering concerns of oversupply in the market.
According to the National Property Information Centre (Napic), a total of 34,092 overhang
units were recorded in the first half of 2022, compared with 31,112 units in the first half of 2021.
Still, on a sequential basis, the level of overhang eased marginally compared with the second half of 2021.
According to Napic, the level of property overhang was down by 7.5% and 4.6% in volume and value, respectively, against the second half of 2021.
“Most of the overhang is in Johor with 6,040 units worth Rm4.73bil. Likewise, the unsold under construction residential units saw a decrease of 11.1% to 62,404 units compared to the second half of 2021 (70,231 units),” says Napic.
PPC International managing director Datuk Siders Sittampalam says more needs to be done to reduce the country’s property overhang levels.
“While the level of overhang has reduced in the first half of 2022 (compared with the second half of 2021), it is still not good enough.
“There needs to be more government incentives and developers also need to know when to cut down on their launches. The entire situation needs to be tackled by both the public and private sectors,” he tells Starbizweek.
Centre for Market Education chief executive officer Carmelo Ferlito says the latest Napic data needs to be looked at closely, before identifying how the situation can be resolved.
“I think data needs to be taken cautiously, bearing in mind that the baseline is 2021, a year that was almost entirely spent in lockdown. So, the entire 2022 data will reflect a rebound which is, I would say, physiological.
“We will have to see, between the end of 2022 and 2023, if the trend remains or how it changes. It is important to keep monitoring the situation and not only in aggregate term, but also by type and price range.”
Additionally, Napic says the serviced apartment sub-sector recorded 22,674 overhang units with a value of Rm19.32bil, indicating a decrease of 6.7% and 5.6% in volume and value, respectively, against the second half of 2021.
“Johor recorded the highest overhang in the country with 68% (15,423 units), followed by Kuala Lumpur and Selangor with 18.9% (4,279 units) and 9.9% (2,248 units), respectively.”
Siders says a market study needs to be conducted on the justification for high-rise properties.
“Landed properties tend to sell better as there’s demand,” he says.
An overhang is defined as units that have received their Certificate of Completion and Compliance but remain unsold for more than nine months after launch.
Ferlito says a tweak in the definition could alter the way the overhang situation is perceived in the country.
“I would suggest first of all that we start measuring overhang a bit differently, by giving more time between the launch and the declaration of overhang.”
With the property market normalising after the 2008-2013 boom, Ferlito says properties today will take more time to be sold.
“So I believe that some adjustment should be made on the measurement. Additionally, I believe that market forces should be left at work. Only with unhampered markets can suppliers better understand the demand side and offer what and how much is in demand,” he says.
Rising sales
Aminvestment Bank in a recent report says sales momentum started to pick up in the second quarter of 2022.
“New sales in the first half of 2022 declined by 8% year-on-year, mainly from the expiry of the Home Ownership Campaign (HOC) and slower new launches in the first half of 2022.
“Nevertheless, we saw new sales begin to gather momentum in the second quarter of 2022, with all developers registering stronger sales quarter-on-quarter.
“In the first half of 2022, developers attained 29% to 75% of their financial 2022 sales target (an average of 46%), compared with 30% to 75% for the first half of 2021.”
Despite the persistent overhang, Aminvestment Bank says it has been seeing a declining trend in overall inventory levels since 2019.
“This is mainly attributed to fewer new launches and more aggressive inventory clearing efforts during the HOC,” it says.
To help drive the sector, the government introduced the HOC in June 2020 under the Penjana initiative.
The campaign ended on Dec 31, 2021. Many industry observers and property players believed that the HOC was a huge help to the market and urged the government to extend the campaign period into 2022.
Looking ahead, Aminvestment Bank says it expects more launches in the second half of this year, compared with the first half of 2022.
“Except for Lagenda Properties Bhd and Sime Darby Property Bhd, which exceeded 50% of their fullyear target of property launches in the first half of 2022, most of the companies attained 3% to 20% of their financial year 2022 planned launches.
“In view of improving labour market conditions and easing building material prices, Mah Sing Group Bhd, UEM Sunrise Bhd and Paramount Corp Bhd plan to ramp up new launches in the second half of 2022.”
Additionally, the research house says it anticipates Sunway Bhd and S P Setia Bhd to continue being prudent in their new launches.
Meanwhile, MIDF Research in a recent report says the near-term outlook for the property sector is expected to remain unexciting due to the oversupply concern.
“The residential overhang units remain on the high side, which we think would make the property market remain competitive and prompt property developers to offer attractive packages to attract buyers.
“That may also make property developers unable to fully pass on the rising cost of construction to property buyers, resulting in margin compression.”
MIDF Research emphasises that high-rise residential properties are the largest contributors to overhang units.
“Residential overhang units are largely contributed by condominiums and apartments.
“We opine that the oversupply situation is more apparent for properties priced within affordable price ranges of below RM500,000.”
The research house says this is followed by properties priced within RM500,000 and Rm1mil; and subsequently units that cost more than Rm1mil.