Residential overhang in 2021 ‘at an all-time high’

Napic defines ‘overhang’ as residential units that have received certificates of completion and compliance but remain unsold for more than nine months after launch.

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KUALA LUMPUR: According to the Property Market Report 2021 by the National Property Information Centre (Napic), residential property overhang increased to an all-time high last year of 36,863 units worth RM22.79 billion, marking a 24.7% increase in volume and 20.5% rise in value compared with 2020.

Napic defines “overhang” as residential units that have received certificates of completion and compliance but remain unsold for more than nine months after being launched.

Selangor had the highest number and value of overhang with 6,095 units worth RM5.28 billion. This made up 16.5% in volume and 23.2% in value of the national total.

The state was followed closely by Johor (6,089 units worth RM4.72 billion), Penang (5,493 units, RM3.56 billion) and Kuala Lumpur (3,908 units, RM3.17 billion), respectively.

Condominiums and apartments made up 55.6% (20,505 units) of total overhang, followed by terraced houses (21.3%, 7,839 units).

Properties in the affordable price range of RM300,000 and below formed the majority of unsold houses (31.5%, 11,610 units). This was followed by properties priced from RM500,001 to RM1 million, comprising 30.2% and 11,139 units; and those priced from RM300,001 to RM500,000 with 25.7% and 9,461 units.

Properties priced more than RM1 million made up 12.6% (4,653 units) of residential overhang.

On a positive note, unsold units under construction improved, dropping 2.1% to 70,231 units. However, the supply of unsold properties yet to be constructed recorded a drastic increase of 69.2% to 21,960 units.

Statistics showing a drop in residential overhang in 2020 and an increase last year. (Napic pic)

Overhang a persistent issue

While Napic’s latest report shows a five-year overview of the market status, previous findings reveal that residential overhang has been prevalent since 2003.

A market boom in the 2010s saw the overhang reduce in tandem with a reduction in supply to 11,316 units, with only 4,956 new completed units added to the existing inventory.

A contributing factor for the overhang is that the saturated market is at the limit of absorptivity, as seen in take-up rates of new launches hovering in the low 30% range since 2016.

In simple terms, the mismatch of demand and supply means there are far too many properties on the market than there are potential buyers.

A common misconception is that residential overhang is caused by a prevalence of overpriced properties catering towards foreign buyers and wealthy Malaysians. Statistics, however, prove otherwise as the bulk of the unsold properties are below the RM300,000 price point classified as “affordable” by the ministry of housing and local government.

The Real Estate and Housing Developers’ Association (Rehda) has previously said the overhang situation could be attributed to developers in many states being forced to build affordable housing alongside their regular units, despite a lack of demand.

This leads to excessive “affordable” properties and increases the cost of ordinary properties to subsidise the construction of these affordable homes.

This article was prepared by Vigneswar Rajasurian of PropertyAdvisor.my, Malaysia’s most comprehensive source of property data, property analytics and insights.

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