While house prices across the world have soared over the past year, local research house Kenanga Research does not see any bright spot for Malaysia’s housing market.
The research house expects the country’s housing market to remain subdued even after recovering from the COVID-19 pandemic, due to the relatively slower economic recovery and long-standing oversupply issues, reported Free Malaysia Today (FMT).
Citing a report released by property consultancy firm Knight Frank, Kenanga noted that house prices have increased in countries such as Turkey (32%), the US (13.2%), Britain (10.2%), Singapore (6.1%) and Indonesia (1.2%).
But since the conditions in those countries did not apply to Malaysia, Kenanga does not “foresee a blanket re-rating for property prices”.
It added that the various movement control order (MCO) enforced by the government – MCO 3.0 in May and full MCO on 1 June – have not helped.
And while the Home Ownership Campaign has been extended from 31 May 2021 to 31 December 2021, the continual movement restrictions hampered productivity as well as impacted sales and earnings for most developers under its coverage.
Kenanga said the oversupply situation in Malaysia began in 2015 when the market was flooded with serviced residences even as the government rolled out cooling measures in 2014.
National Property Information Centre (NAPIC) data showed that overhang units for serviced residences increased at a compounded annual growth rate (CAGR) of 192% from 2015 to the first quarter of 2021.
“This issue is unlikely to abate in the near term given the large amount of overhang and unsold-under-construction units still in circulation today,” said Kenanga as quoted by FMT.
The number of overhang serviced apartments stood at 23,533 by end of Q1 2021. Including those under construction, the figure rises to 154,723 units.
NAPIC defines overhang as units that were launched by more than nine months ago, which are now completed and ready for occupation but remains unsold. Unsold under construction refers to work-in-progress units that were launched by over nine months ago and are still unsold.
The risks facing the property sector include the domino effects in case of financial default by key property firms, impairment, falling property prices as well as increasing building material costs.
Maybank, however, expects Malaysia’s housing sector to recover this year.
In its latest report, Maybank said developers, which believed that “the worst was over”, were ready for lower prices and lower profit margins. The developers also expect the pent-up demand amidst the low interest rate environment to save them.
But the ensuing politics, national recovery plan and the noises relating to the emergency are starting to weigh on any green shoots witnessed earlier in the year.
And while Maybank expects to see a recovery this year, its report did not mention unsold completed units nor the growing number of high-rise homes that are works-in-progress and remain unsold.