This article first appeared in The Edge Malaysia Weekly on April 19, 2017 - April 25, 2017

KAJANG: The total volume and value of property transactions in Malaysia declined for the second consecutive year last year, according to the finance ministry’s Property Market Report 2016.

Volume dropped 11.5% to 320,425 units from 362,105 in 2015, while value fell 3% to RM145.41 billion from RM149.96 billion.

Valuation and Property Services Department director-general Dr Rahah Ismail said the uncertainty enfolding the global political scene, coupled with low domestic economic growth, has taken its toll on the property market.

Rahah expects the market to remain soft in the next couple of years, supported by various property-related incentives and accommodative monetary policy.

“The 2016 conundrums are expected to reverberate into 2017. It would be expected that the property market would take a breather in the next couple of years before it could make a comeback,” she told reporters after launching the report yesterday together with Deputy Finance Minister Datuk Othman Aziz.

According to the report, property transactions in 2016 continued to be driven by the residential sub-sector, which contributed 63.4% of the overall volume and 45.1% of overall value.

As the market continued to soften, data from the report showed that the number of new launches declined to 52,713 units, down 9.8% compared with 58,411 units in 2015.

This translated into lower sales of 16,532 units in 2016, down 32.8% compared with 24,588 units in 2015. The 2015 sales figure itself was 37.7% lower than 2014’s 39,491 units.

“Sales performance was discouraging,” said the report. “Slow market absorption of the primary market led to an increase in residential overhang.”

The report said the number of unsold properties increased 43.8% to 14,792 units in 2016 from 10,285 in 2015. The biggest category was units priced at RM500,000 and above, totalling 6,052 units.

In monetary terms, the value of the overhang surged 70.7% to RM8.56 billion from RM5.02 billion.

“Johor saw an increasing overhang market share at 24.8%, which [was] mainly made up of two- to three-storey terraced houses priced at RM500,000 and above,” said the report.

In the office and retail sector, the report said “vacancy continued to increase”, with Kuala Lumpur and Selangor recording a 16% rise to 2.7 million sq m of vacant office space in 2016, and an 11.9% rise to 2.7 million sq m of retail space.

On the housing oversupply issue, Rahah said there are five million houses in the national supply currently, with some 800,000 houses to be built in the pipeline.

“There are also some 600,000 houses that are in planned supply, and altogether houses in Malaysia total around 6.4 million,” she said. “If you ask me, there is more than enough, if not adequate houses in the country.

“The oversupply must be avoided or minimised, and this requires a concerted effort by developers, authorities and relevant stakeholders,” added Rahah.

Rahah said the mass housing industry started in the 1980s, which was driven by the primary market.

“It then regularly increased and now we have about five million houses in the national stock,” she said, noting that unsold houses in the primary market dated back to 2013, when developers were eagerly launching their development projects as they were banking on good economic prospects.

“By the time they completed those development projects, it was already 2016. So that is why unsold houses are on the rise,” she said.

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