Thursday 28 Mar 2024
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This article first appeared in The Edge Financial Daily on October 12, 2018

KAJANG: The residential property market remained under pressure in the first half of 2018 (1H18), with the transactions slowing further and unsold completed homes at a record high.

Between Jan 1 and June 30, the number of overhang residential properties grew by 18.3% year-on-year (y-o-y) to 29,277 units, while the total value rose 10.2% to RM17.24 billion. The statistics were part of the preliminary data for 1H18 released by the Valuation and Property Services Department (JPPH) yesterday.

JPPH attributed the increase to “slow market absorption” and said a majority of the overhang units are high-rise residences priced between RM500,000 and RM1 million.

Asked whether JPPH expects the number of overhang homes to continue to rise, JPPH director-general Nordin Daharom said it is too early to tell.

“Whether it (the overhang situation) will worsen or not, that is yet to be seen. It depends on the condition of the economy,” said Nordin.

The department, a finance ministry unit, defines overhang properties as “completed units that remain unsold after nine months or more”.

About 50% of the overhang homes are in Johor (20.45%), Selangor (16.03%) and Penang (13.52%).

Of the 14,639 overhang units in the three states, 6,837 (43.63%) are high-rise properties and 34.19% are priced between RM500,000 and RM1 million.

In 1H18, the residential segment remained the mainstay of the property market with a 62.8% share of the transactions and 46.7% of the total value.

However, the residential segment saw pressures from a soft market condition as 1H18 transaction volume and value fell 0.8% and 3.6% respectively y-o-y.

“The total amount of loans applied for the purchase of residential properties [in 1H18] decreased by 3.1% compared to 1H17 while the approved loans fell by 0.2%,” said JPPH in a statement.

“On the outlook, we expect the property market to be soft in the next couple of years, supported by the various property-related incentives and accommodative monetary policy,” it added.

Overall, the broader property market saw a marginal decline in 1H18 to 149,889 transactions worth RM67.74 billion, down 2.4% in volume and 0.1% in value compared to 1H17.

This marks the fourth consecutive first-half y-o-y decline in transacted volume while the marginal dip in first-half transacted value was the third in four consecutive years.

In 1H18, other drivers of the property market included agricultural properties (22.4% of volume; 10% of value), commercial (7.2% volume; 23.4% value), development land (5.9% volume; 8.9% value) and industrial (1.7% volume; 10.9% value).

Speaking during the data release, Nordin reiterated JPPH’s suggestion for a special committee to monitor home prices and advise on affordable pricing levels for new launches.

“What is important is that home prices must be reasonable and affordable to the middle 40% and bottom 40% income groups,” Nordin said. Nordin told reporters there is already such a committee in Melaka, which reviews proposed new launch home prices by developers and makes recommendations accordingly based on affordability levels.

The Melaka committee, called Jawatankuasa Pecah Sempadan dan Belah Bahagi Tanah, is chaired by the chief minister while the state land and mines office acts as the secretariat.

The committee, which recommends appropriate new launch home prices based on available data, dates back to former chief minister Tan Sri Mohd Ali Mohd Rustam’s time. He served as the chief minister between 1999 and 2013.

A local developer told The Edge Financial Daily that after Mohd Ali, the state government requested the federal housing and local government ministry not to approve a development if the committee’s recommended prices are not adhered to. Nordin said the committee had contributed towards maintaining average home prices in Melaka at three times the average gross household income, and proposed that the federal government studies its possible implementation at the federal level.

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