Getting worse?  Overhang growing by 44%. (14,792 units!)

When overhang grows it is not a good sign. If market is healthy the overhang would continue to reduce and not keep going up.  According to National Property Information Centre (Napic) in an article in Theedgeproperty today, value of transactions for 2016 has dropped 3 percent to RM145.1 billion. It was RM149.9 billion a year ago. The transactions by volume has dropped 11.5 percent to just 320,000 transactions for the whole of 2016 from 362,105 transactions in 2015. The overhang units has increased. The residential overhang numbers grew to 14,792 units worth RM8.56 billion. This is an increase of 44 percent in volume versus 2015 and 70.7 percent in value to RM8.56 billion. What were the numbers for Q1 – Q3 2016? Here: Property transactions and price, both dropping.(Jan – Sept 2016)  Total launchings decreased to just 53,000 units compared to 58,000 units in 2015. (I think this is good and I would be more worried if the launchings showed an increasing trend but I wonder if these numbers already include PR1MA, Rumah Selangorku and RUMAWIP. All three has been launching a lot of units as per many news reports) 
Over 65 percent of residential transactions were for property priced from RM300,000 and below. (Demand is still strong. I do not think this is a sector for speculators) Deputy Finance Minister 1 Datuk Othman Aziz said, “As we know, due to the challenging and uncertain state of the global economy, the Malaysian economy has also recorded a slower gross domestic product (GDP) growth at 4.2% in 2016 as opposed to 5% and 6% in 2015 and 2014, respectively. Due to the sluggish growth, no sector is spared including the real estate sector.” (As I have written before, when the world slows, everyone will slow but our current GDP growth is definitely still healthy and we are not about to go bankrupt)  This is what the International Monetary Run (IMF) said recently about Malaysia. Nope, I also do not think it’s possible to ‘force’ IMF to say something positive about us)   House Price Index meanwhile showed a 5.5 percent growth which was lower than the 7.2 percent in 2015 and 8 percent in 2014. (Many would still say that this is still high because the official inflation rate is still lower than this rate of increase.)
Next statement can be a concern or an opportunity. Valuation and Property Services Department (JPPH) director general Dr Rahah Ismail expects the property market “to remain soft for the next few years”. Let’s just say I prefer to look at it as an opportunity. As a working professional, it’s not possible for me to save downpayment within a few months.  The longer the slowdown, the more downpayment I can save which is better too. Else, I could buy nothing. She added, “As we move towards a maturing economy, there has been a shift to more transactions being carried out in the secondary market at 80% and 20% in the primary market as opposed to previously at 60% (the secondary market) and 40% (primary market).  Seriously, I agree and I do think secondary market, especially those where there are still lots of newly completed empty units should be the first to be cleared by the market. Hopefully my next unit would be a secondary. Can slowly view lah.
written on 18 April 2017
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