Property overhang in Malaysia. Johor is top.

Property overhang in Malaysia. Johor is top.

I had a casual conversation with a close friend from JB. Ms. C. She’s the one whom I have to help jump start her car two times within a period of a few months. She told me that one property development whom we spoke about a few years back is now super quiet. In fact it seems that the developer has not ‘surfaced’ for some time.

She asked if I will be buying a property in JB. My brief answer is, yes. However, let’s talk about that one development which has now gone quiet.

Yes, I remember that property and I still remember that the developer team at the time was super confident to attract foreign buyers with their pricing which will scare away most Malaysians. Unfortunately, many things happened since then and Covid-19 has been around since beginning of 2020. Below would be the latest update in terms of overhang numbers for Malaysia, especially in Johor.

Article in themalaysianreserve.com According to Rahim & Co International Sdn Bhd director of research Sulaiman Saheh said, “Right now, as of 3Q21, there are 56,000 units which consist of residential as well as commercial properties amounting to RM41 billion.”

He added, “Johor still accounts for the large chunk of the overhang units, followed by Kuala Lumpur with 10,000 units, Selangor with 6,900 units and Penang with 5,000 units.” He shared this during his presentation of Rahim & Co’s Property Market Review 2021/2022 publication in Kuala Lumpur today. Do read the report in full here: Article in themalaysianreserve.com

Decision to buy or not to buy?

First, we need to know if the property we intend to buy is within that group of overhang / unsold property. If it is, then it’s time to start pressuring the particular developer to sell their unit at a price you like to buy. If they refuse, that means they are not desperate enough. It may also mean that transactions are unlikely to happen and the number will remain high.

Do not be too surprised that some of these developers are able to continue holding because here in Malaysia, the government does not force the developers to sell by certain time or else they will be fined like Singapore does.

Second, if the property we like to buy is in the secondary market, it is also time to use the excuse of new property overhang as an excuse for the property owners of these secondary market to reduce their asking price. Again, if they refuse, it may also mean that they are unwilling to sell at a price you like. This also meant that transactions are likely to be subdued since both parties cannot agree to a price.

Just remember, the decision to buy or not to buy really depends on you. The reason(s) to buy differ and this is why it’s not possible to generalise just because there’s property overhang. Until today, I intend to sell a property I have in Penang but the potential seller is giving me a price which will make me feel bad to sell. So, transaction has yet to happen.

In conclusion, my decision to sell or to hold has got very little to do with overhang / unsold property. It’s everything to do with me. If I need the money, I need to sell lower. Period. Else, I can wait. Hope this explains how a home owner thinks.

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