I always love infographics as it tells a lot within one image. Here we have the Q3 2020 snapshot for property market Malaysia. This article appeared in thestar.com.my. I think they have a good and big team of writers and graphics people too. Good job guys. That infographic image is right at the bottom. Meanwhile, we look deeper into some of the items in the image here.
#1 – Total Overhang is 65,552 units. Overhang is NOT the same as oversupply. Overhang means unit which has been completed and still unsold for 9 months. In other words, it has been handed over to buyers who purchased a unit and when these owners moved in, the developers may still have some unsold units. This is why prices could not move much. Developers are still selling units they hold.
Oversupply, well that’s a very general term and may mean all units under construction, under planning etc. In some situations, the demand may be speculative and thus even if supply is very high, it may all still be sold… In slow situations, like a financial crisis for example, the supply may be way lower but the demand has also dropped tremendously because everyone who could buy is waiting…
#2 – 84.2% of all the overhang is residential and serviced apartment. This means 55,195 units are residential and serviced apartments. Anyway, the overhang number here when compared to the H1 residential transactions alone, it’s still considered okay. The H1 total residential transactions is over 75,000 units. (click here for details) It also goes to show that IF these overhang consists of all attractive properties at attractive prices, then it may no longer be in the statistics.
#3 – Service Apartments is a MAJOR issue in the overhang. These are units which are typically bought for ‘homestay’ purpose versus own stay. In other words, when the demand for homestay is down because of COVID-19 pandemic, of course these units will still be in the market. Plus the fact that this was a very hot in demand property, thus many developers built a lot and this flooded the market. It may take some time more to clear. However, if the prices have fallen to a level which could be covered by rental, hey… that’s a great buying opportunity yeah.
#4 – Malaysian House Price Index (MHPI) is showing a price drop yeah. Please do look at the number very closely. Look at the % change. Despite all the talks about property prices dropping… actually, the MHPI continued to be positive all the way until Q3 2020 where the number is at NEGATIVE 1%. (or thereabouts). There’s no doubt that it has been trending downwards. Briefly, this meant that property prices were still RISING, though at a very low percentage. Want to know why? Read this earlier article.
Conclusion
A RM500,000 property with just a 1% up is RM5,000. Divided into 12 months, that’s an increase of RM417 per month yeah. Of course, it is also the same if the price is dropping by 1%. In 1998, property prices dropped by double digits. That was during a financial crisis. Since then, on a general basis, property prices have always been increasing by a percentage which is above the inflation rate. This is a very important factor to consider for everyone who has a property or thinking of buying a property. In the mean time, take care and stay safe. That COVID-19 is still around us…
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