We’ve heard seen the news, read the headlines: “Slow housing demand”, “Number of unsold units on the rise”, “GST pushing property prices”, “Ringgit slumps against USD”.
According to the Real Estate and Housing Developers’ Association Malaysia (Rehda) Property Industry Survey for the first half of 2015, the number of unsold property units in Malaysia have increased substantially. Developers have complained that the amount of unsold property units increased to 78% in the first half of 2015, compared to 57% and 64% in the first and second half of 2014 respectively.
The reason? Unreleased Bumiputera lots and rejected loans. Most of the loans that were rejected involved residential property priced between RM250,001 and RM500,000 along with those between RM700,001 and RM1 million. The majority of these unsold units are located in Kedah, Penang, Selangor and Johor.
The survey also showed that although only 40% of launched units were being sold, more than 9,000 units of houses are expected to be launched in the second half of the year. More strata units were launched in the first half of this year compared to landed units, and concentrated mainly in Penang, Selangor and Kuala Lumpur. Half of the units launched were priced below RM500,000, while new launches of houses priced below RM200,000 were increasing.
Therefore, it may be rather surprising to note that most of the launches in the second half of 2015 will be priced between RM1 million and RM2 million, twice the price of that in the first half. Another unexpected addition to the pie is Kelantan, where more projects slated for the next half will be between RM200,000 to RM500,000 – a significant increase from below RM200,000 previously due to greater acceptance of condominium units in Kota Baru.
Considering that foreigners are only allowed to purchase property priced at least RM1 million, and the ringgit being in its weakened state, it is highly possible that these multi-million launches are targeted towards high net worth individuals and foreign investors.
Developers in Peninsular Malaysia complained that the implementation of the Goods and Services Tax (GST) has caused their business cost to increase. That is certainly the case, as 80% of the survey’s respondents cited a cost increase of 3% to 5% due to GST. Two-thirds of the developers involved in the survey said that they have absorbed the hike instead of passing it on to house buyers, with 13% saying they bore 100% of the increase.
House prices have gone up almost 5% due to GST, due to the weakening of ringgit which increased the price of imported material such as steel, and other components such as elevators, escalators and air-conditioning which are necessities for both commercial and residential high-rise properties.
On the surface, the situation does look dire for Malaysia’s property market, with more and more properties being launched but without buyers who can afford to purchase them. But take a closer look at property news from all over the world, and you will find that Malaysia is not the only one facing such a situation. Unsold luxury homes in London, new homes sitting vacant in Houston, unsold properties being snapped up by the Chinese government, unsold inventory in New Delhi… Everywhere you’ll see the word ‘unsold’; it is the way the market works when economies are not as ideal as they used to be. Industry experts in Malaysia have admitted that the property market is soft, but there are no fears of a property glut. True, some policies may have to be carried out to ensure that a larger percentage of people are able to obtain loans to purchase homes, but I really do think that (for now) there’s no fear of a property glut.
‘Foreign buyers will not displace local housebuyers’, Astro Awani 11 September 2015 (link)
‘GST pushing cost, home prices up, say peninsular developers’, The Malay Mail Online 11 September 2015 (link)
‘Survey shows slowing housing demand’, The Malaysian Insider 11 September 2015 (link)
‘Unsold property units on the rise in Malaysia’, The Star Online 11 September 2015 (link)