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       WHEN the National Property Information Centre (Napic) released its overhang numbers for 2021 last week, it revealed that Malaysia is still far from resolving an issue that has been plaguing the property market for years.

       Not only are the numbers up on a year-on-year basis, but the statistics also showed that the level of overhang in the country is at its highest since 2018.

       This, says PPC International managing director Datuk Siders Sittampalam, is a cause for concern.

       “The level of overhang is even higher than when they were during pre-pandemic levels,” he tells StarBizWeek.

       Despite the higher year-on-year numbers, Siders points out that the overhang situation in the country is nowhere near at its tipping point.

       “It’s not a new situation in Malaysia and it has not become a major economical issue to the point that developers are going bust.”

       Siders adds that the high level of overhang in the country can be attributed to the properties either being overpriced or were built in less-than-ideal locations.

       Siders: The high level of overhang in the country can be attributed to either the properties being overpriced or at less-than-ideal locations.

       “However, the cost of building properties has been rising and you can’t expect all developers to build cheaper homes.”

       He emphasises that there needs to be more political will in resolving the situation.

       “We need a holistic approach to resolving this. Property development is a state matter and the federal government needs to get the state governments to work together.

       “Instead of approving every project, the government needs to also ensure that there is demand in that locality.”

       On the private sector side, Siders says developers should conduct a study before deciding to develop a project in a particular location.

       “Both the public and private sectors need to come together to resolve this,” he says.

       According to Napic, there were 36,836 overhang units worth RM22.79bil last year, which was an increase of 24.7% and 20.5% increase in volume and value, respectively, compared with 2020.

       Selangor retained the highest number and value of overhang in the country with 6,095 units worth RM5.28bil, accounting for 16.5% and 23.2% respectively of the national total.

       This was followed by Johor (6,089 units worth RM4.72bil), Penang (5,493 units worth RM3.56bil) and Kuala Lumpur (3,908 units worth RM3.17bil).

       Condominiums and apartments formed 55.6% (20,505 units) of the national total overhang, followed by terrace houses (21.3%; 7,839 units).

       Ironically, houses in the affordable price range of RM300,000 and below formed the majority with 31.5% (11,610 units).

       This was followed by RM500,001 to RM1mil with 30.2% (11,139 units), RM300,001 and RM500,000 with 25.7% (9,461 units) and more than RM1mil with 12.6% (4,653 units).

       The number of unsold units under construction improved, dropping by 2.1% to 70,231 units.

       However, the number of unsold units not constructed recorded a sharp increase by 69.2% to 21,960 units.

       Siders says it was a surprise to see units costing RM300,000 and below topping the list of overhang residential properties.

       “Some of these units are located in less-than-ideal locations and may be difficult to sell.

       “What the government can consider doing also is to perhaps relax the financing preconditions to make some of these properties more viable for purchasers.”

       Siva: It would help many property developers if the gestation period to sell properties can be reduced as approvals can take time.

       Rahim & Co International Sdn Bhd real estate agency chief executive officer Siva Shanker says it would be a help to many property developers if the gestation period to sell properties can be reduced.

       “Sometimes, getting the relevant state approval can take time. In some situations, it could take up to a year just to green-light a sale.

       “In a year, a lot of things can change. What was initially a red hot property market can become soft by then. Not many developers have the holding power to hang on to their products for that long.”

       Over the last couple of years, the Malaysian economy took a hard hit as a result of the Covid-19 pandemic.

       To help spur the property market, the government introduced the Home Ownership Campaign (HOC) in June 2020 under the Penjana initiative.

       The campaign ended on Dec 31, 2021. Many industry observers and property players believed that the HOC was indeed a huge help to the market and urged the government to extend the campaign period into 2022.

       Siders believes that even with the HOC last year, demand remained constant, while supply continued to be on a steady rise.

       Siva says that even without the HOC, developers will still find ways to push sales.

       “Developers that are stuck with some units will likely continue to offer rebates and freebies.”

       Learning from the past

       As Malaysia transitions to endemicity, Siva cautions that the property market should not repeat mistakes that were made in the past.

       “In the last two years, developers have slowed down their launches. But this is also because Covid created a terrible set of circumstances.

       “But today as we enter the endemic phase, people have started to move on and have come to accept that the worst is over.”

       As the property industry starts to recover, Siva warns of potential speculators coming back into the market.

       “When the property market starts improving again, all the speculators are going to start crawling out of the woodwork.”

       When the property industry was at its peak some 10 years back, Siva says that it was flush with glorified “property investors clubs” that were purely focused on manipulating the market.

       “If we’re not careful, the whole thing is going to happen again and we’re going to be left with another vacuum of unsold properties.”

       According to National Housing Buyers Association secretary-general Datuk Chang Kim Loong in a paper titled Of speculators and bogus house buyers, an investors club will manipulate the property market through en-bloc purchases, say 100 to 200 parcels in stratified properties, with some nearly dominating 50% of housing units and commercial developments.

       “The modus operandi of the operators of such a club is to negotiate as block purchasers with cash-strapped developers and bargain for a pre-launch block discount of, say, 25% off the sales price.

       “The operators then circulate amongst their members for a “bargain” early-bird discount of 15%, thus making themselves a 10% clean profit. The members of the investors club will subsequently dispose of their “wares” upon delivery of vacant possession at a further profit,” Chang explains in his article.

       Meanwhile, Centre for Market Education chief executive officer Carmelo Ferlito believes that the pandemic has accelerated a growing awareness about certain changes in the property market.

       “While Malaysia moves on the path of being a developed nation, its property market changes accordingly. This means that the extraordinary and fast returns experienced in the past belong to the past.

       “Investors in search of quicker returns may decide to turn to the financial markets, rather than to the real estate. Somehow, these two years contributed to growth in the understanding of this underlying process,” he says.