Despite this, the influx of new projects begs the question, “What happens to the old projects?” If they have all been sold, why are there ‘for sale’ banners on empty units?
These empty units are actually unsold properties, and are known as a property overhang. While they may not hang off the edge of a cliff or a little bukit, property overhang is a familiar occurrence in Malaysia.
What Is A Residential Property Overhang?
A property overhang is a term used to describe a gap between supply and demand in the property market. If a property is completed but nobody buys it, it becomes an ‘unsold property’.
Now, the ‘overhang’ comes in when that property remains unsold for a specific period of time. If a property is still unsold nine months after its launch, it becomes designated as an overhang property.
When people refer to the residential property overhang, they’re talking about the number of properties that have been unsold for more than nine months in Malaysia’s property market.
That can be broken down into specific locations like Kuala Lumpur or Penang, or be used to describe a property market overhang across the entire country.
Other criteria for a property to be considered as overhang is if it has been completed with CCC (Certificate Of Completion And Compliance), and there are more than five unsold units.
Altogether, understanding property overhang is summarised as:
- A property that is still in the market nine months after its launch
- A property that is completed with CCC
- A property that has over five unsold units
Is A Property Overhang Bad?
You don’t need us to tell you that the property market is complicated.
There are many reasons why a property overhang can happen. One of the causes of property overhang and in the simplest case possible, could just be that the building of homes is accelerating faster than demand.
That could be because people are cautious about buying property at a particular time, maybe because of uncertainty about economic factors.
Another big influence can be the lending attitude of banks and financial institutions.
If the bank is cautious about giving out loans, there aren’t many people who have a spare RM500,000 hidden underneath their bed that they’re saving to buy an apartment. People need home loans to be able to buy.
The type of property being built is also a big concern. Homes have to be affordable for the people looking to buy them.
If developers are only building million-Ringgit luxury condos but no affordable homes, it’s easy for a property overhang to develop. With thousands of properties on Mudah.my to search through, at least we can promise we’ve got something for everyone!
There’s no quick answer to if a property overhang is definitely bad.
What you can say, is that it shows that for some reason, or several reasons, the supply of properties and the demand to buy them aren’t matching up the right way.
What Is Malaysia’s Current Property Overhang?
Malaysia’s property overhang for 2023 can be viewed through data by the National Property Information Centre (NAPIC), which we’ve put together to take a clearer look.
As of Q4 2023, there were 25,816 reported properties completed and unsold, estimated to be worth RM17.68 billion. Condominium and apartment units marked the highest volume at 15,606 units, while terraced homes made up 6,279 units.
During this period, Perak had the most overhang properties with 4,598 units. Other states such as Johor, Kuala Lumpur, Selangor, and Pulau Pinang recorded over 3,000 overhang units each.
How Can We Fix The Property Overhang?
As we discussed, the idea of property overhang is largely one of supply and demand. But there are ways that that equation can be juggled to deal with property overhang.
Government initiatives such as the Home Ownership Campaign in 2019 helped stimulate residential house purchases with financial incentives. First-time buyer initiatives and stamp duty exemptions are also being supported by the government to help tackle the overhang.
Besides that, Rent-To-Own (RTO) schemes are another angle gaining traction with some developers, helping buyers pay towards purchasing a property through a rental investment scheme.
Evidently, the property overhang is a complicated business. It’s not just the case of there being too many homes, but also down to the type of homes available.
The good thing is that next time you’re picking up your teh tarik, you not only know what a property overhang is, but you can even talk about the numbers and present concrete facts. Hopefully, that conversation will steer towards buying property and reducing the overhang too.
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