What’s the deal with the property overhang? The government is talking about it. The newspapers are talking about it. Even that Uncle is talking about it when you pick up your teh tarik! It’s time for Mudah.my to get to the bottom of this.
Sit down, pull up your learning socks, and let Mudah explain the what, where and why of Malaysia’s property overhang.
What is a residential property overhang?
Let’s keep it simple to start off. 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’. With us so far?
Now the ‘overhang’ comes in when that property remains unsold for a specific period of time. If a property is unsold nine months after 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 areas like Kuala Lumpur or Penang, or be used to describe a property overhang across the entire country.
Is a property overhang bad?
You don’t need Mudah to tell you that the property market is complicated. There are many reasons why a property overhang can happen. In the simplest case it 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 down the back of the sofa 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 over 200,000 properties on Mudah 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 demand to buy them isn’t matching up in the right way. Mudah gives you a ‘sort of’ answer on that one.
What is Malaysia’s property overhang?
Malaysia currently has a property overhang. You probably knew that. But do you want to know the numbers? We’ve got you covered! Thanks to the National Property Information Centre (NAPIC), we can take a clear look of how that overhang adds up.
Is the property overhang going to be ‘fixed’?
As we discussed, the idea of property overhang is largely one of supply and demand. But there are ways that equation can be juggled to tackle the problem.
Government initiatives such as the recent Home Ownership Campaign helped stimulate residential house purchases with financial incentives. First time buyer initiatives and stamp duty exemptions are also being supported by government to help tackle the overhang. Rent-to-own schemes are another angle gaining traction with some developers, helping buyers pay towards purchasing a property through a rental investment scheme.
It’s pretty clear that 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. That’s something that’s going to take a while to shake out of the system.
The good thing is that next time you’re picking up your teh tarik, you not only know what a property overhang is, you can even talk about the numbers. If only everything was this simple when it came to property. Now, does anyone know where we left our house keys?
It’s time for a Mudah recap!
- What’s a property overhang? A reference to the number of properties unsold after nine months of launch.
- Is a property overhang bad? It’s not as simple as ‘bad’, but it does show a mismatch in supply and demand.
- Does Malaysia have a property overhang? Yes, and it has been increasing over the last five years.
- Are steps being taken to balance the overhang? Yes, financial incentives and stamp duty exemptions are designed to boost residential property purchases.