THE Nationwide Property Data Middle not too long ago launched statistics on the efficiency of the Malaysian property marketplace for 2021.
Whereas the headline numbers confirmed the variety of transactions surpassed the 300,000 unit threshold stage, up by 1.5% year-on-year(yoy), the information continues to be beneath the pre-pandemic stage when the variety of transactions hit 328,647 models in 2019.
The 2021 whole transacted models had been additionally decrease than the 2017 and 2018 information factors when whole transactions had been effectively above 300,000 models.
Nonetheless, transaction worth in 2021 was considerably increased at RM144.87bil, up 21.7% yoy and on the highest stage because the 2016 whole worth of RM145.41bil.
Oversupply sustained throughout segments
For property overhang, this column aggregates the availability within the residential phase and takes the information from each service residences and the Soho sub-segment to gauge the market’s total residential overhang standing.
In any case, it’s the mixture of the three that’s the actual market provide within the residential market phase as proven in determine 1.
In whole, the residential overhang is now at a brand new peak with 63,432 models remaining unsold value some RM44.54bil.
In contrast with a 12 months in the past, the variety of overhang models elevated by 11.0% in models and seven.2% in worth.
What’s much more compelling is to take a look at the information on the finish of 2017 and 2021 for comparability.
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It’s somewhat surprising that even so far as early 2018, market watchers had been out with the pink flags, and at this time, from the extent we had been 4 years in the past, the market’s overhang when it comes to quantity has doubled, whereas when it comes to worth it’s up by virtually 120%.
An attention-grabbing reality from this information is the overhang throughout the excessive rise phase (which incorporates residential excessive rise, industrial service residences, and Soho models) is now at a brand new document excessive of 44,800 models value some RM33.32bil.
Total, this interprets to 70.6% of the general market overhang in quantity and virtually three-quarters of the whole worth.
Think about, seven in ten properties in Malaysia which can be unsold at this time are high-rise models.
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For the residential phase by state, the important thing overhang is in Selangor, Johor, and Penang as they account for 48% of whole overhang models, value some RM10bil or 43.9% of whole overhang worth within the residential phase.
For Penang, overhang models elevated by 165.5% yoy to five,493 models, and when it comes to worth, the overhang information reveals that the market has seen a major leap of 231.6% to RM3.55bil from simply RM1.07bil a 12 months in the past. For service residences, Johor and Kuala Lumpur are key geographical areas with essentially the most overhang with a complete of 87.1% of the phase’s overhang when it comes to models and 90.3% when it comes to worth. Johor alone accounts for two-thirds of the phase’s whole variety of models at 16,476 models and almost 70% of the phase’s whole worth at RM14.14bil.
RM110bil value of unsold properties
A 12 months in the past, the whole variety of models that remained unsold and beneath development was 111,804 models, value about RM60.6bil, bringing the whole overhang and people beneath this class to 167,104 models value some RM101.4bil.
Statistics for 2021 revealed that the whole variety of models that remained unsold and beneath development has jumped by 10.1% to 183,918 models, and when it comes to worth, this elevated by 8.1% to RM109.7bil as seen in Determine 2.
Property trade unperturbed by overhang
As this column has highlighted prior to now that Malaysia is within the denial stage in relation to the property market overhang, what’s much more astonishing is taking a look at future provide.
For simple reference, the information in Determine 3 for future provide contains begins, incoming provide, deliberate provide, and deliberate new provide.
One factor that’s apparent from the desk, regardless of the large quantity of overhang that we see within the service residences and Soho segments, builders remained optimistic to construct much more of them and future provide is anticipated to be greater than the present stock even. When it comes to states, the important thing states with huge future provide particularly throughout the Soho and repair residences sub-segment are Selangor (for the anticipated enhance within the variety of Soho models), Kuala Lumpur (for the anticipated enhance within the share of Soho models) and the anticipated enhance in service residence within the variety of models) and Penang (for the anticipated enhance within the share of service residences models) as seen in determine 4.
Malaysian property market is stagant
From Sydney to Singapore, from New York to New Zealand, the property market is booming throughout the globe however not in Malaysia.
The sheer overhang that the market is experiencing plus the avalanche of latest product launches that we see in Malaysia has resulted in these wanting to purchase solely taking a look at new merchandise and thus leaving stale merchandise unsold for a substantial interval.
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One can’t think about if a developer continues to be advertising a product that was launched 5 to seven years in the past and at this time continues to be being marketed whereas builders proceed to innovate with precise new launches.
These new launches have completed comparatively effectively because the market is receptive to them, particularly landed and inexpensive houses in good places.
However on the identical time, with a lot within the pipeline so far as future provide is anxious, what’s going to the form of the Malaysian property market be in 5 years or 10 years?
RM222bil by 2030?
It took simply 4 years for the overhang to double out there and with the worth of these beneath development at 150% of overhang, easy arithmetic appears to counsel that we may even see the market experiencing an unprecedented quantity of unsold properties by 2030.
Because the tempo of overhang and unsold properties stays on an upward trajectory and if the rise over the subsequent 9 years stays at about 10% a 12 months within the variety of models and eight% in worth, we’ll see whole overhang and unsold beneath development hitting 436,000 models by 2030 and valued at about RM222bil, greater than double than the place we’re at this time.
Be careful for stability sheet strains
As builders and financiers pour more cash into development-related actions and if we see a sustained enhance in unsold properties, particularly models which can be accomplished however stay unsold, the important thing threat for builders is rising inventories.
This will even end in builders’ having money tied up in unsold properties and if their funds aren’t robust sufficient, they must resort to extra exterior funding, be it within the type of new fairness or money owed.
Rights problem or personal placement may very well be one type of fundraising, which most traders dislike, whereas one other type of funding may very well be new borrowings, which banks will doubtless keep away from, realizing the severity of the market dynamics as bankers could be involved about this bubble that by no means appears to pop.
Pankaj C Kumar is a long-time funding analyst. The views expressed listed below are the author’s personal.