H1 2022: Marginal improvement in residential property overhang but numbers remain high

Theresidential overhang situation improved in the first half of 2022 with adecrease of 7.5% and 4.6% in volume and value respectively against H2 2021,according to NAPIC’s Property Market Report H1 2022.

Despitethe marginal decrease in the volume of residential overhang, numbers remainhigh. As of H1 2022, a total of 34,092 overhang units worth RM21.73 billion wasrecorded.

Unsoldunder construction residential units also saw a decrease of 11.1% to 62,404units compared to H2 2021 (70,231 units).

Johor retained thehighest number and value of overhang in the country with 6,040 units worthRM4.73 billion. The state made up 17.7% and 21.8% in volume and valuerespectively of the national total.

Pulau Pinang hadthe second highest numbers with 5,508 units worth RM3.64 billion (16.2% share)followed by Selangor with 5,156 units worth RM4.71 billion (15.1% share).

The bulk of theoverhang units were high-rise buildings with condominium/apartments forming58.7% (20,025 units) of the national overhang. This was then followed byterraced (20.8%; 7,095 units) signifying stronger demand for landed homes.

In terms of theprice range of overhang units, properties priced more than RM500,000 took upthe largest share, accounting for 43.4% (14,794 units) of total overhang.

As such, it islikely a contributing factor why under Budget 2023 the government has increasedthe stamp duty exemption from 50% to 75% until 31^st Dec 2023.

However, with theupcoming elections there exists a remote possibility the budget may be re-tabledshould the current government not retain power.

Properties pricedat RM300,000 and below accounted for 28.3% (9,655 units) while RM300,001 toRM500,000 took up 28.3% (9,643 units).

On the supply side,residential construction activity registered an increase in completion and newplanned supply. Completions rose 5.9% compared to the previous year and newplanned supply increased 12.9% but housing starts did decrease by 7.2%.

WP Kuala Lumpurcontributed the most completions, accounting for 28.2% (8,939 units) of thenational total, followed by Selangor (27.4%) and Johor (8.7%).

NAPIC’s reporthighlights that as of the end of June 2022, there were approximately 6.02million existing residential units and 0.41 million units in incoming supplywith nearly 0.42 million units in planned supply.

When it comes tonew launches, the market reflects the cautionary sentiment of propertydevelopers. The primary market saw fewer new launches with only 10,552 unitslaunched, down by 66.7% against 31,687 units in H1 2021. New launches were alsolower by 13.3% when compared against H2 2021 (12,173 units).

Sales of newlaunches were poorer in this half of the year as well. Sales performance fornew launches recorded at 20.3%, slightly lower than the revised H1 2021 salesperformance (20.6%) and the H2 2021 sales performance (28.1%).

Despite having thehighest volume of overhang, Johor recorded the highest number of new launchesin the country. The state comprised nearly 23.8% (2,509 units) of the nationaltotal with sales performance at 31.8%.

Sabah recorded thesecond highest number (1,335 units, 12.7% share) with sales performance at10.6% while Perak came third (1,317 units, 12.5% share) with sales performanceat 19.4%.

Hardly a surprise,terraced houses formed a large majority of the new launches. Single storey(2,047 units) and 2-3 storey (5,150 units) together contributed 68.2% of thetotal units with sales performance at 22.0%, followed by condominium/ apartmentunits at 19.0% share (2,009 units) with sales performance at 12.4%.

Ona positive note, property transactions in the first half of 2022 grew by 34.5%year-on-year when compared to H1 2021. To learn more about market activity andtransactions trends, check out our previous article here.