Residential overhang reached record numbers in 2021

According to the Property Market Report 2021 by the National Property Information Centre (Napic), residential properties worth RM22.79 billion were left unsold at the end of last year. 

The figures mean that the residential overhang is at an all-time high, up 24.7% in volume and 20.5% in value compared to the previous year. 

Selangor had the highest number and value of overhang with 6,095 units worth RM5.28 billion. This made up 16.5% in volume and 23.2% in value of the national total. 

In second place was Johor (6,089 units worth RM4.72 billion) followed by Penang (5,493 units, RM3.56 billion) and Kuala Lumpur (3,908 units, RM3.17 billion), respectively. 

In terms of the types of overhang properties, condominiums and apartments made up 55.6% (20,505 units) of the total overhang. This was followed by terraced houses st 21.3% (7,839 units). 

Properties priced more than RM1 million made up only 12.6% (4,653 units) of the residential overhang. Instead, properties in the affordable price range of RM300,000 and below formed the majority of unsold houses (31.5%, 11,610 units). 

This was followed by properties priced from RM500,001 to RM1 million, comprising 30.2% and 11,139 units; and those priced from RM300,001 to RM500,000 with 25.7% and 9,461 units. 

The supply of unsold properties yet to be constructed recorded an large increase of 69.2%, reaching 21,960. units. However, the number of unsold units under construction has reduced, dropping 2.1% to 70,231 units. 

‍

‍

Napic’s latest report only shows a five-year overview of the market status but previous findings have revealed that the residential overhang has been persistent since 2003. 

A market boom in 2010s saw the overhang reduce in tandem with a reduction in supply to 11,316 units, with only 4,956 new completed units added to the existing inventory. 

A contributing factor for the current overhang is that the saturated market is at the limit of absorptivity, as seen in take-up rates of new launches hovering in the low 30% range since 2016. 

Another possible reason is the mismatch in demand and supply, with factors such as location or product offerings being unappealing to the target market. 

A common misconception is that residential overhang occurs because of a prevalence of overpriced properties catering towards foreign buyers and wealthy Malaysians. 

However, statistics prove otherwise: The bulk of the unsold properties are below the RM300,000 price point classified as “affordable” by the ministry of housing and local government. 

Real Estate and Housing Developers’ Association (Rehda) has previously said the overhang situation could be attributed to developers in many states being forced to build affordable housing alongside their regular units, despite a lack of demand. 

This leads to a surplus of affordable properties, which in turn drives up the cost of ordinary properties because of the need to subsidize the construction of affordable homes.