Reduce property prices to clear overhang units, urges property firm

As at end of last year, the overhang residential properties stood at about 35,000 units, while for serviced apartment/Soho/Sovo commercial property it amounted to nearly 20,000 units. — Reuters pic
As at end of last year, the overhang residential properties stood at about 35,000 units, while for serviced apartment/Soho/Sovo commercial property it amounted to nearly 20,000 units. — Reuters pic

KUALA LUMPUR, Jan 16 ― Reducing the property prices is the only approach to clear the overhang units in the country, urged CBRE-WTW managing director Foo Gee Jen.

As at end of last year he said, the overhang residential properties stood at about 35,000 units, while for serviced apartment/Soho/Sovo commercial property it amounted to nearly 20,000 units.

“In Klang Valley, if there is no major correction of prices in serviced apartment/Soho/Sovo, it would take over the next five years to be cleared (the overhang units).

“While for residential units, there are still hopes for the prices to go up as it could hedge against inflation for long-term prospective, that would probably take two years to clear,” he said, adding that the economy must continue to grow healthy without facing any recession.

He told a media briefing on the real estate outlook 2020 here, today.

The real estate outlook 2020 report released by CBRE-WTW today showed the overhang units in Klang Valley residential units had increased 5.1 per cent year-on-year (y-o-y) to 12,007 units in the third quarter of 2019 (Q3 2019).

Close to one-third of the overhang units in Klang Valley said the report, was made up of residential properties priced between RM200,000 and RM500,000.

Meanwhile, Foo also said the Home Ownership Campaign (HOC) launched in January 2019 did not provide much help to clear up the overhang situation in the country.

“There were about 35,000 overhang units of residential property as of Dec 31, 2019, but only 2,000 units have been cleared, even though the government statistics showed over RM20 billion worth of properties were sold under HOC.

“It means there are a lot of new launches that were sold, so the HOC does not really help in clearing up the entire overhang,” he said.

Last week, Housing and Local Government Minister Zuraida Kamaruddin said the campaign had RM23.2 billion worth of houses in 2019, surpassing the government’s initial target of RM17 billion.

The HOC had managed to clear 31,415 residential units developed by federal and state governments as well as private builders, she said.

To overcome the overhang situation, Foo suggests Malaysians emulate their European peers like those in London where they bargain property prices at the showroom and even in the primary market.

“This had never happened in Malaysia,” he said, adding that there is no such thing as a fixed price and Malaysian consumers should have the rights to bargain the price.

“You (Malaysians) should also earn your rights, it is your own money and you decide what you want to pay for and do not follow the herd mentality,” he added.

Asked if the government should restrict or control the new properties launching due to the overhang situation, Foo said he did not think the government could control the market

“Everything is on business, and it is on a supply-demand basis, the market should decide it. Housing is a basic necessity and I don’t think the government should put too much hands to control it, let the market decide,” he added.

Moving forward, Foo expects 2020 would be a very flattish year for the property sector in the country.

“I do not think the strong number of RM23.2 billion sold under the HOC in 2019 would be repeated this year and I expect growth of the landed residential properties would remain flat at about five per cent,” he said.

He also anticipates that high rise properties over RM1 billion would see a big correction in price this year. ― Bernama

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