THE number of unsold residential properties is at a decade-high, with a majority of units being in the RM250,000 and above price category, beyond the income of most Malaysians, said Bank Negara Malaysia in its quarterly bulletin published today.

The central bank also said the oversupply of office space and shopping complexes in the major states is expected to be exacerbated by incoming supply, potentially becoming more severe than during the Asian financial crisis.

Supply-demand imbalances in the property market have increased since 2015, primarily on account of the mismatch between the prices of new housing launches and what the households can afford to pay.

“Since then, the supply-demand imbalances in the residential and commercial property segments have increased,” BNM said today. 

In the first quarter of this year, unsold residential properties stood at 130,690 units, the highest in a decade. This is close to double the historical average of 72,239 units per year between 2004 and 2016, the central bank said. 

About 83% of the total unsold units were in the above RM250,000 price category. Some 61% of total unsold units were high-rise properties, out of which 89% were priced above RM250,000. 

Johor has the largest share of unsold residential units (27% of total unsold properties in Malaysia), followed by Selangor (21%), Kuala Lumpur (14%) and Penang (8%).

Price and income mismatch

Over the period 2016 to Q1 of this year, only 21% of new launches were for houses priced below RM250,000. 

“This is insufficient to match the income affordability profile of about 35% of households in Malaysia.

“Second, the mismatch was exacerbated by the slower increase in median household incomes relative to median house prices. These factors have resulted in median house prices in Malaysia being five times annual median household income in 2016, rendering house prices ‘seriously unaffordable’ in Malaysia.”

BNM added that the housing affordability issue is even more acute in certain states, with house prices being “severely unaffordable” in Sabah and Penang, where the median multiple was 5.5. 

“Such a wide disparity between the supply and demand of affordable homes has worsened the imbalances in the housing market,” it added.

The central bank said unsold residential units within the affordable price range of below RM250,000 (17% share) were caused by unattractive locations of some affordable housing projects due to factors, such as distance from work places and low transport connectivity.

Second, the unsold affordable homes may reflect households’ preference towards landed properties over high-rise properties. 

Third, applicant registries maintained by providers of affordable housing may comprise many non-creditworthy applicants, resulting in delays in the allocation of affordable homes, the central bank added. 

Over the past decade, property-related investments have risen significantly, making up 25% share of total investments in 2016 compared with 18% 2005. 

Currently, the property market is characterised by an oversupply of unaffordable housing and idle commercial space, and conversely, an undersupply of affordable homes.

“This situation could worsen if the current supply-demand conditions persist. Within the country, Johor is poised to have the largest property market imbalances (highest number of unsold residential properties and potentially the largest excess supply of retail space).” – November 17, 2017.