UNSUITABLE locations and pricing as well as state governments’ refusal to release unsold Bumiputera units are among the reasons for a property overhang, Real Estate and Housing Developers’ Association (Rehda) president Soam Heng Choon said today.

He said projects that failed to cater to the needs of target buyers, which are built in the wrong location or unsuitably priced, are likely to remain unsold.

“The  convergence of product, pricing and location must be there. If these three do not converge, the property cannot be sold,” he told a press conference on an upcoming property expo at Rehda’s headquarters in Petaling Jaya today.

Soam said the state governments’ refusal to release unsold Bumiputera lots for sale also contributed to the surplus. 

According to the National Property Information Centre, Malaysia has 32,000 unsold units valued at RM20 billion in the first half of this year.

He cited unsold terrace houses in Sg Ular, Kedah, and high-rise building units in Seremban worth RM300,000 as examples of properties with poor uptake. 

He said these properties remain unsold because they are unsuitable to the location.

Also contributing to the overhang, said Soam, is refusal by state governments to release unsold Bumiputera lots for sale to non-Bumiputeras.

“For example in Johor, the Bumiputera quota there is 40%. Assuming I have already sold 30%, I still have 10% unsold,” he said.

He said 40-50% of Bumiputera units are unreleased and unsold.

“For unreleased Bumiputera lots, if the state government doesn’t want to release them, what can we do?” he said when the overhang issue will be resolved.

Soam said developers are more in need of cash flow over profit these days, and that developers also conduct feasibility studies before starting a project.

“Some professionals are trying to take advantage of the situation by saying that developers don’t do feasibility studies and cause an overhang,” he said.

“Can they guarantee us today that if we let them do the feasibility study, there will be no overhang?” 

He said developers conduct feasibility studies because they are also investing their own funds into the project, as banks typically only provide 60% of the funding. – September 30, 2020.