Gear up for a bumpy ride next year in Malaysia’s property market as the number of unsold units continues to rise. Despite the challenges, there are some opportunities for investors and rent-seekers.
By Khalil Adis
According to the Valuation and Property Services Department’s (JPPH) latest figures, the number of unsold completed residential units rose from 20,304 units to 30,115 units year-on-year as at 30 September 2018.
This represents an increase of 48.35 per cent.
Meanwhile, the total value was RM19.54 billion, representing a 56.44 per cent rise from RM12.49 billion a year ago.
However, if JPPH were to also include serviced apartments and small offices home offices (SoHos), this would bring their overhang value to 40,916 units valued at RM27.38 billion.
According to JPPH, Johor has the largest number of unsold completed serviced apartments and SoHo units at 7,714.
JPPH notes that it rose a whopping 191 per cent from the 2,647 units recorded a year ago.
The overhang in serviced apartments is valued at RM6.16 billion compared with its residential overhang of RM4.44 billion.
This means the total overall value of its unsold serviced apartments is 1.5 times that of residential housing.
In summary, Johor has the highest number of completed unsold units in Malaysia at 6,053.
This is a 55 per cent increase from the 3.901 units a year ago.
With an overhang in supply spanning from Johor to Selangor, here are some of the likely property trends to emerge next year.
#1: Renter’s market
The new supply of the completed units plus the those from existing units will lead to a downward pressure in the rental market causing rentals to fall.
This is because rent-seekers will be spoilt for choice while landlords will be fighting for tenants.
This will make it ideal for rent-seekers as landlords will most likely be open for price negotiations.
Meanwhile, it is bad news for landlords should they be able to find a tenant or not.
In the former, the rental will most likely not be able to cover the mortgage resulting in negative cash flow.
In the latter, landlords will have to cover the mortgage themselves.
Those who cannot will have no choice but the let go of their units.
#2: Buyer’s market
The property market will also favour buyers as sellers will be desperate to offload their properties, especially those who have multiple units.
Therefore, buyers will be in a more stronger position to bargain in a market flooded with so many units.
#4: Buy properties in the secondary market
If you urgently need a roof over your head, then the secondary market is the way to go as you are buying a completed property.
Sellers are also more willing to negotiate on the terms of payment and will likely cut a flexible payment deal via their agents if you do not have a sufficient deposit in hand.
In addition, the supply overhang also mean that properties in the secondary market are priced 20 to 30 per cent cheaper than new launches.
However, do bear in mind that you need to pay a 10 per cent deposit.
#5: Overhang in supply means good deals in the auction market
Unfortunately, there will also be distressed properties which will be auctioned off in court.
If you are looking for a below market value (BMV) property, then this will present a very good opportunity for you.
When buying a BMV, you will need to attend an auction in court and prepare a bank draft in advance to show of interest.
This will cost you around 10 per cent of the reserve price.
For example, if the property is being auctioned off at RM50,000, you will need to prepare RM5,000 in bank draft.
If you have successfully bid for the property, you will need to settle the balance of the payment within 120 days.
However, there are a lot of hidden costs, for example, legal, quit rent (cukai pintu), unpaid utilities and maintenance fees, assessments and so on.
Perhaps, the biggest risk is this - while the property is legally yours, you may find it hard to evict the tenants or owners.
You may have to apply for a court order, through a lawyer, to evict the occupants.
This process can take you up to four weeks and costs you between RM1,500 to RM2,000. Even so, there are no guarantees they can be evicted as Malaysian laws favour occupiers.
When buying a BMV property, it is best to find out if the property is occupied by tenants or owners.
#6: It also means good deals from the primary market
Developers have to move their unsold inventory as each unit means added cost for them.
As such, developers will be coming up with creative schemes like zero downpayment and such to lure buyers.
Speak to a good developer and check if they have a good master plan to ensure your property values are protected.
Remember the 5Cs I always talk about?
Check against them before you commit to buying a property,
#7: More restrictions on Airbnb accommodations
Making money from your short stay travellers may prove to be even harder even if the government legalises Airbnb.
This is because we are seeing trends of management committees barring Airbnb-type of accommodation due to security and safety issues.
So before you decide to list your untenanted unit on Airbnb, it is best to check with your management committee if this is allowed.
However, if you happen to own a serviced apartment, this will not be an issue as it falls under a commercial title.
#8: Transit-oriented developments (TODs) along SSP Line
The Sungai Buloh-Serdang-Putrajaya Line (SSP Line) is one of the few major infrastructure projects that will be continued under the newly elected government.
In fact, the project is currently under construction and is fast taking shape.
Some developers have already acquired land banks along this line to build TODs.
Areas to watch out for include Kwasa Damansara, Kwasa Sentral, Sungai Besi, Bandar Malaysia and Cyberjaya City Centre
Is it on of off? We study each station and list down the good and the bad from the possible impact of its postponement in their surrounding areas.
With recent news of the High Speed cancellation, much remains to be seen if Bandar Malaysia will succeed or not. However, Bandar Malaysia North MRT station’s alignment has already been confirmed. Initially, Bandar Malaysia has been planned with a gross development value (GDV) of RM150 billion with a dedicated commercial district to support new start-ups as well as small and medium-sized enterprises (SMEs). In addition, Kuala Lumpur City Hall (DBKL) has said 30, 000 units of homes will be delivered housing some 120, 000 residents within Bandar Malaysia. Whether or not this will go ahead, remains unclear. The only glimmer of hope here is the Digital Free Trade Zone by Jack Ma which so far has not been canned by the new government.
The Bangi-Putrajaya HSR station is located in the south of Klang Valley and within the state of Selangor at Kampung Abu Bakar Bagindar. Putrajaya is the Federal Administrative hub of Malaysia. Major townships include Putrajaya, Cyberjaya and Bangi. There is a proposed connection to the Putrajaya Monorail that will connect this station to Putrajaya Sentral which will serve as an interchange station to the MRT station and the Putrajaya Sentral Express Rail Linl (ERL). The latter links you to KLIA and KLIA2.
The Seremban HSR station is located within the Malaysia Vision Valley area within the state of Negeri Sembilan. Sited within the Labu and Kirby estates, major townships in the vicinity include Bandar Enstek, Bandar Ainsdale Property and S2 Height. Seremban will be an interchange station to the Seremban Komuter Line and KTM Electric Train Service .
The Melaka HSR station is located in Ayer Keroh within the state of Melaka. Melaka is a hub for tourism and medical tourism. Major townships in the vicinity include Taman Tasik Utama, Kampung Baru Ayer Keroh and Taman Melaka Perdana. Many Indonesians and Singaporeans flock to hospitals such as Mahkota Medical Centre for medical treatment.
The Muar HSR station is located within the state of Johor at Bandar University Pagoh. Muar is a coastal town by the Straits of Melaka that is a hub for furniture manufacturing. Major townships in the vicinity Pagoh, Parit Jawa and Sungai Balang. The main economic drivers here are those in the education, trading, furniture manufacturing, historical tourism and agrotourism industries.
The Batu Pahat HSR station is located within the state of Johor at Pura Kencana, Seri Gading. Batu Pahat is a hub for garment and textile factories. Major townships in the vicinity include include Rengit, Yong Peng and Semerah. The main economic drivers here are those in the the furniture manufacturing, food processing and agrotourism. However, isnce 20011, there has been a notable growth in small and medium industries such as textiles, garments and electronics.
The Iskandar Puteri HSR station is located within Gerbang Nusajaya in the state of Johor It is the gateway to Iskandar Malaysia and covers an area of 1,841-hectare. Gerbang Nusajaya features a number of catalytic developments including Nusajaya Tech Park and FASTrack Iskandar. Major townships in the vicinity include Gerbang Nusajaya, Iskandar Puteri and Medini. This will be the final leg of the Malaysian station before it enters Singapore, terminating at Jurong East. While the station in Nusajaya has not yet been announced, government officials have indicated that it will be located close to Motorsports City near East Ledang.
The Jurong East HSR station is located within the Jurong Lake District in Singapore. It is the gateway to Singapore and covers an area of 67-hectare. Jurong Lake District is the hub for commerce, retail, healthcare and tourism industries. Major townships in the vicinity include Jurong East, Teban Gardens, Lakeside and Taman Jurong. Jurong East will be an interchange station to the North South MRT Line, East West MRT Line and the proposed Jurong Region MRT Line.
Also known as MRT Line 3, this is the final line that will comprise of a “wheel and spoke” system to connect to MRT Line 1 and SSP. Line 3 is expected to be completed in 2025. Collectively, all three lines will be integrated with the current trains systems forming the Klang Valley Integrated Train System. However, this project has been postponed by the new federal government when it took power in May 2018 owing to budget cuts.
The impact for this postponement will be marginal as this MRT Line will still need to be constructed to connect the SBK Line and SSP Line.
We will most likely see speculators staying away from the market.
This presents good opportunity for genuine homebuyers to start looking in and around the station.
Homes in the secondary market will be the most ideal as they are priced cheaper than new launches.
An independent analysis from yours truly