According to data released by National Property Information Centre (NAPIC), residential overhang units increased to 35,592 units in 1QCY22 from 27,468 units in 1QCY21. The increase in overhang units could be attributed to the disruption to economic activity from several lockdowns in Malaysia. Meanwhile, the increase in residential overhang units implies lingering concern of oversupply in the property market.
Nevertheless, the situation showed signs of easing on a sequential basis as it eased marginally to 35,592 units in 1QCY22 from 36,863 units in 4QCY21. This was following the reopening of economic activity as Malaysia is transitioning to the endemic phase. In a nutshell, we see that issue of oversupply in the property market remains as residential overhang units
remain high in 1QCY22, staying above 30,000 units
Johor has the highest overhang units. Across all states, Johor holds the highest count of unsold completed units at 5,992 units, followed by Penang (5,816 units) and Selangor (5,215 units). Meanwhile, MIDF sees the growing concern about property oversupply in Penang as overhang units in Penang ballooned to 5,816 in 1QCY22 from overhang units of 3,043 in 1QCY20.
Condominiums and apartments are the largest contributors to overhang units. Residential overhang units in 1QCY22
were largely contributed by condominiums and apartments. Condominiums and apartments contributed 20,680 units or 58% of total residential overhang units. Meanwhile, 2-3 storey terraces contributed 5,889 units or 17% of total residential overhang units followed by 2-3 storey semi-detach (5%). In terms of the price range of overhang units, properties priced between RM300,001 to RM400,000 contributed the highest number of overhang units of 5,565 followed by properties priced between RM200,001-RM300,000 with total overhang units of 5,245. In a nutshell, we opine that the oversupply situation is more apparent for properties priced within the affordable price range of below RM500k as it contributed to 58% of total overhang units.
Properties priced within RM500k-RM1m contributed to 29% of overhang units while properties priced above RM1m constitute 13% of overhang units.
Government incentives to boost house ownership and reduce overhang units. The government launched the Keluarga Malaysia Home Ownership Initiative (i-MILIKI) which provides stamp duty exemption for first-time homebuyers in order to boost home ownership. MIDF believes that i-MILIKI initiatives could reduce residential overhang units, particularly for properties priced below RM500k which contributed to the highest number of residential overhang units in 1QCY22. 0.0 1,000.0 2,000.0 3,000.0 4,000.0 5,000.0 6,000.0 Units 29% 58% 13% RM1m Sector Thematic Friday, August 12, 2022 Maintain NEUTRAL on property sector.
MIDF sees the near-term outlook for the property sector to remain unexciting due to the oversupply concern. Residential overhang units remain on the high side in 1QCY22, which we think would make the property market remains competitive and prompt property developers to offer an attractive package to attract buyers. That may also make property developers unable to fully pass on the rising cost of construction to property buyers and bring margin compression to property developers.
In a nutshell, MIDF maintains its NEUTRAL view of the property sector. BUY calls for the sector are Mah Sing (BUY, TP: RM0.74) and IOI Properties Group (BUY, TP: RM1.29). MIDF likes Mah Sing for its strategy of focusing on the affordable home segment. Mah Sing could benefit from i-MILIKI as Mah Sing is focusing on selling properties priced within an affordable price range and below RM500k. MIDF is are also positive on IOI Properties Group due to its undemanding valuation of trading at 73% to its NTA per share of RM3.60. It sees the earnings outlook of IOI Properties Group to underpin by higher contribution from property investment and leisure & hospitality divisions following the reopening of Malaysia’s economic activity
