According to data released by the National Property Information Centre, the residential overhang is at the lowest level since 2QCY18. The numbers declined to 26,286 units from 26,872 units in 1QCY23 after surging to a peak of 36,863 units in 4QCY21 due to the Covid-19 pandemic but started to decline from 1QCY22.
The decline is the sixth consecutive quarter and was at the lowest level below the 3-year average of 31,000 units. MIDF notes the decline was due to renewed buying interest in the property after the reopening of Malaysia’s international borders.
Among states in Malaysia, Johor has the highest residential overhang of 4,717 units, followed by Selangor at 4,307 units, Perak at 3,333 units, KL at 3,173 units, and Penang at 2,901 units. In terms of price range of residential overhang, properties priced between RM200k-RM300k made up the highest residential overhang at 4,262 units, followed by properties
priced above RM1m at 4,045 units and properties priced between RM300k-RM400k at 3,811 units. In a nutshell, affordable properties priced below RM500k made up more than half of residential overhang in 2QCY23, contributing to 52% of the total residential overhang.
Residential overhang in Selangor showed patchy recovery in 1HCY23 as residential overhang spiked to 4,995 units in 1QCY23 before tapering to 4,307 units in 2QCY23. Residential overhang in Selangor remains elevated as it stays above 4,000 units level and higher than residential overhang of 3,698 units in 4QCY22. Nevertheless, residential overhang in 2QCY23 of 4,307 units was below the 3-year average of 4,597 units, showing an improving residential overhang in Selangor. Gombak in Selangor had the highest residential overhang of 1,452 units followed by Kuala Selangor at 902 units and Petaling at 757 units. Most of the residential overhangs in Selangor were condominiums and apartments.
Bank Negara Malaysia kept OPR unchanged at 3% in July and September 2023, MIDF views this as positive to the sector as that will keep buying interest on property supported. The house estimates that every 25bps increase in interest rate increases monthly installment by RM60-RM70 for a house loan of RM500k. Looking ahead, its in-house economist forecasts that OPR to remain unchanged for the rest of this year which is positive for the property sector.
MIDF upgraded the call to the sector as POSITIVE from NEUTRAL (with positive bias). Besides, unchanged OPR is positive for property companies as that supports recovery in demand for property. In view of the improving outlook for the property developers, the house is narrowing our RNAV discount and target prices for property companies under coverage.
Top picks for the sector are Mah Sing Group and Matrix Concepts however remains sanguine on property developers that focus on mid-market and affordable segments amid resilient demand for affordable homes.
