Property glut in Malaysia plausible?

The number of unsold residential properties in Malaysia may have reached a tenable level. Supply has been rising since 2015. And now 83% of units are priced above what most local Malaysians can afford.

Emerald Hills, Malaysia.

Malaysia’s central bank warns against a property glut

Malaysia’s central bank, Bank Negara Malaysia (BNM) has warned against a possible property glut. The level of unsold properties is at its highest in a decade. The highest number of unsold residential units is in the Southern Johor state.

BNM has partly attributed the glut to developers selling units at unaffordable prices of above RM250,000 (S$81,500). Most of the unsold units are priced above RM250,000 and 61% of these are high-rise apartments. To combat rising home prices, Prime Minister Najib Razak has announced an allocation of RM2.2 billion put aside for 248,000 more affordable living options.

Gap between affordable and unaffordable housing

For Malaysian citizens, the provision of affordable public housing might ease the burden these new and often foreign-developed and owned properties impose. Homes priced RM150,000 and below are considered affordable and are built by several federal agencies.

For investors, however, what does this mean for the journey ahead?

Will prices of new private apartment units drop below RM250,000? And with only a RM100,000 difference between what is considered affordable public housing and unaffordable private housing, how will units in this range fare? Are they more worthy of investment monies in the long run?

High land bank prices meant developers have been building increasingly expensive units at a pace faster than income-rises. Johor, in particular, will have the largest imbalance should the supply-demand scale continue to tip the wrong way.