Malaysia's central bank warns of property glut

Housing development in Iskandar, Johor, seen from Lim Chu Kang. The largest oversupply of residential properties is found in southern Johor state.
Housing development in Iskandar, Johor, seen from Lim Chu Kang. The largest oversupply of residential properties is found in southern Johor state.ST PHOTO: MARK CHEONG

Number of unsold homes at a decade high; 83% of units priced above what most locals can afford

Malaysia's central bank warned yesterday that the number of unsold residential properties are at their highest level in a decade, with the largest oversupply found in southern Johor state.

Bank Negara Malaysia (BNM) said the glut is caused by developers selling these units at above RM250,000 (S$81,500), beyond what most Malaysians could afford.

BNM on its website yesterday said there were 130,690 unsold units at the end of March this year, with 83 per cent priced at above RM250,000. It said 61 per cent of the unsold units were high-rise apartments.

"Supply-demand imbalances in the property market have increased since 2015. Unsold residential properties are at a decade high, with the majority of unsold units being in the above RM250,000 price category," the central bank said.

The issue of high home prices is being tackled by Prime Minister Najib Razak, who is expected to call for a general election in the next six months. In Budget 2018, he announced a RM2.2 billion allocation to build 248,000 more affordable houses.

BNM projected that one in three offices will be vacant by 2021, and that 140 new malls will enter the market by that year. In March, The Malaysian Insight news site reported that there were 255 shopping centres in Kuala Lumpur and its surrounding districts alone, with 14 more set to open this year.

The central bank suggested a single agency to be set up to handle "affordable housing". Such homes are usually priced at RM150,000 and below, and are built by several agencies under both the federal government and various Malaysian states.

In a newspaper column published yesterday, Datuk Seri Azman Ujang, chairman of national news agency Bernama, said Malaysia could learn from Singapore's example in its Housing Board, a single authority efficiently handling public housing.

In Malaysia, the steady rise in landbank prices, fed by stable economic growth, has led developers to build condominiums at ever-increasing prices, even though salaries have failed to catch up.

BNM in its statement said: "This (glut) situation could worsen if the current supply-demand conditions persist. Within the country, Johor is poised to have the largest property market imbalances (highest number of unsold residential properties and potentially the largest excess supply of retail space).

"As such, it is timely for all parties to act now to mitigate any potential risks to macroeconomic and financial stability."

A version of this article appeared in the print edition of The Straits Times on November 18, 2017, with the headline 'Malaysia's central bank warns of property glut'. Print Edition | Subscribe