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Penang property overhang? Price and Financing issues

I know it’s not an awesome time for Penang property market. I know because the price that I wanted for a condo of mine in Penang is still nowhere near and my real estate negotiator friend kept teasing me. According to Article in NST for reference here: Residential overhang in Penang a major issue.  According to the Valuation and Property Services Department in its Malaysian Property Market Report 2017, the residential overhang in Penang increased more than twofold to 3,916 units worth RM3.82 billion last year from 1,896 units worth RM1.47 billion in 2016. In brief, it’s worsening. Most of the residential overhangs in the state were condominiums and apartments priced at above RM500,000 per unit. (Now I understand why. Perhaps a little waiting is now needed while waiting for the next catalyst)  Briefly, overhang is defined as built properties that remain unsold at least nine months after completion.

The two major reasons for the overhang in Penang is likely due to unaffordable property prices and financing issues. (When people just could not afford them, of course they will remain unsold. In terms of financing issues however, I think it’s both ways; banks and the borrower themselves. We can say the banks are more stringent but we have to also understand that the borrowers today are no longer saving as much as their peers from yesterday. This is why someone with RM10,000 salary may not be able to afford a RM500,000 home while someone who saved enough and earns just RM8,000 may still get their loans approved when they want to buy a RM500,000 home. The typical mortgage for a RM500,000 property should be between RM2,250 – RM2,500. Even with a RM8,000 pay, this mortgage is only 31 percent of their income. Approval is quite certain unless of course there’s the credit card debts, high car loan payments etc)

In fact the article suggested that the developers may not need to worry so much going forward as the overhang situation in Penang could get better in the second half of this year or from next year onwards. The reason is because the Penang government will be reviewing all the charges currently imposed on developers to make property prices more affordable for consumers. Among the charges to be reviewed are those for development, infrastructure and amenities. State Housing, Local Government, Town and Country Planning Committee chairman Jagdeep Singh Deo said, the charges inflated the prices of properties which would be borne by consumers, but upon review, is expected to fall. Meanwhile Rehda Penang chairman Datuk Toh Chin Leong said developers are still lumbered with a high number of unsold stocks. He said, “Rehda was thankful to the state government for assisting in promoting Mapex 2018 by providing special incentives, such as the waiver of the levy on foreign purchasers, and the two per cent levy on sub-sales within three years.” Please refer here for the full article.  Happy following and hoping for more good news.

written on 3 Aug 2018

Next suggested article:  Buy on fundamental, not based on speculative stuffs. Why not buy based on why? 

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kopiandproperty.com

kopiandproperty.com is everything about property related writings and news. Enjoy reading with a latte.

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