I think I have explained this many times in my talks. Happy to repeat it. Oversupply is definitely UNSOLD units. However, UNSOLD units is not equivalent to oversupply. Please Click here to read an earlier article yeah Fortunately, most of the people I talk to understand my rationale. However, the sentiment is still negative because most first-timers think oversupply is unsold and unsold is oversupply. So, even if they found a property they like, they think and think and think and in the end decided not to buy, yet. Earlier article about first-timer and why we need to help them understand. Our National Housing Department director-general Jayaselan Navaratnam said something along the same line.
Article in theedgemarkets.com National Housing Department director-general Jayaselan Navaratnam said, “Overhang means the industry is in dire straits and unable to absorb any new supply.” Unsold units would be a more appropriate term to describe the current market situation. According to the definition by the National Property Information Centre (Napic), overhang is defined as residential units which have received Certificate of Completion and Compliance (CCC) but remained unsold for more than nine months after launch. Napic’s Property Market Status Report for 2018 showed that there is a total of 32,313 units of unsold completed residential properties valued at about RM19.8 billion in Malaysia in 2018.
He also shared that the nine-month period that is being used to define overhanf is ‘too short.’ (Frankly, I think it is okay. Let’s not change something which has been set for some years so that we are able to do comparison with same periods of years ago) He also explained ‘overhang.’ He said, “For example, demand is 500 units but I went and built 1000 units – that is overhang. But the situation now is not that. People still want to buy houses, just that they are facing issues like financing and others.” He then gave another justification too. He said, “If developers could not sustain their projects [with unsold units], why are they still launching? That means the unsold units are within their means to control.” The article is a long one and has many more details. Do read it here. Article in theedgemarkets.com
To answer one more question for those who found a good property to but but is worried that the property bubble is bursting soon. Or a financial crisis is on its way. Well, if the crisis do happen as what economists predict, every 10-12 years, then the property prices will be down. Stock market will collapse too. However, what has happened all the time is that crisis will recover and so do property prices. In fact, buying AFTER a property crisis will usually be more expensive than buying during a slowdown. The slowdown in terms of property transactions meanwhile has started since 2013 and did not start only in 2018. CAUTION. As for buying overvalued properties with huge discounts, it will be a crisis in the future for the buyer. Do due diligence before buying, please. Happy understanding.
Article written and edited by Charles. News article summarised by Dina Batrisyia.
Next suggested article: Unsold units? Rent them out perhaps?