Someone posted some comments about overhang numbers in Malaysia. Overhang property is a worry, right?
Overhang property looks worrying?
Perhaps for many first-timers the overhang property seems scary. So, will the overhang properties crash the property market? I answer this as an owner. I have no idea. Without unforeseen circumstances, no. There’s no guarantee that the property market will not suddenly collapse if the economy suddenly crashes okay. This is the latest about the economic situation in Malaysia and ASEAN. (click to read)
However, if the economy is doing just fine and unemployment numbers kept going down, (latest article here on unemployment) then the overhang numbers should continue to reduce in numbers slowly. UNLESS of course most of these overhang properties were due to mismatch in demand (what people wanted / needed / could afford) versus supply (what was actually built). If this is the case, then these overhang numbers may just continue to appear quarter after quarter.
From the Perspective of Demand vs Supply
To put things into perspective, the latest 1H 2020, total transactions for residential properties alone is 75,000. Read here if you like to know details. In other words, if developers stopped building and people only focused on buying the overhang units, we would have completely wiped the overhang property clean within less than a year. So, is demand really so small when compared to the overhang?
The answer is a simple one. Demand is by far higher than supply and there are reasons for the overhang and not just simply due to oversupply / overbuilt or whatever. Please do refer to the image below for the total overhang.
As an owner? Depends on what you own
If you are an owner of a property which is wanted by many people, this overhang issue will not affect you. When you want to sell, you will still find lots of people wanting to buy. If you are an owner to an overpriced property, whether or not there’s overhang, you will still not be able to sell at a price close to what you paid.
If you are an owner who just want to stay in your current property, happy staying because nothing is happening to you just because the market has overhang of property. So, overhang property is a worry only to some people who would still worry even without overhang property.
As a buyer? Depends on what you want to buy
If you want to buy into the area where there’s no overhang and everyone wants to buy there, sorry yeah, most likely you will not get much discount. If you want to buy into the overhang property because you like it, then you are in luck because there’s HOC and developer is more than willing to sell it to you. They need to clear current stocks to launch future projects.
If you have no intention to buy any property then you will not gain anything or lose anything. This is why it’s super important to understand what is our intention for this current market condition. Overhang property is a worry? Better focus on identifying the right investments because there will be opportunities in a slow market. When the market is booming, it will become riskier because everything is fully valued and sometimes over-valued. Happy understanding.
Love to be updated of investment news? Sign up for KopiWeekly. (once per week for property, finance, investment news and more)
Next suggested article: Oversupply = unsold, true. Unsold is not necessary overhang yeah