Overhang Properties in Malaysia. Going up or coming down?

Overhang Properties in Malaysia. Going up or coming down?

No, your decision to buy or not to buy is not tied to overhang properties

A few years ago, a friend asked me whether it’s still a good time to buy a property. I asked him why he asked such a question. He said the overhang is getting higher and higher. I asked him if he’s interested in any of the overhang properties. By the way, this is how overhang properties are defined.

NAPIC: Napic defines ‘overhang’ as residential units that have received certificates of completion and compliance but remain unsold for more than nine months after launch.

In other words, somehow the property was not sold during soft-launch, not sold during actual launch and not sold even after keys were handed over for past 9 months. Ever wondered why? There could be many reasons but one reason may be price versus attractiveness. Truth is, if the property is attracting lost of interest, price would be high. If it did not and the price is not lowered then it will just remain unsold.

So, if we are not interested with the overhang properties, why do we allow it to decide for us whether to buy or not to buy? However, if we are interested in these overhang property, it’s really possible to go to the developer and get a good deal. After all, the developer is definitely wanting to sell versus to hold.

Note: Some developers can hold for a very long time! They have good cash flows from other developments or even other businesses.

What’s the latest situation on overhang properties?

Let’s look at the trend below from NAPIC. It was 32k in 2018, dropped to 30k in 2019 (which is supposed to be a good sign) and it dropped even further to just 29k in 2020 but everyone knows what happened in 2020 yeah. Covid-19 came. Thus the overhang increased to 36k in 2021. Guess what, we are now back on track and the overhang properties are the lowest in the past 5 years yeah. It’s now at 27,746 units. So, is the decision to buy now? Haha. Reminder. Overhang number should not be your main reason whether to buy or not to buy.

If you hated it last year, you will still hate it this year

Let’s not even talk about property. If there’s a car model you hated last year, what’s the chance you will suddenly fall in love with it this year? Well… unless of course the price has now become very attractive, right? For most, they will still hate it. This is why the overhang property will take some time to clear. However, properties which are at a great location, properties with superb township development and many other properties with specific purpose, say for medical tourism etc will not face much problems in selling and certainly will not add to the overhang numbers.

Happy deciding.

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