Property Overhang in Malaysia. If you hated it last year, what happens this year?

Property Overhang in Malaysia. If you hated it last year, what happens this year?

Property overhang lah, so I skip property investment (many told me)

I love to ask this question to any property investor who told me that there is a property overhang. If we are thinking of buying a property, please remember to choose a great property. Right price (not overpriced), right place (not in some place we would not even want to stay) and right product (not a property which the design we hated). All these questions are by far more important to be answered versus being stopped by OVERHANG property comment by some media whose writer may not even be a property investor.

Overhang property is not the same throughout all the properties lah.

The one big category would be serviced apartments. Today, total overhang is 19,000 units. This is a lower number compared to just one quarter before. In other words, the transactions are happening. However, maybe not from newer units? From this 19,000 units, take a look at those numbers below. Only 907 units are for properties whose overhang is below 3 years. The rest are at minimum 3 years or higher.

Can these overhang properties be cleared?

Of course it could. The developer could perhaps adjust the prices so as to give heavy discounts. Turn those who dislike the design to accept it since with the discounts, they could financially do something about it. Of course this could also mean the developer will be taking some financial losses since the margin was not very high to behind with. Or with time, the infrastructure becomes better. More shops maybe. Or better connectivity maybe versus previously. However, without ANY significant changes, then nothing will change.

The older the property, the harder it would be without any significant change in the offering

Sometimes, when there are not enough owners, plus the fact that some owners refuse to pay the maintenance fee, then everything degrades very fast. A greenish / brownish looking swimming pool can actually happen within months without proper maintenance. Gym with broken equipments will make any potential buyer to back out. Without enough maintenance, the security service would usually be the cheapest possible and that’s when things will get worse too.

If the place is over 10 years, the paint would have also started peeling and since there are not enough funds to carry out any repainting, then it would be uphill to get a sale even if it comes with a heavy discount. This is the reason why there has to be a plan to quickly sell versus just leaving it and wishing for the ‘high tide carries all boats’ season.

Should we buy an overhang property?

Find a real estate negotiator (not illegal brokers yeah) and go pay a visit if the price is super attractive. Super attractive means less than half of the market value. I would say if 30 percent and we know the property well and the area too, then it’s a must-view dee. In other words, pricing itself is already like an attractive auction price without the need to go auction. No harm yeah. Treat it as a learning trip.

Check online and see if there are people renting the place. If there are many advertisements and the rental price is very stable versus one very high and one very low etc, then perhaps there is already an established rental market for this development. Can go view and decide dee. Walk along the corridor of the serviced apartment and you should be able to know if the whole floor is full of residents or all quiet and deserted. If it’s the latter, I would skip.

Opportunities for potential profit depends on effort

There are people who buy a highly underpriced unit, renovated it with clever touch ups and then selling the unit for a profit. The reason is because there are buyers who are more willing to pay a premium and just move in with their suitcases. These are usually the younger generation who are not looking to spend time speaking to renovation people etc…

There are people who found units where the developers are letting go at 50 percent discount but wants cash instead. Imagine buying a unit for RM73,000 and yet the rental is RM650 per month? If we want these units, we need to really view, ask, check and quickly take it up when it presents itself. Do it properly yeah. Do not be penny wise and pound foolish by not engaging own lawyer for example.

Happy finding great opportunities amongst the overhang OR you can start focusing on the right things versus how many are the overhang numbers.

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