Slow and steady recovery for Malaysia’s property market

According to MIDF Research, the number of unsold homes in Malaysia has dropped to its lowest level in five years.

MIDF research analysts, citing data from the National Property Information Center (NAPIC), said the number of unsold properties in the second quarter of this year dropped to 26,286 from 26,872 in the first quarter, the lowest level since the second quarter of 2018.

“The decline in residential overhang was due to renewed buying interest on property after the reopening of Malaysia’s international borders,” it said.

The number of unsold properties in the second quarter of this year was also lower than the average of 31,000 units in the past three years. At the peak period in the last quarter of 2021, the residential overhang rose to 36,863 due to the impact of the epidemic.”

Figure 1: Residential overhang in Malaysia

Source: NAPIC, MIDF Research

The analyst pointed out that the five states with the most unsold houses in Malaysia are Johor, Selangor, Perak, Kuala Lumpur, and Penang. Johor and Penang, in particular, have seen a decline in unsaleable properties.

“The unsaleable property situation in Selangor and Kuala Lumpur has also improved slightly, while only the unsaleable problem in Perak has worsened,” it said.

Figure 2: Residential overhang by states

Source: NAPIC, MIDF Research

Residential overhang in Johor

Johor still has the most unsold properties in Malaysia, but the number has dropped for four consecutive quarters, falling to 4,717 in the second quarter of this year.

The unsold units in the first quarter and the second quarter of last year were 4,759 and 6,040 respectively.

Service Apartment Overhang

The analyst said that the unsaleable problem of serviced apartments has also improved, from 23,267 units in the first quarter to 22,497 units in the second quarter.

“Most of the unsold serviced apartments are located in Johor, with 13,366 units, followed by Kuala Lumpur with 5,450 units. The majority are units priced above RM1 million,” it said.

Lower inventory level of property companies

The analyst pointed out that the reduction in unsaleable properties in the country is also in line with the trend of local developers reducing inventory units.

“Developers have been actively selling off inventory in the past few years to obtain the cash flow they need in the difficult epidemic environment,” it said.

Notably, Eco World Development has seen the largest decline in inventory, with a total inventory reduction of 58% since 2019.

Similarly, Mah Sing Group, S P Setia Group and Glomac all had double-digit inventories during this period.

Analysts believe that the reduction in inventory can improve developers’ finances and have stronger pricing power when launching new projects in the future.

Additionally, with the National Bank currently maintaining the overnight policy rate (OPR) unchanged at 3%, this will be beneficial to property companies, supporting a recovery in demand for properties and buying interest.

With the outlook improving, the analyst is more optimistic about the property sector’s prospects and has upgraded its rating from “neutral” to “positive,” naming Mah Sing Group and Matrix Concepts Holdings Bhd as top picks.