If you’re interested in buying properties then you should take note! Recently, a report by Bank Negara Malaysia (BNM) has warned citizens that residential properties in Malaysia are in oversupply, which has caused an alarm in the property market. As a result, the government has taken notice and here’s what has happened so far.
1. Four types of developments will be frozen starting 1st November
According to EdgeProp, the Cabinet has ordered Kuala Lumpur City Hall (DBKL) to freeze approvals for four types of developments starting from November 1. These are shopping complexes, offices, serviced apartments and luxury condominiums that are priced at over RM1 million.
This includes existing applications – comprising variations made to building plans that have received development orders – that must receive planning permission by January 2018.
2. The freeze will last indefinitely until the market has balanced itself
Federal Territories Minister Datuk Seri Tengku Adnan Tengku Mansor confirmed this and said that the freeze could last for one to three years, depending on market conditions until the glut is cleared and there is an increased demand for these properties.
Malaysiakini reported that Finance Minister II Johari Abdul Ghani said the cabinet made this decision after studying the BNM report. “This will be temporary until we can clear all the excess supply. There is a stark imbalance between supply and demand and we have to review the strategy in real estate development as we do not want such a situation to adversely affect the economy,” he explained.
3. Instead, the government plans to focus on developing affordable homes
However, it looks like there may be good news for the rakyat as Johari said that the government will focus more on affordable homes that cost below RM300,000. So, cheaper houses for us? There was reportedly a 48 per cent demand for affordable homes but only a 28 per cent supply in the market.
Under the Budget 2018, Prime Minister Najib Razak has also announced that an allocated RM2.2 billion will be used to build 248,000 more affordable homes.
4. This oversupply had the potential to be more severe than the 1997 Asian Financial Crisis
The first quarter of 2017 showed that we had 130,690 unsold units consisting mainly of houses priced above RM250,000, the highest it has been for the decade. In Malaysia, Johor had the highest proportion of unsold units in Malaysia at 27 per cent, followed by Selangor at 21 per cent, Kuala Lumpur at 14 per cent, and Penang at 8 per cent.
In the report, BNM said, “This situation could worsen if the current supply-demand conditions persist. Within the country, Johor is poised to have the largest property market imbalances (highest number of unsold residential properties and potentially the largest excess supply of retail space). As such, it is timely for all parties to act now to mitigate any potential risks to macroeconomic and financial stability.”
That’s not all, BNM predicted that by 2021, one in three offices will be vacant and 140 new malls will enter the market across the Klang Valley, Penang and Johor. That’s way too many malls for us! Hence, BNM governor Muhammad Ibrahim said this oversupply had the potential to be even more severe than the 1997 Asian Financial Crisis.
Maybe we can finally afford to actually buy a house in the future!
Also read: Expert Predicts M’sia Property Market Crash in 2018, House Prices will Drop Drastically