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Supply imbalance

  • As luxury condominiums and office spaces are in a glut, there is an obvious short supply of affordable homes for average Malaysians. Photo courtesy: Sin Chew Daily

Sin Chew Daily

The domestic property market is off balance now, with supply of certain categories of properties in apparent surplus, and the trend is showing signs of deterioration.

As such, the cabinet has instructed the approving authorities to stop issuing permits for the construction of new shopping malls, office towers and high-end condominiums priced at RM1 million and above.

This new ruling, which has taken effect since November 1, is believed to help ease the current imbalance and the issue of oversupply in certain categories of properties.

The Malaysian real estate sector is displaying signs of slowing down after experiencing an explosive expansion in earlier years. The booming construction sector in previous years has attracted enormous sums of investments and in pursuing more lucrative returns, most of the capital has been put in the construction of high-end condominiums, office towers and malls.

It is estimated that some 140 new malls will come on stream in the country by 2021, a substantial number in view of the country's relatively small population of 32 million.

When the market is flourishing, the emergence of huge quantities of high-end condominiums and office towers will result in a glut beyond the ability of the market to absorb.

Such a phenomenon will not only have a negative impact on the domestic real estate industry, but will also pose severe risks to the overall economy of the country.

Bank Negara expressed its concerns while releasing the Q3 GDP report recently. The central bank's statistics show that the number of unsold residential units was at an all-time high of 130,690 during the first quarter of 2017, a warning sign not to be trifled with.

Meanwhile, the vacancy rate of office spaces remains staggering, with Klang Valley topping out at 24%. This rate is anticipated to reach 32% by 2021.

With all kinds of warning signs popping up and increasingly evident, the issue of an off-balance property market warrants serious attention from the relevant parties. From the aspect of supply, the government's decision to stop issuing permits for the construction of shopping malls, commercial towers and luxury condominiums is a positive move to help prevent the problem from worsening. High vacancy rates will pose serious threats to the stability of the national economy.

However, as luxury condominiums and office spaces are in a glut, there is an obvious short supply of affordable homes. Developers should strive to build more affordable homes in line with the market trends to satisfy the needs of average Malaysians.



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