The government is proposing stricter policies for developers, requiring them to sell at least 15% of completed residential units before approving new construction projects to reduce housing overhang.

Dr Muhammad Iqmal Hisham Kamaruddin, a senior lecturer at the Faculty of Economics and Muamalat at Universiti Sains Islam Malaysia, stated that this policy is aimed specifically at unsold homes priced between RM300,000 and RM500,000. It is also designed to help avoid an oversupply of properties.

To manage excessive supply, Dr Muhammad Iqmal suggested that the government could introduce stricter controls by linking the approval of new residential developments to the existing property overhang in a given area. For instance, if the proportion of unsold residential units in a particular location exceeds 15%, the authorities should restrict approvals for new developments until the number of unsold units has decreased.

Properties priced within the RM300,000 to RM500,000 range have been identified as the most commonly unsold homes in Malaysia as of the third quarter of 2024. According to data from the National Property Information Centre (NAPIC), these units accounted for 31.9% of the market segment, amounting to 7,003 homes with a total value of RM2.78 billion.

Dr Muhammad Iqmal also emphasised the importance of ensuring that property prices align with the affordability and average income of the local population. He explained that if the average household income in a particular state supports the purchase of properties up to RM500,000, then homes should not be priced above that threshold.

He pointed out that a mismatch between household income and housing prices is the primary factor contributing to the large number of unsold units in the RM300,000 to RM500,000 range. In 2023, the median household income in Malaysia was approximately RM6,338, whereas the Malaysian House Price Index (MHPI) showed an average property price of RM483,879.

In such a scenario, most houses within that price range would require a monthly repayment of RM1,500 to RM2,500, implying a minimum household income of RM4,000 per month. This level of repayment constitutes more than 60% of the household’s income, placing a significant financial burden on potential buyers.

Additionally, he noted that the ability to make a down payment of at least 10% of the property’s value is another critical barrier to home ownership.

Despite the high volume of unsold units, average property prices have continued to rise in Malaysia up to 2024. For example, the MHPI recorded an average house price of RM465,604 in 2023, which increased to RM483,879 in 2024. The average price of a single-storey terrace house rose from RM238,600 in 2023 to RM251,500 in 2024, while two-storey terrace houses saw an increase from RM442,549 to RM466,506 over the same period.

This trend appears to contradict basic economic principles, whereby an oversupply would typically result in falling prices. However, in the current context, housing prices have not only remained stable but have shown a steady upward trajectory. The common belief that older unsold homes, particularly those remaining on the market for five to ten years, will eventually be sold at reduced prices has proven inaccurate.

Dr Muhammad Iqmal stressed that these older properties must be discounted and accompanied by rebates to remain competitive with new developments. Furthermore, he warned that a persistent oversupply of unsold houses could have broader economic implications. Developers unable to sell sufficient units may default on loans, posing risks to the financial and banking sectors.

(Source: Bernama)

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• Construction Projects
• Developers
• Dr Muhammad Iqmal Hisham Kamaruddin
• Housing
• Property
• Residential Units