GEORGE TOWN – Bank Negara has been urged to encourage banks to diversify housing loans to help overcome property overhang that has lingered for close to a decade, said the Penang Real Estate and Housing Developers Association (Rehda).
Penang Rehda chairman Tan Hun Beng told The Vibes that banks can consider a longer loan repayment or progressive loan packages to lower the rejection rate and allow for more properties to be sold.
He said there is room for loan diversification as local banks continue to register strong profit margins in the midst of the pandemic.
“Affordable units are the main drive of the overhang speaks volume that there is a mismatch between financing and market demand. Developers are told to shift their production towards affordable housing, yet the buyers cannot get loans.”
For example, Tan suggested the UK model where buyers enjoy a loan repayment that stretches up to two generations, from parent to child in the same property.
Alternatively, he proposed progressive loans, meaning the buyers can be judged based on the type of work segment that they are employed in and assessed by their chances of a strong career path, which can lead to the buyers having a higher income after a certain period.
“For such buyers, the loans should be approved as eventually, they can afford it. Also, banks are offering margins beyond the reach of buyers, meaning some are offering only 70% to 80% financing when conventionally it should be at 90%.”
He added that local authorities can help lower the housing prices by cutting down licensing requirements and fees imposed on developers.
Tan also urged for clarity in the Malaysia My Second Home (MM2H) scheme for non-citizen retirees, as it can help stimulate the purchase of higher priced properties.
“The recent decision to tighten requirements and the lack of clear guidelines have caused the participants to become uneasy with MM2H.”
Based on the latest data by National Property Information Centre (Napic), properties in the affordable price range of RM300,000 and below formed the majority of unsold houses – some 31.5% or 11,610 units.
This was followed by 11,139 units (30.2%) priced from RM500,001 to RM1 million and 9,461 units (25.7%) priced from RM300,001 to RM500,000.
Properties priced more than RM1 million made up 12.6% (4,653 units) of unsold units.
The residential property overhang increased to an all-time high last year with 36,863 units worth RM22.79 billion, marking a 24.7% increase in volume and 20.5% rise in value compared with 2020.
Napic defines “overhang” as residential units that have received certificates of fitness and compliance but remain unsold for more than nine months after being launched.
Selangor has the highest number of unsold units at 6,095 worth RM5.28 billion. This makes up 16.5% in volume and 23.2% in value of the national total.
This was followed by Johor (6,089 units worth RM4.72 billion), Penang (5,493 units valued at RM3.56 billion) and Kuala Lumpur (3,908 units worth RM3.17 billion).
Napic also noted that its latest report shows a five-year overview of the market status, revealing residential overhang has been prevalent since 2003.
A market boom in the 2010s saw the overhang reduce in tandem with a reduction in supply to 11,316 units, with only 4,956 new completed units added to the existing inventory.
A contributing factor for the overhang is that the saturated market is the limit of absorptivity, seen in take-up rates of new launches hovering in the low 30% since 2016.
A common misconception is that residential overhang is caused by a prevalence of overpriced properties catering towards foreign buyers and wealthy Malaysians.
Statistics, however, showed that the bulk of the unsold properties are below the RM300,000 price point and classified as “affordable” by the government. – The Vibes, April 24, 2022
