Improvement in property sector but building material prices still a concern

The real estate sector saw improvement both in terms of transactions and value this year compared with 2021, supported mainly by the resumption of economic activities across the board and the reopening of the country’s international borders.

The National Property Information Centre (Napic), which comes under the Valuation and Property Services Department revealed that over 188,000 transactions worth RM84.40bil were recorded in the first half of 2022, an increase of more than 30% in volume and value compared to the same period previously.

The residential property sector recorded 116,178 transactions worth RM45.62bil in the review period, an increase of 26.3% in volume and 32.2% in value year-on-year (y-o-y).

Penang, Kuala Lumpur, Johor and Selangor remained as the four major states, accounting for 47% of the total national residential volume.

The commercial property segment recorded 15,169 transactions valued at RM14.02bil, up by 45.4% in volume and 28.3% in value compared with the same period in 2021.

Selangor contributed the highest volume and value to the national market share with 26.5% in volume (4,025 transactions), and 33.5% in value (RM4.7bil).

The first half of 2022 saw more than 10,000 newly launched units, down by 66.7% against 31,687 units in the first half of 2021.

Napic said 20.3% of newly launched units were sold, slightly lower than the 20.6% recorded in the first half of 2021, and 8.1% in the second half of 2021.

This does not mean that the sector is without challenges on the business operation side.

The industry is still plagued by price hikes of building materials and labour shortage, severely affecting productivity in both the property and construction sectors, Real Estate and Housing Developers’ Association Malaysia (Rehda) said.

Its Property Industry Survey for the first half of 2022 and Market Outlook for the second half of 2022 and first half of 2023 revealed that fewer residential units were launched in the first half of 2022, recording a 26% decline compared with the second half of last year.

Sales performance was down by five percentage points from 50% in the second half of last year to 45% in the period under review, according to its study which surveyed 150 developers.

“Rehda has called upon the government to address these issues swiftly, as the current situation will be detrimental on various levels, including to purchasers.”

“Should these issues be addressed, we believe that the second half of next year will paint a better picture for the industry and the nation as a whole,” Rehda said. — Bernama

Property market activity records better performance

The International Real Estate Federation (FIABCI) Malaysia is hopeful that the property sector will start seeing significant improvements in 2023.

Coming off of the pandemic, FIABCI Malaysia president Datuk Firdaus Musa said the property market has been seeing some improvements already, this year.

“Based on the latest statistics released by the National Property Information Centre, property market activity recorded better performance in the first half of 2022.

“More than 188,000 transactions were recorded worth RM84.40bil, showing an increase of more than 30% in volume and value compared to the same period last year, as all property sectors recorded year-on-year growth,” he told StarBiz.

Firdaus said the overhang situation also showed improvement with a significant decline of 7.5% and 4.6% in volume and value respectively, to 34,092 units worth RM21.73bil.

“Although house prices continued their slow pace of growth, the office and retail sectors remained unchanged.

“However, in the third and through the fourth quarters, the residential market showed slower activity due to the increase in the overnight policy rate, resulting in lower take up rates of new and completed projects.”

Still, Firdaus said the movement of office and retail activities showed a sudden surge in office and retail requirements, amidst the expectation of a new government and the positive outlook of the economy based on exports activities.

“Going into 2023, I hope that there would be new economic policies, the foreign direct investments influx and a fresher and investor friendly approach that should be able to kick-start real estate activities, especially in new and more dynamic development projects.” - The Star

More property projects fall sick

Selangor has the most number of abandoned or “sick” housing projects based on statistics released by the National Housing Department as at Oct 21, 2022.

According to the Housing and Local Government Ministry, a “sick” housing project is one that has been delayed by more than 30% of its scheduled process or where the sale and purchase agreement (SPA) has lapsed.

There are 387 “sick” projects in the country. Out of this number, the department listed 73 in Selangor with 14,774 units involving 7,423 buyers.

Selangor also has 62 delayed projects comprising 9,842 units and affecting 6,496 buyers.

Despite holding pole position with the most number of “sick” housing projects in the country, statistics further show that in the same period 674 housing projects with 134,007 units were launched in Selangor involving 59,710 buyers.

Overall, there are 816 licensed housing projects in the state.

In Peninsular Malaysia within the same period, the department identified 3,020 projects licensed by the ministry but only 2,444 projects were launched.

In comparison to figures in March 2020 when the Covid-19 pandemic hit, there were 3,541 licensed projects, 2,831 launched projects and 365 sick projects in Peninsular Malaysia.

“This shows a marginal decline in the number of licensed projects and launched projects today.

“This means that the rate of projects becoming problematic spiked despite a fall in total licensed and launched developments,” said National House Buyers Association (HBA) honourary secretary-general Datuk Chang Kim Loong.

“With 387 ‘sick’ projects against 2,444 launched projects, it indicates that the fate of nearly 16% of house buyers is determined by errant developers.

“Hence for every 100 housing projects launched, 16 projects are diagnosed as ‘sick’.”

According to statistics, there are 56 “sick” high-rise strata projects involving both private and government developers including Syarikat Perumahan Negara Bhd (SPNB) and PR1MA Corp Malaysia as at Nov 15, 2022.

“There may also be other government-linked housing agencies under different entities such as Rumahwip (Federal Territories Affordable Housing Project) where developers and contractors create separate legal entities for each project undertaken although these may not be indicated in the statistics,” said Chang.

Selangor and Johor have the most number of “sick” high-rise strata projects at 13 followed by the Federal Territory at 11.

The data also shows that there are three ailing landed strata housing projects in Selangor.

However, in the last few years, there have been reports of white knight property developers stepping up to rescue some of the abandoned development in Selangor especially in Klang.

Last year, Selangor housing, urban well-being and entrepreneur development committee chairman Rodziah Ismail in a StarMetro report said that Klang topped the list with 39 abandoned projects, Kuala Langat was second with 20 and Hulu Langat in third place with 13.

As at Sept 30, statistics reveal 10 “sick” housing projects involving 3,914 units and 2,685 buyers in Selangor which are in the process of being revived.

Covid-19’s role in situation?

On whether the statistics are an accurate reflection of the crisis, Chang said the Covid-19 pandemic and various movement control orders in 2020 and 2021 affected the economy including the housing sector.

“In fact, the housing market and broader property sector had been weak even before the first MCO was imposed on March 18, 2020.

“The Covid-19 pandemic was a global event which brought difficulties to all economic sectors.

“Most of these housing projects were launched before the pandemic and developers had not expected their projects to be forestalled by the pandemic, disrupting supply chains and manpower,” he said.

But what is causing the increase in “sick” residential projects?

Chang cited a news portal report earlier this year stating that the main cause was financial constraints that developers had faced during the pandemic.

“The report also cited poor management, rising building material cost, lack of manpower and unsuitable locations.

“Citing unsuitable locations is a poor excuse. Pandemic or not, the project location does not change.

“When a developer embarks on a project, it would have done its costing with regards to building materials and the timeline on completing the project as well as feasibility and viability studies,” he added.

Look for completed units

Chang said the number of “sick” housing projects in the country was reflective of some developers over-promising and under-delivering in situations beyond their control although most of these projects started construction before the pandemic.

“One property consultant has advised that if there is a need to buy a house, buy a completed unit which you can see and touch. Do not buy off-plan (buying a property based on plans that are available for inspection).

“His rationale is that some developers want to make as much sale possible.

“Many people buy units off-plan because of the many incentives offered by developers but these are just sales gimmicks. It is important not to fall into the ‘getting the best choice, the best floor or the best view,” he added.

In contrast, when people buy completed units, Chang said they could see the plus points and negative aspects.

“You know more or less what you are going to get,” he added.

Effects on buyers

House buyers of abandoned properties run the risk of owing banks the amount that is drawn down and paid to rogue developers.

“They have to continue servicing partially drawn down housing loans or risk being blacklisted by Bank Negara and the banking system.

“House buyers renting homes also have to keep paying rent resulting in emotional stress and financial constraints for them.

“On the other hand, banks suffer when the borrowers cannot service their housing loans. Worse still, the uncompleted houses have zero cash-able value,” he said.

Chang said banks suffered more as they were in possession of collateral parcels of land (where houses are built) that could have multiple charge holders.

“It becomes virtually impossible to cash out to recover the banks’ expenses,” he said.

Proposal for risk mitigation

Selangor has the bulk of abandoned housing problems due to massive development taking place in the state.

National Association for Abandoned Property Owners (Victims) chairman Dr Mohamed Rafick Khan Abdul Rahman said 52,000 house buyers nationwide were still affected by delayed, problematic or abandoned housing issues.

He said Victims had submitted a proposal on solutions to address problematic projects brought on by cash flow issues including a suggestion for a pre-SPA contract.

“With this approach, the number of potential house buyers becoming victims reduces tremendously. This is part of a risk mitigation strategy. The paper is with the department for its consideration,” he said.

“With this proposal, we hope developers will have generated enough sales before starting construction. Financial problem faced by developers is the biggest cause of abandoned housing projects,” he said, adding others were due to technical issues on site and cheating. - The Star