Oversupply! The Wrong Kind of Housing Boom

Oversupply! The Wrong Kind of Housing Boom

Oversupply! The Wrong Kind of Housing Boom

An oversupply! The wrong kind of housing boom threatens Malaysia’s property market. It appears to be that Kuala Lumpur is entering or has been nestled in for some time already, what seems to be a property bubble. More and more high rise residential developments are going unsold with just as many new projects being launched.

The Star reported that there are a massive amount of unsold residential units totalling some RM 20 billion. Bank Negara has reported that this number is the highest it has been in ten years. The reported number of unsold residential properties was 130, 690 units as of Q1 2017.

The situation seems dire enough such that the government has felt that it needs to intervene – Malaysia’s Finance Minister Johari Abdul Ghani stated that the Government has frozen approvals of luxury property developments indefinitely together with stopping the development of all shopping malls and condos priced above RM 1 million in order to deal with the current oversupply.

It was however mentioned the day after the announcement that the freeze would not be a round-the-board ruling and that new developments would be considered on a case-by-case basis.

There are calls saying that Government intervention is not necessary and that by getting their hands dirty, it will only prevent natural market forces from rebalancing the currently oversupplied market. It remains to be seen what the outcome will be in the coming months but many experts have concluded that property prices will come down.

Considering that we are also at the tail end of a property bull market, it only makes sense that the time for a lull period is not very far away. Remember all markets are cyclic, so this is by no means any reason to panic. Stay calm and be objective – the news should be information that is taken in and examined, then used to make decisions on what to do with your property in the upcoming property bear market.

You will, most certainly need to consider your rental options – short-term rentals vs long-term rentals as well as decide on how you plan to cope with your property loan repayments during these trying times. You may also want to possibly put off your next planned purchase for the time being and wait to see what happens in the coming months.

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