Market Needs At Least Three Years To Clear Johor Property Overhang

Market Needs At Least Three Years To Clear Johor Property Overhang

Pavither • May 20, 2020

CBRE-WTW Managing Director Foo Gee Jen believes the market needs another three years to absorb the property overhang in Johor. 

The state posted the biggest overhang units for commercial and residential properties last year, accounting for 18.4% (5,627 units) of Malaysia’s residential property overhang and 55.9% (13,998 units) of commercial property overhang, reported The Malaysian Reserve.

Based on the 2019 Property Market Status Report of National Property Information Centre, majority of Johor’s overhang homes were condominium/apartment units priced at between RM600,001 and RM700,000.

The state also emerged as the primary contributor to the serviced apartment overhang, accounting for 71.2% or 12,207 units.

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Foo noted that Johor’s property overhang is by and large located in Iskandar Malaysia, which is a favourite destination among foreign investors.

“The market has been experiencing a supply gush of serviced apartments since 2012 to 2013. The price tag of these investment-oriented serviced apartments is a mismatch to the affordability of locals,” he told The Malaysian Reserve.

“It could take three to five years for the market to absorb these unsold units.”

Although property prices in Iskandar Malaysia remains attractive compared to those in major cities in Southeast Asia, the market’s immediate challenge would be the weakened investment appetite among foreign property buyers in view of the Covid-19 crisis, said Foo.

Meanwhile, VPC Realtors (JB) Sdn Bhd Asia-Pacific property consultant Bruce Lee noted that Johor’s property situation is slightly different from that of Penang, Kota Kinabalu or Kuala Lumpur, due to the Iskandar Malaysia mega project.

“Although the overhang property units situation nowadays is not encouraging in Johor, given a period of another three years I personally believe Johor situation will resolve better than the rest as long as the government policy to welcome foreign investment is consistent,” he said.

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“Generally, the overhang of serviced apartments will remain for the next few years, unless there is a major change of demography and infrastructure, or a sudden paradigm shift of people’s behaviour to live in serviced apartments that are more convenient to commercial amenities and facilities.”

Lee added that classifying serviced apartments as commercial properties led to severe misled information on the actual overall supply and demand situation of residential property.