Residential Vacancy Rates: Property Overhang and Market Supply

affordable-in-penangBy See Kok Loong

Lately, there are several publications such as National Property Information Centre (NAPIC) published on Jan 2019 on the data for 3Q18, the number of unsold homes in Malaysia has reached a new high of 30,115 homes amounted to RM 19.54 billion. (The above figure is the unsold homes completed 9 months from CCC and exclude residential properties build on commercial land like serviced apartment, SoHo and etc.)

Furthermore, a property consulting firm also published on February 19, 2019 that at the end of the third quarter of 2018, Malaysia’s overhang stood at 43,219 units worth RM29.47 billion, including serviced apartments and small-office home-office (SOHO) units.

All the above only represent Property Overhang and not about market supply. The above figure only covers the developer’s stock and does not cover units already sold to individuals or companies.

The real ratio that represents supply and demand situation should be Residential Vacancy Rates (RVR). Unfortunately, we don’t have the RVR in Malaysia and I believe it is timely for Napic providing the information on RVR instead of just overhang number.

RVR is the percentage of all units in the particular market that are unoccupied during a particular time. Vacancy rate is calculated by multiplying the number of vacant units by 100 and then dividing that by the total number of units in the building.

NAPIC should provide RVR by national, state, city or location basis just like other developed countries such as USA, Singapore, Australia and etc.

It will help developers, banks, property consultants, home buyers, investors to make a decision by understanding the current demand and supply situation. For RVR above 7% is considered high and it is alarming for the market to add on supply and etc.

Low vacancy rates generally mean that the real estate market performance of an area is good. They are an indication that a strong demand for rental real estate units exists. Once we have a series of data over several years, we will able to analyse the market situation better in term of demand and supply.

RVR can be obtained from utility company like TNB to provide the data on the zero usage of utility bill units base on monthly basis. Napic should compile and publish it on a quarterly basis for the public to analysis.

For a better Malaysia, we should start providing more information on a timely basis so that the stakeholders can react accordingly.

Mr. See Kok Loong, Executive Director of Metro Homes Realty Berhad and Deputy President of Malaysia Institute of Professional Estate Agents and Consultants (MIPEAC).

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