Unsold commercial properties worrisome


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The number of unsold properties has seen a respite amid the government’s Home Ownership Campaign (HOC) except for the commercial market, which remains worrisome amid the new norms, Bank Negara Malaysia (BNM) Governor Datuk Nor Shamsiah Mohd Yunus said.

“The amount of unsold properties is still very high. It is about 170,000 units but it has been coming down but the level is still very high. The HOC that the government has introduced last year has helped clear some of these unsold units.

“But in terms of unsold properties, we are worried about commercial properties because even before the pandemic we had a very high supply office space and shopping complex.

“With the pandemic and greater online sales, more work from home arrangements, the need for office space and physical premises will come down and the demand will not be as high as before,” she told an editors’ briefing session on Tuesday.

So, in terms of unsold properties, BNM is much more worried of the unsold commercial space because the excess capacity in the market would be made much worse under the new normal. “Luckily, the bank’s exposure to this segment is very small. It accounts to 3.2 per cent of the total loans,” she said.

Nevertheless, the central bank said in its Financial Stability Review Second Half of 2020 that the softer housing market conditions prompted developers to adjust supply towards more affordable housing segments.

“While overall launches declined significantly across all price segments in the first three quarters of 2020 (24,853 units; 1Q-3Q 2019: 60,955), the decline has been notably sharper for properties priced above RM500,000.

“As a result, the share of newly- launched properties in this segment fell to 20.5 per cent of overall new launches (1Q-3Q 2019: 31.8 per cent). This is a welcomed adjustment and will help reduce demand-supply mismatches that had worsened housing affordability and increased risks of price corrections in the past,” it said.

It added that the low interest rate environment also encouraged purchases for both own occupancy and investment purposes.

Demand for financing correspondingly rose in line with market activity, with housing loan application growth picking up across most price segments except for houses priced below RM300,000.

Risks to banks, however, remain well-contained, with the current impairment ratio and share of borrowers in negative equity for household investors at only 0.9 per cent and 1.3 per cent, respectively.

The average loan-to-value ratio of outstanding housing loans remained below 60 per cent, substantially mitigating the risk of more borrowers falling into negative equity, as well as limiting the potential losses to banks.

Source: Bernama


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