Property formula: Foo says about 97,500 units per year were needed based on the average household of four people.

KUALA LUMPUR: The local residential property market is facing an undersupply of housing stock – while at the same time coping with one of its worst overhang situation in years.

CBRE|WTW managing director Foo Gee Jen said a mismatch of price, location and products has led to this conundrum.

“Based on the population growth rate of 1.3% of 32 million people as of 2016, the annual growth is around 390,000.

“Based on the average household of four people, we need about 97,500 units per year.

“Bank Negara estimated average Malaysians can afford houses priced RM250,000 and below. But 78.7% of new launches in the first half of 2017 were priced beyond RM250,000.”

He said almost half of the launches (49.8%) comprised units priced over RM400,000, and 25.4% of them were above RM500,000.

“Over the past 13 years, household incomes in Malaysia have generally moved in tandem with house prices.

“But, the main concerns are on distribution of household incomes and distribution of houses in the market.”

This, he said, has contributed to the high level of overhang in the country.

In November last year, Bank Negara said the number of unsold residential properties was at a decade-high, with a majority of units being in the RM250,000 and above price category – beyond the income of most Malaysians.

The central bank also said the oversupply of office space and shopping complexes in the major states is expected to be exacerbated by incoming supply, potentially becoming more severe than during the Asian financial crisis.

It said supply-demand imbalances in the property market have increased since 2015, primarily on account of the mismatch between the prices of new housing launches and what the households can afford to pay.

Separately, Savills Malaysia Sdn Bhd deputy executive chairman Allan Soo said the medium term outlook for the local retail property sector is expected to “remain challenging.”

“With incoming supply over the next few years, we expect to see more consolidation,” he said, adding that the local retail property market will be flat in 2018.

Soo forecasts that there will be a total of 197 malls in Malaysia by 2021, representing 86.2 million sq ft of retail space.

There are 170 malls or 62 million sq ft of retail space as at end 2017.

Separately, Rahim & Co International Sdn Bhd research director Sulaiman Akhmady Mohd Saheh said he is optimistic about the outlook for the industrial property sector.

“Recent factors such as growth in e-commerce particularly, has been gaining more attention as it has been recognised as a critical enabler to accelerate revenue growth for the Malaysian economy, thus driving demand for logistics and industrial space.”

The 11MPS is co-organised by PEPS and the Valuation and Property Services Department.