DEVELOPERS in Johor Baru (JB) should stop building serviced apartments in a state which accounts for about half the country’s unsold properties and a capital city which is facing massive oversupply, low take-up rate and rising uninhabited structures.

The rush to capitalise on wealthy foreign buyers has left the state with over 16,000 unsold properties worth billions. Structures erected in the city were left empty with only a few units taken up. The high price also prevented many of the 3.7 million Johor populations from buying such residences.

VPC Realtors (JB) Sdn Bhd AsiaPacific property consultant Bruce Lee said while Johor still has an abundant supply of land viable for development, the state does not have enough population or demand to take up the available properties.

“Properties in Johor were not built based on current demand, but based on speculations. They assume that more people will migrate to the state, including foreigners. But when those did not happen, the units are left unsold.

“The local demand in the state is not able to absorb the supply, and I don’t think the population can meet the supply any time soon,” he told The Malaysian Reserve.

Johor is the third most populous state in Malaysia with an estimation of 3.74 million people as at 2018.

The state alone made up more than 30% of the total overhang situation in Malaysia in the first quarter of 2019, according to the National Property Information Centre.

The fifth-largest state recorded 16,844 in overhang units valued at RM14.44 billion in the period from a total of 54,078 units worth RM37.23 billion in the country. The report does not detail the type of overhang units according to states.

However, residential properties made the bulk of the overhang in Malaysia with 32,936 units worth RM19.96 billion as at March 2019.

The second-largest contributor to the number is serviced apartments with 13,013 units valued at RM10.18 billion, followed by shops (5,472 units at RM4.5 billion), SOHO (1,537 units at RM707.82 million) and industrial properties (1,120 units at RM1.87 billion).

Meanwhile, Johor is ranked the sixth state with the most expensive homes, with an average house price of RM348,200. The state is still behind Kuala Lumpur with an average house price of RM779,488 and Selangor at RM477,816.

Surprisingly, the most populous state, which is Selangor (6.47 million), only has 8,136 overhang homes, while Sabah (3.9 million) has 1,483 overhang units.

Lee said JB has the most unsold but completed units, while other districts in Johor do not have a severe overhang situation.

“Stop building serviced apartments in JB until the demand can absorb the supply,” he said.

According to Knight Frank Malaysia Sdn Bhd’s latest research report entitled Real Estate Highlights 1H19 (first half of 2019), the cumulative supply for high-rise residential homes in JB — including serviced apartments and SOHO — rose to about 104,070 units as at last year.

It noted that two high-rise projects were completed in 1H19, namely Southern Marina in Puteri Harbour (456 units) and Marina Residences in Permas (168 units).

In addition, two high-rise projects were launched in the first six months, namely One 49 Residences and Laman Damai (Green Avenue), Central Park.

“The overall residential market has shown slight improvement in terms of volume and value of property transactions.

“However, with the high-end residential segment continuing to experience slow take-up, the focus of most developers is on the affordable housing market,” the report read.

News Source: The Malaysian Reserve, 5 August 2019