Oversupply of office space could be worse than Asian financial crisis - BNM

Bank Negara Malaysia (BNM) today made a strong statement by acknowledging that there are supply and demand imbalances in the property market.

In the quarterly bulletin published by BNM, the paper entitled "Imbalances in the Property Market" also spells out an oversupply in the office space as well.

The report stated that "oversupply of office space and shopping complexes in the major states will be exacerbated by incoming supply, potentially becoming more severe than the Asian Financial Crisis".

OFFICE GLUT TO INCREASE

The BNM bulletin highlights incoming supply could exacerbate the glut in Klang Valley. It states that since the first quarter of 2015, office vacancy rate in the Klang Valley area has increased steadily from 20.9% to 23.6% in first quarter of 2017. This is higher that the national average rate of 18.1% and more than three times the regional average of 6.6%

Speaking at the third quarter GDP announcement, BNM Governor Tan Sri Muhammad Ibrahim said that "supply-demand imbalances in the property market have increased since 2015". This is confirming various statements made by property market punters and speculators that the property 'bubble' exists, and may burst in 2018.

SHOPPING COMPLEX SUPPLY TO AGGRAVATE OVERSUPPLY

BNM also says that the total retail space in major states in the country has increased sharply over the years. In 2016, Penang had the highest retail space per capita in the nation at 10.5 square foot per person, followed by Klang Valley (8.2 sq ft/person). Benchmarking against international cities, Hong Kong has 3.6 sq ft/person followed by Singapore at 1.5 sq ft/person.

This shows that the incoming supply of 140 new shopping complexes by 2021 across the Klang Valley region will aggravate the oversupply of shopping spaces across Klang Valley, Penang, and Johor in the coming years

UNSOLD RESIDENTIAL UNITS MOSTLY HIGH-END

Muhammad also stated that "unsold residential properties are at a decade-high with majority of unsold units being in the above RM250,000 price category.

He also announced that the Real GDP growth rate for the third quarter of this year grew at 6.2% compared to 5.8% in the same period last year. He took the opportunity to also announce that the inflation rate of the country is moderate.