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De-mystifying the Housing Overhang problem in Malaysia

Author/s: Hui Hon Chung

Date Published: 30/06/2024

Published in: Volume 29 - 2024 Issue 1 (pages 57 - 83)

Abstract

The problem of completed unsold housing, or overhang, has been regularly highlighted in the media in Malaysia. There was a particularly sharp increase in overhang after 2015. A large proportion of these unsold houses were in the mid- and high-price segments, suggesting that affordability could be the issue. Some media analysts pointed out that poor housing location could also explain the volume of overhang. Thus, a formal inquiry into this concern is timely and necessary. In this study, we collected and analysed a panel data of 12 states or federal territories in the country over the period 2008-2022. The main novelty of the research is that it constitutes the first panel data analysis of the overhang issue in Malaysia. Our findings from panel data models indicated that overhang was a persistent problem with past overhang contributing to the accumulation of overhang in the current period. More importantly, we presented strong evidence that deterioration in affordability contributed significantly to overhang. However, there was weak evidence supporting the view that housing location affected overhang. These results survived a series of robustness checks.

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Keywords

Housing Overhang - Malaysia

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