This article first appeared in City & Country, The Edge Malaysia Weekly on October 9, 2023 - October 15, 2023

Residential properties made up 25% of the listings in the auction market in 2Q2023 compared with 20% in the quarter before, with a number of apartments and condominiums being listed. The increase can be attributed to the recent rise in the overnight policy rate, banks’ aggressive approach to loan recovery efforts, the rising cost of living and the effects of the pandemic, says Property Auction House executive director Danny Loh.

In an email interview with City & Country, Loh says, “We have observed that many of these units are unoccupied and the projects are rather new.”

Overzealous investment in properties before the pandemic and aggressive marketing programmes undertaken by developers, especially low-entry-level or zero-deposit programmes, could have also contributed to the situation, he continues.

“Many buyers are saddled with high loan commitments and unable to redeem the loan even though they wish to dispose of the properties. Their anticipation of a rise in market value did not come true, and many ran out of money due to the pandemic,” says Loh, adding that a number of property owners were not able to earn recurring income as they had difficulties in finding tenants for their units during the pandemic.

A survey conducted by Property Auction House found that those who purchased auction units did so for their own occupation, Loh shares.

Loh highlights that landed residential properties are the most sought-after auction units. 

One of the noteworthy transactions during the quarter under review was for a 3-storey detached house with a land size of 5,087 sq ft in Sunway Rymba Hills, Sunway Damansara, which garnered much interest and achieved a bid price of RM3.55 million — a 35% increase from its reserve price of RM2.63 million. The property was auctioned on May 15.

In Ampang Utama, Selangor, a 2-storey detached house with a land area of 9,800 sq ft fetched RM2.73 million on April 13. That was 16% higher than its reserve price of RM2.35 million.

Another noteworthy transaction involved an intermediate 2-storey house with a land size of 1,647 sq ft in Setia Alam, Selangor. It was sold at RM607,000 on June 27, a 22% increase from its reserve price of RM495,000.

Meanwhile, for high-rise condominiums, projects that were developed by premium developers were able to command a better price, according to the survey.

Anticipating an increasing number of properties being auctioned in the coming months, Loh says the market is worth looking at during this period.

“We have noticed that the valuations on the properties, especially the newer ones, are lower than the entry point. These owners can sell their properties in the sub-sale market if they are able to redeem them from the bank. Otherwise, we will see them end up in the auction market.

“In fact, we have received many requests from house owners to sell their properties by way of an open-market auction. They find that it is a quicker way compared to selling on the sub-sale market,” Loh reveals.

“This is the best time to look at the auction market as some of the property prices have dropped below their replacement value. Do take note that the [cost of] building materials and [workers’] wages have gone up exponentially due to the pandemic and they are not expected to come down [so easily].”

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