De-mystifying the Housing Overhang problem in Malaysia

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.