Prices expected to climb further


Domestic and Singapore developers and investors seem to have become more interested in Johor Baru, particularly Iskandar Malaysia, in the past two months.

“Our office started getting enquiries after the formation of two joint-venture companies between Khazanah Nasional Bhd and Singapore’s Temasek Holdings for projects in both countries,” says Samuel Tan, director of KGV Lambert Smith Hampton, when presenting The Edge/KGV-Lambert Smith Hampton Johor Baru Housing Property Monitor for 2Q2011.

The enquiries, he adds, have been mostly from the larger developers while a good number of investors are looking for land in good locations.

Calling the development “a paradigm shift”, Tan says he hopes it will dispel the perception that the Singapore government is not interested in investing in Malaysia and that its investment is not welcomed by the Malaysian government.

Khazanah and Temasek will jointly develop an estimated 500 acres in Iskandar Malaysia and six tracts in Singapore, including four prime tracts in Marina South. The projects have an estimated value of RM30 billion.

Tan sees the new partnership as the beginning of a model similar to Hong Kong and Shenzhen. Close trade and  business and social links have benefited both cities greatly.

“As a result of this joint venture between Singapore and Malaysia, we can expect more business-to-business interaction in the future,” says Tan, adding that this will bring more investment into the property market.

Another key partnership between Malaysia and Singapore is the development of the rapid transit system (RTS). The proposal is to link Singapore’s Thomson mass rapid transit (MRT) line with Johor Baru’s RTS and is targeted for completion in 2018.

According to Tan, the termination point of the line in Singapore is likely to be within the vicinity of Republic Polytechnic and in Johor, JB Sentral.

“It will also allow commuters to clear only one Customs instead of two and greatly reduce traffic on the road. With this kind of access and escalating property prices in Singapore, Malaysians working in Singapore or even Singaporeans themselves could stay in Johor Baru,” says Tan.

As it is, observes Tan, there is already speculation about the location of the stations, prompting investors to look for land in these areas.

“By making it easier for people to travel, housing demand will increase in the areas near the stations. As a result, property prices will rise,” says Tan.

Recovering housing schemes
To provide a more comprehensive and current view of Johor Baru’s housing market, several changes have been made to the monitor’s sampling.

The sampling of standard 1-storey terraced houses is no longer included in the monitor due to its declining number of developments and demand. In its place are the more in demand 2-storey semi-detached/cluster houses.

In the standard 2-storey terraced houses category, with the exception of Bandar Baru Permas Jaya, Taman Molek and Taman Impian Emas, all the previous housing schemes have been replaced by newer schemes.

Similarly, except for Straits View Condominium, all condominiums in the partments/condominiums category have been replaced by newer developments.

In regards to the retained schemes and condominium, samplings are taken from the latest phases of developments to reflect the current market price and movement.

“We feel that the old samplings no longer represent the market situation. Some of the older schemes like Taman Pelangi are not as popular anymore and it is reflected in the relatively stagnant house prices,” explains Tan.

Tan says while property prices in Johor Baru still lag those in the Klang Valley, they are definitely on the rise.

“The upswing started in 2H2009 and it has certainly been more obvious this year. I’m pleasantly surprised that Johoreans have more than adapted to the new prices,” he says, adding that this could be the beginning of an upward swing for Iskandar Malaysia.

An example would be the 2-storey semi-detached houses in Taman Bukit Dahlia, which fetched an average of RM320,000 in 2009 before surging to RM430,000 in 1Q2010. Since the beginning of this year, the prices of these homes have reached RM470,000.

Nearly all of the sampled standard 2-storey semi-detached/cluster houses in Tebrau/Kempas have shown increases in price in 2Q2011 from 1Q2011. The highest increase is in Austin Heights, which saw its price rose to an average RM520,000 from RM480,000 in the previous quarter.

Despite the fact that some housing schemes have seen an increase in rents, Tan says the occupier market is relatively slow and has disproportionate rental returns.

“Most people buy to stay. If you consider the rent they have to pay and the monthly loan repayments, they might as well choose the latter as the amount is not that different,” he says, adding that Malaysians working in Singapore make up a portion of the occupier market.

Tan sees two established housing areas in Johor Baru — Tebrau and Skudai/Nusajaya.

Calling Tebrau the “stronghold of the mid to high-income group”, Tan says the main attractions of the area are the abundance of amenities and shopping, and good access. As for Skudai/Nusajaya, this area is near the Second Link Expressway that links Johor to Singapore.

“Most of the new developments are located in these two areas. You can see the prices increasing with each successful launch but people are still buying,” remarks Tan.

Also, areas once deemed unfavourable are starting to blossom because of new infrastructure. For example, the Southern Link and Eastern Dispersal Link Expressway have improved the outlook for housing schemes such as Bandar Baru Permas Jaya, Taman Rinting and all the way to Pasir Gudang.

The change is by way of a rise in demand and the prices of new homes. For example, Bandar Raya Development Bhd recently soft-launched Elita@The Straits View Condominium at RM400 psf onwards compared with RM300 psf onwards in the past.

“Elita, the final tower in The Straits View Condominium, also offers larger built-ups of 1,600 sq ft onwards, which makes it costlier but it is selling. Because of demand, developers are more willing to go into these areas and develop,” says Tan.

While much has been said about property investment flowing into Iskandar Malaysia from Singapore, Tan believes other countries are starting to notice Iskandar Malaysia’s potential.
“In the past, many foreigners did not know where Iskandar Malaysia was but that is changing. It is now on the radar screen of investors and homebuyers of other countries.”

A recent significant development is the signing of a memorandum of understanding between Global Asia Assets (M) Sdn Bhd (GAA) and United Malayan Land Bhd’s subsidiary Seri Alam Properties Sdn Bhd on the acquisition of 111 bungalows in Bandar Seri Alam, Pasir Gudang.   

GAA is a subsidiary of Global Asset Asia Investment Ltd, a Hong Kong-based holding company, the clientele of which comprises mostly high net worth Japanese investors. Seri Alam Properties will develop the bungalows for GAA, which will later be sold to its Japanese investors to be used as holiday homes.

The bungalows will have an estimated built-up of 2,200 sq ft and a private swimming pool along with a club house for all the residents. Their estimated gross development value is between RM200 million and RM400 million.

Tan feels that the government should look into holidays homes as a spin-off product.

“These investors are here to spend money and they add a certain prestige because they came here by choice. Iskandar Malaysia has land, sunny weather, plenty of shopping malls and other attractions. Our properties are a good bargain compared with properties in Singapore and in Japan.

Iskandar Malaysia is also so near Singapore — it offers the best of both worlds,” reasons Tan.

Due to all these developments, and barring unforeseen circumstances, Tan believes property prices in Johor Baru will continue to climb in the next two to three years before slowing down.

“In the past, we have seen a cycle of about 10 to 12 years, of which half was a period of boom and half a period of slump. I believe because of the way and at the rate things are moving today, the cycle will be shorter. So, it will likely be three years of boom and three years of slump,” concludes Tan.

This article appeared in City & Country, the property pullout of The Edge Malaysia, Issue 873, Aug 29-Sep 4, 2011