Huge potential property oversupply in Iskandar: Edge

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And so it begins. The Edge reports that over the last few months, the ‘promised land’ of the Iskandar region has witnessed a series of mega land deals, including those involving land reclamation, which have “shocked the market and changed sentiment”.

Really, nothing to be shocked about. We could see it coming.

(Data from The Edge, 14 April 2014:)

Already, based on the original master plan, there is potential supply of:

  • 130 million sq ft of gross floor area in Gerbang Nusajaya
  • 130 million sq ft in Medini, and
  • 25 million sq ft in Puteri Harbour.

With new land reclamation, it is clear that the potential oversupply will be huge.

For example, the Puteri Cove project was launched last week. It comprise three 33-storey residential towers – 1000 homes in all.

Tower 1 (329 homes), launched some months back – 70 per cent of homes already booked.

Tower 2 (also 329 homes), launched last weekend – only 25 per cent booked.

We are talking about RM1300-1600psf here.

The Edge contrasts this to the Teega project in late 2012 – 98 per cent sold within a month of launch.

Banks are also more cautious in giving out housing loans. Bank Negara has tightened the eligibility requirements for borrowers. Other factors mentioned: the last Budget’s cooling measures, high household debt, rising interest rates, and the raising of foreigners’ minimum buying threshold to RM1m.

The report warns: “Iskandar is like the goose that lays the golden egg. Don’t kill it by over-expanding development and supply.”

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Tougher market conditions mean developers have to offer better value to buyers. “Gone are the days when customers blindly bought units like hot cakes,” The Edge concludes.

What lessons can we learn for the Klang Valley and Penang? The unbridled greed behind the property speculation may pop the bubble eventually. Cool the building frenzy before it is too late.

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19 COMMENTS

  1. Most developers are building houses beyond the reach of the Johor bahru citizen.Government of the day is only interested in so called “DEVELOPMENT’. Ordinary citizen are caught in the middle income trap;they cannot afford these houses and as the price of houses keep moving up without any abatement, we can only hope for a change of government to curtail the spiraling which is already out of hand. I am a chinese Malaysian and I am unhappy the the China chinese grabbing all the premier sea frontage for foreigners.Please stop all these ‘pawning’ for the sake of our children and their children.

  2. Iskandar Malaysia is now facing dire consequences because of an oversupply caused by a sudden surge of land reclamation and property deals in Johor?

    Just looking at the planned launches (serviced apartments, hotels, office and retail spaces) by Country Garden, Hao Yuan, Guangzhou R&F Properties Co Ltd, CapitaLand and Greenland Group, the hotspot areas, ie, Danga Bay and Tanjung Puteri is already an enormous supply of high-rise mixed development projects and thus may put pressure on asset value.

    Country Garden Holdings Co Ltd, with Kumpulan Prasarana Rakyat Johor (PRJ) have planned a development of over 5,000 acres of reclaimed land. This is 3% the size of Singapore today! This project is so huge that it is envisioned that it will take over 30 years to fully develop it. The project even includes a man made island which will be near the second link in Johor. The island is for luxury homes. The man made island has started work and recently raised some concerns about its environmental concerns.

  3. Iskandar properties: Hitting the doldrums?
    http://www.youtube.com/watch?v=JjDhraBsPcg

    The Iskandar development corridor has had a massive impact on Johor in terms of direct foreign investments in several industries including property development, education, leisure, hospitality, logistics, manufacturing, petrochemical and a host of other activities.

    The development work has been furious since 2006.

    For awhile, since the first bulldozers came in to clear the land for development in the Iskandar property prices have shot up, even in Johor Bahru town itself which has seen depressed prices.

    This buoys those looking at properties as instruments of personal investments.

    But the Iskandar development isn’t without criticism, chief of which is that citizens of Malaysia’s southern neighbour have gained more than Malaysians themselves. And this is because of the value of the Ringgit against the Singapore Dollar. A 500,000 Ringgit property is a mere 190,000 Singapore Dollars.

    Note: The interviews were carried out in December 2013. Any reference to ‘next year’ means 2014.

  4. On The Star today: Another developer from China comes to Johor Baru, plans RM10bil project .
    http://www.thestar.com.my/Business/Business-News/2014/04/17/Another-developer-from-China-comes-to-Johor-Baru/

    The Greenland Group is the latest developer from China to purchase land for a property project in Danga Bay, Johor Baru. It entered an agreement yesterday to buy 13.96 acres from Iskandar Waterfront Holdings Sdn Bhd (IWH) for RM600mil with plans to develop projects with a potential gross development value (GDV) of RM2.2bil. The transaction comes amid an environment where property developers are seeing lacklustre response from buyers for their launches in Johor.

    The latest to feel the heat was Singapore’s Pacific Star Development Pvt Ltd that saw only 25% bookings in the second phase of its condominium project in Puteri Harbour that is located in Iskandar Malaysia.

    The purchase price works out to RM984 per sq ft, which is just below the record RM991 psf that Hao Yuan Pte Ltd, a Singapore-based but China-owned firm paid for 37 acres in Danga Bay last December.

    Maybank IB Research had recently expressed concern about Iskandar Malaysia’s medium-term prospects, saying the massive incoming supply of residential and retail properties in hotspots like Danga Bay and Nusajaya could be harmful to asset values.

    “Judging from the planned launches (serviced apartments, hotels, office and retail spaces) by Country Garden, Hao Yuan, Guangzhou R&F Properties Co Ltd, CapitaLand and Greenland Group, the hotspot areas, ie, Danga Bay and Tanjung Puteri, could be flooded with an enormous supply of high-rise mixed development projects, inducing price volatility,” it said in a client note last week.

  5. THE property market in Johor, particularly Iskandar Malaysia, might be a case of too much too soon.
    Red flags are showing in the state where launches of projects and high prices are common place but the pace of launches, which now includes “carpet building” by China developers, is flooding the market with more houses than what could be sustainable.

    Hwang-DBS Vickers Research says Country Garden’s 9,000 units launch at-one-go in Danga Bay alone could cause a glut, although delivery could be challenging given tight building material and labour supply over the next three to four years.

    Hong Kong-listed Guangzhou R&F Properties Co Ltd recently bought 116 acres in Johor Baru from the Sultan of Johor for RM4.5bil. Market talk is that a 19-block development is in the blueprint.

    The average residential value for Johor property has risen some 45% over the past five years to RM197,147 in 2012 from RM136,034 in 2009. Comparatively, the country’s average residential value has only gone up by 30% in the same period to RM248,515.

    While many still believe in the Iskandar story, the success of it will largely depend on the movement of international businesses setting up shop in the area, which is reliant on how fast infrastructure there improves, which experts say has not really kicked off as yet. Demand for high-end condominiums remain largely speculative as Iskandar Malaysia still lacks critical mass, Hwang-DBS says.

    http://www.thestar.com.my/Business/Business-News/2014/02/15/Johor-chokes-on-property-Carpet-building-by-China-developers-results-in-too-much-too-soon/

  6. Puteri Harbour is for rich foreigners as it us priced beyond the affordability of average Malaysians, just like The Light in Penang.

  7. Take EDL highway to the end approaching the sea facing Spore – the area has been fenced up to build super condos most locals cannot afford (except those Msians who earn big Spore $ salaries !).

    Country Garden along Danga Bay project by China developers cater for Sporeans / China Chinese as primary target. Compare this Giant Developer to our local developer that develop Danga Tropicana you can see the big difference. China developer create the infrastructure for recreational/dining/shopping to be ready for operation before they start building residential units. Foreign buyers are impressed with their big operational readiness. Tropicana a dwaft in comparison.

    btw, this Danga Tropicana now join venture with Penang’s Ivory to develop Penang World City at Bayan Mutiara. Seeing the progress of Tropicana in JB Danga Bay, the investors for Penang WorldCity better be warned to do homework b4 put your money there. Don’t later say nobody kind enough to alert you.

  8. The developers (some are from China that have bought RM4.3 billion worth of Johor land from the Sultan) are targeting Singaporeans and China citizens using proximity to Singapore and ‘lower cost’ (lower Ringgit vs SingDollar) as factors to lure them. Heavy promotion on Singapore TV and newspapers with Singapore TV artists and China film star Tang Wei as spokespersons (Danga Bay Country Garden mixed development). But MH370 and Singamata incidents may dampen the purchasing mood from China residents. Now prices are beyond locals as they are pegged with assumptions that local Johorean folks work and earn SingDollar. Oversupply is imminent and bubble will evemtually burst.

    • Singapore’s Billionaire Peter Lim (Company: Rowsley) is jointly developing the RM5.5 billion integrated project Vantage Bay @ Iskandar in the heart of JB with the Sultan of Johor. Vantage Bay sits on a land area of 9.23ha, which can be compared to the size of 13 international-sized football fields, consisting of developments like Medical hub, Shopping Malls, Offices, Residential Condo, Convention Centres and Service Apartment into one project. Once completed, its set to become the most important and iconic development in Zone A of Iskandar.
      It will have a twin tower residential condo, set to become one of the tallest condominiums in Malaysia. Skies @ Vantage Bay is the name of this residential condominium.
      Its location near the C!Q has been primarily selected to appeal to the opulent population in Singapore.

  9. Indeed, Tong Kooi Ong posted recently on his blog, “Why another Iskandar launch falters?”.

    But John Gilbert, writing in The Malaysian Reserve, proclaimed: “Iskandar on track despite cooling measures”.

    What is the truth? Which shade of grey is closest to that?

    Meanwhile, I am pondering about Najib’s “Friendship Bridge”, announced after his pow-wow with S’porean PM Lee Hsien Loong. Dr M’s aptly tagged “Crooked Bridge” reincarnated, possibly with a different set of ghouls and vampires?

  10. In Cosmopolitan Penang, who actually approves the frenzied scale of building + pricing of high-end properties? Or is it tied to a hidden Local Plan that has morphed into a Developers’ Plan?
    Such hifi-frenzies are labelled by Hokkien lang as ‘Tua Khang’, by Malay as ‘Gaya Raya’ by Indian… Anil can you help to phrase it?
    Btw, we were shown many moons ago, leadership by example of thrift & prudence in a sadiwara of taking economic flight, bla-bla-bla. Buat sekarang, tak serupa bikin dulu.

    In the not too far future, I can see a MercS300Lansi driven all the way up to the helipad of Komtar Tower!

    • i am now in Penang on food visit and tasted the chendol u recommend. sorry to say at RM2.30 by road side standing eating a rip-off !

      Penang past 5 years develops faster than past 2-3 decades combined. Don’t just blame LGE. STP2 project likely to involve BN components otherwise why they keep silent all these months ????

  11. Learn from Johor?

    Take it from the Kapitan! He will want to do it bigger than Johor. His developer friends will advise him that Penang has more potential than Johor, as Penang is nearer to the South Indian Ocean!

    If the property bubble bursts, it is not the developers ( his friends) who suffer. It is the poor first time house buyer, the ordinary guy in the streets.

    • The Kapitan Deity works on the frail human delirium of overt-worshipping + high hopes of CHANGE (that never delivers in ori-form & genuine promises).

      The greedy-not-enough developers thrive on the FEAR Factor of Kia Su or Bing Chui covetousness.

      Both of these highly skilled psycho-political & economic hi-pricing manipulation work hands in perfect fitting gloves to deliver a blow to the cherished dreams of Home Sweet Affordable Homes for Penangites post 308.

  12. I say pop it. RM1,000 per sq feet condo where there is no public transport and few jobs that can pay for it, is just flight of fancy of complete integration with Singapore which will fall far far short from the fantasy.

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