Iskandar oversupply

Is there oversupply in Iskandar? I am not surprised as highlighted in several of my articles that johor doesn't have the population or demand to sustain such boom in constructions. Now there are cautions from Maybank. There's also a good article by CNA showing Iskandar's properties are underperforming as compared to other cities. So buyer beware!

Chinese developer pulling out of Iskandar

There're more signs that developers are also feeling the oversupply. According to the papers today, the chinese developer Sichuan Sanjia is in talks to sell its site in Iskandar. The site is a 1.64ha site at the Permas Jaya waterfront which they bought for RM44 million in 2012. Reason sited are the many large projects coming up.  

Levy on Singapore-registered cars

Another case of the malaysian authorities not thinking hard on the implication before acting. This could be another case of flip flop policy. Now they plan to impose a levy on Singapore-registered car not (at not more than RM50/SGD20). Well, this totally contradict their master plan to have Iskandar succeed.

1. Live in Johor and work in Singapore. I have always think that this idea is not feasible due to the inconvenience of the immigration queue. This will make it worst. That means, it will cost an additional SGD20 now per day or SGD400 per month. One can buy a bigger car in Singapore with this extra.

2. Shoppers in Johor. Imagine the impact for Singaporean shoppers if they need to folk out additional SGD20 per visit? Might erode much of their savings for shopping in Johor and cheap petrol. There are a lot of Singapore crossing the causeway daily for that purpose and especially for weekends. There are about 60,000 cars on a typical day this could be the main driver for the authorities to change their mind soon. 

3. Lower cost of Iskandar. The whole idea of having different sectors like manufacturing in Iskandar is also to get the spillover effects from Singapore based companies wanting lower cost in Malaysia. Well, now it worsen their cost advantage.

Most of the Malaysian registered vehicles entering Singapore are as a result of the heavy import of goods from Malaysia such as poultry, vegetables, fruits, etc. The flow of money goes to Malaysia. As for those Singapore registered vehicles entering Malaysia, it is for shopping. The flow of money goes to Malaysia again. This increase won't do them any favour. Sometimes, need to understand who needs who more in any relationship before making any decision or will result in a lose-lose for oneself.

Sigh, such kiddie tit-for-tat behaviour is just the worry for me when it comes to property in Malaysia. The causeway may look like this in future :)

Bubble Alarm Bell for Iskandar

I am glad that there are more and more people that is raising the alarm for the oversupply of Iskandar. Now from a recent article from the Straits Times has clearly pointed that out and supported by numbers. Let me interpret in simple terms what it means. 

1. Severe oversupply.

In forth quarter last year, there were 118,191 homes under construction in Iskandar and another 168,371 planned. Johor has a population of 3.5 million as compared to Singapore of 5.3 million. However, Singapore only has about 67,000 homes under construction and another 6,000 planned as of first quarter this year. 

More development are coming up. Country garden launched 9,000 and developing a 2,000ha island called Forest City off Tuas. This is 3 times the size of Ang Mo Kio.  Guangzhou R&F princess Cove will build another 3,000 apartments by 2017. It may even launch as many as 30,000 in the end. Another 80ha of Iskandar land has been bought by Shanghai-based Greenland Group, Zhouda Real Estate Group and Hao Yuan Investment. 

2. Is there an economic boom to sustain such frenzy in real estate development?

As far as i can see now, the answer is clearly a 'no'. Of all the RM131.6 billion (S$51.5 billion) committed investments in Iskandar from 2006 to december last year, a quarter (RM33 billion) went into residential property development.  This is very strange as usually for such a frenzy to start first, there should at least be a boom in the economy. Not the other way around. Take china for example, the economy is booming as it has become a global factory over the past decades and thus the sky rocketing prices of the properties in some of the major cities. But what about Iskandar? It appears to be the other way around where they are pre-empting a boom in the local economy and building houses. Is there a gold rush such that companies around the world are rushing to setup factories or business there? Answer again is no. The gold rush is nothing but appears to be hype created by property developers to capitalize on our greed.

There was an interview that they did with a real estate agent. She said that she plans to rent out her condo and the rental demand could come not just from expatriates working in Johor but also those working in singapore who would like more space and the lifestyle in Iskandar. Well, i would say that's only wishful thinking. Firstly very few expatriates would want to live in Johor and work in Singapore. It is just too inconvenient having to cross the causeway twice daily. If they are indeed expatriates, the company will pay for the rental and why should they care? If they pay for it themselves, they are not viewed as 'expatriates' generally but just foreigners on local terms. Secondly, if they want more space and lifestyle, they wouldn't have rented a condo too but a house. Soundly as absurd as it is, people tend to believe what they want to believe so it is up to you to decide with all the supporting argument and data (more would be preferred but I think that little is already scary enough for me).

Johor investors to face problems

At least another person felt the same as me (my post in 14 dec 2013 and 1 mar 2014), according to this article in Yahoo.

Greed is now taking over the driver seat in most minds but good to pause and reconsider options.

RM1 million limit for foreign buyers in Malaysia effective today

It's official. There's now a RM1 Million limit for foreign buyers of Malaysia properties effective today (1 March). Well, what's the implications for the malaysian properties?

Property developer may price the new development higher to above RM 1 Million so that it allows foreigners to buy. Most of the properties are targeted at foreigners anyway. This will make the gap between landed and condominium even wider (already big gap now). This will make the condominium prices in Malaysia even more inflated. This is not a good sign especially if you consider that majority of Malaysians buy landed and not condominium. 

It may also drive the prices suddenly lower for those condo nearer to RM1 Million mark as the demand will drop. If buyers dry up once this new law comes about, it may result in a lack of demand. Then developers will get desperate and drop the prices to get rid of the stocks.  It will trigger a fall in prices.

Well, let's see which direction it will go.

Iskandar Properties: To buy or not to buy?

Read an interesting article about property purchase in Malaysia. With the statistics, it is confirmed that landed property is still the most transacted in Malaysia according to Coassets. The findings below shows the transaction between Q12012 to Q12013.

With so many condominiums sprouting up and many more rushing in, might be a good time to review your choices and considerations.

Once again, my concern for buying a property and especially condominium in Johor is as follows:

1. Malaysians don't buy condominium but landed properties. You might ask why this matters? Well, if you want to be able to cash out and liquidate, the only group you can sell to are foreigners like Singaporeans.
2. The Malaysian government has increased the foreign ownership threshold from RM $500K to RM $1 Million. That means if you want to cash out, you cannot let go of your property to any other foreigners for anything below RM 1 Million.  I don't think you can find any Malaysians willing to buy a condominium above RM $1million. 
3. Fickle minded officials. With such fickle minded officials, you get policies that are not carefully thought through and the impact to investors. It is just too volatile and uncertain. Imagine they even change the weekends suddenly from weekend to a Friday and Saturday.
4. No rental market. There's no rental market in Johor so far. The employment market in Johor is just not so great. Who are you going to rent to? Malaysians or expatriates? There's just not that many expatriates in Johor. 
5. Too much land in Malaysia. There are simply just too much land in Malaysia. You can keep driving till you fall asleep. Even if it is not enough, there's plenty of old buildings in Johor to be torn down and rebuild. Just look around and you will find no shortage of supply.  
6. Serious price gap between landed and condominium. The average current prices of condominium in Johor is now approximately RM $1100+ psf. The average current price of a landed property can be anything from RM $250-600 psf. That gap is simply too big and getting irrational. 

To summarise, I still think that Johor property is best bought for your own stay and not for rental. If it is for your own stay, buying a landed and G&G (guarded & gated) community is a better idea if security is a concern. It looks like a bubble to me so better be rational and not to be too carried away by herd mentality. History tends to repeat itself everywhere around the globe so I think this is no exception. Sounds like a bubble, feels like a bubble and it might just be a bubble.

Iskandar a gold rush or just bubble waiting to burst?

This is what i feared most. Everyone is rushing into Iskandar to build something just to sell and capitalizing on our greed (Singaporean's greed). A caption like 'Grow your Wealth' seems to be clear enough the motivation of the developer. There just need to be enough demand for such developments. Who will buy condos in JB? Only the expats or Singaporeans. Malaysian still preferred landed. So i ask myself the following questions:

Is there limited supply of land in JB? No
Is there a huge population explosion in JB? No
Is there an economic boom in JB like in China for manufacturing? No
Is there a big high end expat community in JB like in Singapore including bankers, traders? Definitely NO.
Who can you re-sell to? either Singapore or Expats mainly.

Well, i think moderate growth is good for all but unrealistic or overhyped expectations often resulted in bubble. A real boom needs to be built on some kind of strong economic foundation and not something artificial or made out to be. So far i do not hear of great demand but mainly of initiatives pushed out by governments of both sides as well as developers. Everyone is rushing in to build some kind of condos, including many developers new to Malaysia. That's what happened to Ireland where many estates have become ghost town. It is starting to look like bubble to me and it is starting to look worrying.