This article first appeared in The Edge Malaysia Weekly on May 15, 2017 - May 21, 2017
THE residential property market in Johor will remain under pressure with the completion of several high-rise residential projects in the next few years, according to industry observers.
About 9,500 “five-star living” condominiums in Country Garden Danga Bay will be ready by September, putting more pressure on the rental market in Johor Baru.
“With the current economy, the Johor property market has also been affected. The oversupply is mainly in the stratified residential [sector] — many high-rises were launched prior to 2014. The completion of these high-rise projects over the next few years will add pressure to the supply side,” KGV International Property Consultants (Johor) Sdn Bhd executive director Samuel Tan tells The Edge.
According to the National Property Information Centre’s (Napic) Malaysian Property Market Report 2016, the Johor property market softened further last year. A total of 40,066 transactions worth RM19.45 billion were recorded — translating to declines of 16.1% and 10.2% in volume and value respectively, from 2015.
The residential sub-sector continued to propel the overall market, accounting for 65.4% of the state’s property market volume. The sub-sector’s volume and value fell 15.7% and 7.6% year on year to 26,186 units and RM8.58 billion respectively.
In line with the easing of market activity, overhang units surged 90.7% y-o-y to 3,671 units. The units were valued at RM2.57 billion, compared with RM1.17 billion in 2015.
Samuel expects the market to remain subdued in the first quarter of this year, but the situation may change in the second half when developers launch affordable products. He also believes the residential sector with products priced below RM700,000 will continue to do well.
“Landed properties still hold up quite well. As for high-rise residential units, if they are priced rightly at RM400 to RM500 psf, there are still buyers,” he says, adding that Country Garden’s expected supply of 9,500 units may dampen the rental market.
However, Bursa Malaysia-listed Johor-based developer BCB Bhd is unfazed by the oversupply in Johor as most of the projects launched by Chinese developers were started in the past few years and most of them had been taken up by investors between 2014 and 2015.
“As most of the buyers are from China, I don’t think they will resell their properties. They will likely rent them out, so the concern should be the impact on the sub-sector; the pressure will be on the rents,” BCB executive director Tan Vin Sern tells The Edge.
He expects the influx of foreign home buyers and tourists to fuel demand for Johor properties in the next two years, as foreigners are still keen on investing in the state due to the weaker ringgit.
According to him, 80% of the group’s property buyers in Johor are foreigners from Singapore, Taiwan and China. Amid the weak economic conditions, the group still aims to launch mixed-use development projects worth RM3 billion in Johor Baru and Batu Pahat in the next two years.
In fact, property agents say developers are looking beyond the oversupply situation as they mainly target foreign buyers.
A property agent tells The Edge that most developers today are not targeting Johoreans as the population of the state is only about 3.5 million.
He says some of them have chosen to work and stay in Singapore, lured by the stronger Singapore dollar.
“For me, Iskandar Malaysia can sustain simply because of the Chinese investment,” says the property agent, who also assists foreigners in applying for the Malaysia My Second Home programme. According to him, local banks have turned cautious on buyers who want to invest in Johor since May last year, when a report said the Johor property market was facing a housing glut. This prompted local developers to pin their hopes on Chinese investors.
Iskandar Regional Development Authority’s (IRDA) chief executive Datuk Ismail Ibrahim says he does not expect the slowdown in the property sector in Iskandar Malaysia to last long as there is a need for new homes.
To him, Iskandar Malaysia still needs about 500,000 homes to cater for an estimated three million-strong population by 2025. But currently, the state only has about 70,000 new homes.
“Iskandar Malaysia is growing at an annual rate of 7% to 8% and we expected the population to grow from 1.45 million in 2005 to three million in 2015. This population will need a total of 1.2 million homes,” he says via email.
However, observers say as most homes built earlier were for Chinese buyers, the mismatch in demand and supply is an issue the market will need to sort out in due course.
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