Adapting to Iskandar’s market demand

DEVELOPERS have begun to make adjustments to mitigate the slowdown in Iskandar Malaysia’s property market. These include adapting offerings to suit demand and focusing on the strengths of the brand whether it is expressed through products or customer service.

Industry players say the Iskandar market is experiencing a slowdown because of the property cooling measures, Goods and Services Tax and overall subdued sentiment.

“Buyers are more cautious in selecting the properties they want to buy. Those who already have a few properties have a lower margin of financing when seeking housing loans, while first-time buyers are looking at properties priced below RM500,000. Banks, on the other hand, are getting stricter in terms of approving housing loans. All these are affecting the market,” observes UEM Sunrise Bhd managing director and CEO Anwar Syahrin Abdul Ajib.

The master developer of Nusajaya (Flagship Zone B of Iskandar) has not been spared the effects of these market conditions. “Sales for 1H2015 were RM600.4 million compared with before the measures were announced in October 2013, when our sales were RM1.7 billion for 1H2013,” says Anwar Syahrin.

Meanwhile, WCT Land Sdn Bhd director Choe Kai Keong says the company has deferred some launches to next year. UEM Sunrise has also taken the same route, says Anwar Syahrin, especially in 2014 when the developer focused mainly on unsold inventories in East Ledang, Almãs and Nusa Idaman.

In a weaker property market, the strategy, he says, is to “offer a good mix of quality products that appeal to our customers from all income segments and target markets with an equal balance between landed and high-rise strata units”.

The developer will also launch products that fit market needs. One such need is for affordable homes, which it responded to when it launched Bayu Nusantara.

The launch in September last year involved 351 units of 2-storey houses and shopoffices, of which 71% have been taken up. Most of the unsold units are at the solicitors or loan application stage, says Anwar Syahrin.

UEM Sunrise, together with Denia Development Sdn Bhd, has delivered 3,736 units of residential properties and shopoffices in Taman Nusantara. It plans to launch another affordable home development called Denai Nusantara by the end of the year.

“Consisting of five blocks, 12-storey each, we plan to launch 1,109 units of 3-bedroom homes, with built-ups of 1,000 sq ft, priced at RM150,000 each, and 108 units of 1-storey shoplots, with built-ups of 1,200 sq ft, priced at RM200,000 each,” Anwar Syahrin says, adding that plans are underway for the development of two other affordable home projects, Citra Nusantara and Gerbang Nusantara.

Not resting on laurels

Iskandar Waterfront Holdings (IWH) is also feeling the effects of the slowdown. The master developer, which seeks out and engages with strategic partners to sell and develop its 4,300-acre waterfront landbank in Danga Bay (within Flagship Zone A), says the sentiment is subdued. Executive vice-chairman Tan Sri Lim Kang Hoo says this is due to political uncertainties, an unstable ringgit, the general economic slowdown and dismal global outlook.

Although IWH has secured strategic partners in China-based Greenland Holdings Group Ltd, Hao Yuan Investment Pte Ltd and Country Garden Holdings Co Ltd, as well as CapitaLand Malaysia, Temasek Holdings and Brunsfield Group, the company cannot afford to rest on its laurels, says Lim.

“We continue to talk to prospective investors to woo them to invest in our landbank. As I speak, a high-powered IWH team is in Beijing talking to several leading China banks. We are also talking to potential investors from Japan, Indonesia, South Korea and Singapore,” he says, adding that beyond the Johor Baru area, the company is considering a resort/hotel development in Desaru.

“IWH or its associate company is also talking to the Negeri Sembilan government to develop a waterfront project in Port Dickson, and is also exploring buying land in KL,” says Lim.

Acknowledging that the property market will remain sluggish in the coming year, Sunway Bhd managing director of property development Malaysia/Singapore Sarena Cheah says things will start to settle when there is an improvement in the economic outlook and sentiment.

Meanwhile, the company, which is developing Sunway Iskandar, is keeping a close watch on the market and adjusting the pace and scale of its launches accordingly. To date, the developer has launched 167 designer office units (fully sold) and 328 units of Citrine Residences (60% sold).

“Our strategy remains unchanged, and that is to continue to offer a strong value proposition to our customers by leveraging our build-own-operate business model to ensure that we have continued momentum and that our communities are viable and sustainable for the long term,” Cheah says.

Continuing to invest

This month, Sunway will be having previews of its first landed properties and retail shops that are located next to Emerald Lake. Located on a hilltop with exclusive lakeview, Emerald Residence is a low-density development that comprises 222 units of link homes, courtyard homes, garden villas, link semidetached homes and semidees. Emerald Boulevard features 88 units of 2- and 3-storey retail shops.

UEM Sunrise says it is still actively pursuing projects in Iskandar. “We continue to work on four township developments in Nusajaya — East Ledang, Puteri Harbour, Nusa Idaman and Nusa Bayu,” says Anwar Syahrin.

The developer is also working on various catalytic developments in Gerbang Nusajaya, such as FASTrack Iskandar and Nusajaya Tech Park, and Puteri Harbour, such as the Marina, Boulevard and Convention Centre/Hotel.

“We will continue our efforts to deliver industrial land/plots such as SiLC Phase 3 and Nusajaya Tech Park, [both of which are in very high demand]. Such industrial areas will spur employment and, eventually, contribute to population growth in Nusajaya,” he says.

Anwar Syahrin says its joint venture company with Ascendas — Nusajaya Tech Park Sdn Bhd — entered into an agreement with Mitsui & Co Ltd in July to offer “Build-to-Suit” properties for lease in Nusajaya Tech Park. The joint venture marks the first Japanese partnership for industrial parks in Nusajaya, he adds.

The following month, UEM Sunrise launched its first landed development in Puteri Harbour, called Estuari Gardens, with an estimated gross development value of RM634 million. “A total of 83 units of 2-storey super-link houses in the Serenity Aralia precinct were released and the take-up has been encouraging,” says Anwar Syahrin.

“Estuari Gardens is Phase 1 of the overall development of Estuari, estimated to be valued at RM7.4 billion,” he adds. The company also plans to launch Phase 1 of its mid-market residential development called Melia Residences this month.

Although UEM Sunrise has a sizeable landbank in Iskandar, the company is also active in the Klang Valley and Australia. Its projects Down Under are to an extent helping to cushion the impact of the slowdown.

UEM Sunrise conducted a global exclusive preview of its second Melbourne CBD development — Conservatory — in August, and commenced construction for Aurora Melbourne Central in September.

In July, the developer bought its first city-fringe property in Melbourne. The 0.387-acre site on St Kilda Road was acquired for A$58 million (RM161 million).

It is also largely business as usual for S P Setia Bhd, one of the pioneer developers in Iskandar. Acting president and CEO Datuk Khor Chap Jen says the company continues “to launch, promote its offerings and provide quality customer service”.

“S P Setia is famous for being able to adapt its products to market demand as it has the breadth and depth to do so. That was how it weathered the 1997/98 Asian financial crisis. At the time, we had planned to launch 2-storey link houses. But with the crisis, we quickly changed plans to 1-storey link houses with a lower price tag. I believe we were the only property developer selling well at the time,” he says.

“Fast forward to the current slowdown, we are continuing with the proven strategy of adapting our offerings to the needs of the current market. The focus is currently on affordable housing,” Khor says, adding that though its projects continue to garner interest from property buyers, many of them are unable to obtain approval for their housing loans due to the tighter bank regulations.

“This year, we have launched 287 units of 2-storey terraced homes in Setia Eco Gardens and 24 units of shops in Setia Indah. Commercial developments are faring well as we see all the non-bumiputera shop units already taken up. Projects in the mid-priced range are also seeing good take-up, with encouraging sales in the past four to five months,” he says.

Khor also says the buyer profile remains consistent with the slight increase in interest from Malaysians, especially those who live in Johor but work in Singapore. “The uniqueness of Setia is that all our townships are located strategically, coupled with ready amenities and easy accessibility, so we are able to attract the attention of long and short-term buyers. Furthermore, with the brand name S P Setia has built, especially in Johor, our buyers know that it is synonymous with quality, reliability and innovation.”

Progressing with plans

Eastern & Oriental Bhd, whose first phase of 208 units of Avira Garden Terraces was well received, is progressing with its plans. Benjamin Ong, its general manager of operations (JB), says the developer is planning the launch of the second phase soon and already has a “steady stream of registrants recorded”.

“We are progressing with plans to realise Avira’s concept of Prolonging Quality Active Years. In this regard, the planning for Avira’s dedicated 12.5-acre Wellness Sanctuary, earmarked to be a vital element in bringing the wellness concept to life, is taking shape,” he adds.

“The Wellness Sanctuary will be equipped with holistic wellness programmes … apart from that, the Wellness Sanctuary will be designed to accommodate long-term wellness programmes for residents, such as private villas, additional treatment rooms for the spa area, and two gymnasiums with a wider variety of fitness equipment.

“As part of our marketing efforts, we have just launched a mobile application for Avira home buyers to keep tabs on the progress of their property, as well as to be updated on future launches.”

The E&O brand has proven its resilience and has weathered economic downturns, says Ong. “By being agile, flexible and always prepared to leverage opportunities when the market turns, we have successfully withstood several market tests by undertaking the appropriate prudential measures suited to the different scenarios and as a result, emerged even stronger each time.”

Wish list

Given the challenging near-term outlook for Iskandar, developers hope the Iskandar Regional Development Authority (IRDA) can play a role in mitigating some of the downside risks. Choe feels that all stakeholders “need to re-energise the publicity regionally, especially in Singapore, on the future Iskandar initiatives to comfort and attract investor confidence”.

Khor agrees and suggests that IRDA organise a media campaign to counter all the negative news that is building up around the Iskandar region. “International roadshows would help us to promote the liveability and quality of living at Iskandar, which will attract foreign buyers,” he says.

Choe is hoping that the Real Property Gains Tax exemption on revenue gain for property disposal, which will expire in 2020, will be extended. “This will help stir up interest in Medini Iskandar again,” he says.

Click here to look at some properties in Johor.

This story first appeared in The Edge Malaysia’s “Iskandar Malaysia Special Report” on Nov 9, 2015. Subscribe here for your personal copy.