Horizon Hills

THE Johor property market continued to be weak in 4Q2015, as market sentiment remained low and pessimism increased as the global economy deteriorated.

“There was an obvious reduction in the number of launches of landed properties and high-rises in 4Q2015. At the same time, real estate agents reported difficulty in closing deals on the secondary market due to the measures to tighten housing loans,” says KGV International Property Consultants (Johor) Sdn Bhd executive director Samuel Tan, when presenting The Edge-KGV International Property Consultants Johor Baru Housing Property Monitor 4Q2015.

According to data provided by KGV International, only seven new non-landed projects or phases were launched in the last quarter of 2015. Two notable launches were Eco Palladium at Tebrau by Eco World Development Group Bhd and the first phase of Forest City at Tanjung Kupang by Country Garden PacificView Sdn Bhd.

Eco Palladium is part of the Eco Spring mixed-use development. KGV International says Eco Palladium consists of 400 retail offices with built-ups starting from 1,141 sq ft. Units are priced from RM570,000 and the development is 50% sold.

The four seafront residential blocks of Forest City in Tanjung Kupang comprise 560 apartments with built-ups from 893 sq ft. It opened for registration at end-2015 with indicative prices from RM1,200 psf.

New launches of landed properties in 4Q2015 included Precinct 4C1 of Arista at Taman Gaya, Ulu Tiram, by Daiman Group and Phase 9E02-Verana of Bandar Putra Kulai by IOI Properties Group Bhd.

The new phase of Arista comprises 72 cluster houses with built-ups from 3,512 sq ft. It opened for registration in November last year with prices from RM1.15 million. The new phase of Bandar Putra Kulai has 189 cluster houses with built-ups starting from 1,399 sq ft and selling for RM340,900. It has recorded a 50% take-up so far.

Tan believes the Johor property market is likely to remain quiet in the near future.

“Developers with unsold stock will be trying their best to clear it. I believe 1H2016 will basically be the same [in terms of new launches and property market activity] as what we saw at the end of last year,” he says.

According to KGV data, transaction prices for the majority of residential properties it sampled, be they landed or non-landed, remained flat in 4Q2015.

Nevertheless, landed properties performed relatively better than non-landed. “Although transaction prices of the landed properties we sampled were stagnant, the price trend is still moving upward. Non-landed properties we sampled is moving gradually downward,” Tan says.

For example, 2-storey terraced houses (built-up 1,820 sq ft) in East Ledang were being sold for RM1.35 million in 4Q2015, up from RM1.3 million a year ago.

Meanwhile, a 1,600 sq ft condo unit in Straits View Condominium, Permas Jaya sold for RM720,000 in 4Q2015, down from RM750,000 in 3Q2015.

The data shows that the price of units at Straits View Condominium reached its peak — RM750,000 in 2Q2014 — before staying flat for more than a year and dropping to RM730,000 in 4Q2015.

Notable Issues

While the property market was muted, it was not an uneventful quarter.

More multinational companies announced their business development plans in the state. Among them, VADS Bhd, the wholly-owned subsidiary of Telekom Malaysia Bhd, is investing RM130 million to build a data centre in Nusajaya Tech Park. Bosch continues to pursue further business opportunities in Johor after it opened its newest office in the state and Japanese international intermediate food ingredients supplier Fuji Oil Group leased a parcel of industrial land in Senai Airport City for business development.

“The press even reported that Alibaba Group plans to set up a logistics hub here,” says Tan.

He says that in Budget 2016, RM4.5 billion was allocated to support development initiatives in the Desaru Coast Destination Resort. “This will be spent from now until 2022. The Minor Hotel Group has announced its entry to the resort.”

Minor Hotel Group is a global company focused on restaurants, hospitality and retail trading. It is also one of Asia’s largest food and beverage companies with over 1,700 outlets operating in over 20 countries.

The Iskandar Regional Development Authority also announced that it is in talks for another three theme parks, making Johor a theme park destination.

The state will also see the establishment of a new medical centre, Vantage Bay Healthcare City. It is a medical city development that was replanned from a township project originally named Vantage Bay. The 300-bed Gleneagles Hospital started operations in 1Q2016 and it allows Singaporeans to use their Medisave (Singapore’s medical saving scheme) to pay their bills.

“The above developments are catalytic in nature. When implemented or operational, they create employment opportunities, which in turn stirs demand for properties,” Tan remarks.

However, he does not see a bright spot in the near future.

“I believe developers will be sourcing land away from the city where it is cheaper. This will be developed with affordable houses priced at RM500,000 and below, ” says Tan, adding that properties in the affordable price range are still very much in demand.

This is why Tan predicts that the secondary market may see improvement in the future as the average price is more realistic now.

“The secondary market will be more sought after as properties are priced within the reach of purchasers. However, the effective rate of sale will depend on the purchasers’ eligibility for loans,” Tan stresses.

He suggests that if there is any improvement in the local economy by the second half of the year, the property market, be it primary or secondary, may see increased confidence and transaction volume.

Foreign buyers in wait-and-see mode

Despite the weakening ringgit, Tan does not see it drawing more overseas property buyers to Malaysia, particularly Johor.

“I believe foreign buyers, especially from Singapore, are still on the sidelines watching both the property market and the exchange rates of the two countries,” Tan says. “They are still in wait-and-see mode.”

Tan agrees that the depreciated ringgit would attract Singapore buyers, provided Malaysia’s economy is convincingly strong.

“Under normal circumstances, the current property market would be attractive to Singaporeans, as their strong currency means a hefty discount for properties here.”

Not to forget the potential for future appreciation, which Tan says is likely as the transport connectivity between the two countries improves. Taking into account the cheaper ringgit, Johor properties should be selling like hotcakes to many Singaporean homebuyers.

“Their hesitation is due to the current economic situation and the volatility of the ringgit vis-à-vis the Singapore dollar and other currencies,” Tan says, adding that Johor will only see more Singaporeans and foreign buyers when the ringgit stabilises.

Tenant market soon?

Two of the core reasons Johor’s property market remained stagnant were the loss of foreign buyers and difficulty in obtaining financing for local buyers.

Considering the slow market, Tan says there could be a tenants’ market in the future.

“The demand for accommodation, especially high-rises, will be too low to match the incoming supply of completed serviced apartments. With a limited pool of tenants, the tenancy market will become competitive,” Tan says.

Based on KGV’s research, the majority of residential properties it sampled saw gross yields moving south in 4Q2015.

For example, a 2-storey terraced house in Horizon Hills recorded 4.5% gross yield in 4Q2015, down from 4.7% in 1Q2015.

At the same time, gross yields for all eight 2-storey semi-detached houses sampled also declined. For instance, the yield of a 2-storey semi-detached house in Taman Bukit Indah has dropped over the years and was last recorded at 4.3% in 4Q2015, compared with 6.7% in 1Q2011.

“Nevertheless, there will be exceptions, such as niche properties or properties in prime locations,” says Tan, adding that such properties are still receiving a fair rental demand now.

One example is Straits View Condominium, which recorded 5.8% gross yield in 4Q2015, up from 5.6% in 3Q2015. It is a luxury condominium located only a 15-minute drive to Singapore and 9km east of Johor Baru’s city centre.

Click here to check out the price trends for Tropez Residences, Johor.

This article first appeared in City & Country, a pullout of The Edge Malaysia Weekly, on Feb 29, 2016. Subscribe here for your personal copy.

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