City & Country: Prices expected to rise with recovering economy

Most developers see Johor Baru housing prices likely to inch upwards for the next one to 1½ years if the economy continues to recover, a recent poll by KGV Lambert Smith Hampton revealed.

Samuel Tan (pix), director of KGV Lambert Smith Hampton, says that while it is difficult to say how much prices will rise, it is likely that values will adjust upwards with each new launch.

The JB housing primary market fared well in both 4Q2009 and 1Q2010, with developers pricing new launches at about 10% higher than 4Q2009, says Tan in presenting The Edge/KGV Lambert Smith Hampton Johor Baru Housing Property Monitor for 1Q2010.

Besides rising construction costs, Tan believes there are other factors pushing prices up. “I think there is a strong perception that the property market is recovering and people think they should buy now before prices rise further.

“There is also a limited supply of good products. In the 1990s, many developers unveiled mass products. Today, developers work differently. They are more cautious and cater for the home upgraders market in select locations.”

Buyers, Tan says, look for a quality design, a liveable environment and good security in a home, and these are only offered in certain housing schemes in Johor Baru. 

The number of developers in Johor Baru has also declined over the years. “Many developers were family-based companies, and these are rapidly being squeezed out by the bigger players.

“It’s a different market today. People expect quality, ready infrastructure and facilities. These require a high investment upfront, something which smaller companies find challenging, so the supply is limited. If you want quality products, you have little choice but to pay the price,” explains Tan.

The developers polled say consumers are getting more affluent. “If developers can get the best and right product in the right location, it is likely to generate good sales,” says Tan.

On the secondary market, Tan says there was an improvement in terms of transactions and pricing in the quarter under review, after a flattish 4Q2009, in housing schemes such as Taman Bukit Indah, Taman Perling, Taman Nusa Bestari and Bandar Baru Permas Jaya.

The government has allocated RM3.5 billion in Budget 2010 for infrastructure and basic amenities, as well as training programmes and socio-economic projects in regional corridors, of which a sizeable chunk will be spent on Iskandar Malaysia.

With infrastructure work at full steam, several housing schemes are attracting market interest. This is especially true of Bandar Baru Permas Jaya and Taman Perling, at one end of two highways thatare under construction, the Eastern Dispersal Link and the East Coast Highway respectively

The better performance was also influenced by improving regional and global economies, as well as the positive stock market performance and development in the oil and gas, and manufacturing industries, says Tan.

Manufacturing activities are on the rise with small and medium enterprises (SME) reporting higher job orders. Manufacturers from China were also coming into Malaysia as part of their continuous expansion overseas. 

“The growth in the manufacturing industry is something we have not seen in two years; this feels like a comeback of sorts,” Tan notes.

He says there are now about 10 multinational oil and gas companies operating in Johor Baru, creating over 4,000 jobs mostly concentrated in Pasir Gudang. Tan expects the entry of more players in the near future with operations expanding towards the southeastern side of Johor Baru.  

New offerings
One of the 18 new launches in 1Q2010 was Senibong Cove, Johor’s first waterfront residential project. This comprises apartments, cluster homes, bungalows and semi-detached houses with prices ranging from RM290,000 to RM1.8 million.

The RM1.7 billion project is a joint venture between Australian property developer Walker Corp and landowner Iskandar Waterfront Sdn Bhd, a subsidiary of Iskandar Investment Bhd.

Senibong Cove, located right next to the Johor Baru East Coast Highway, will be developed in phases over 10 years. Phase 1, comprising 244 houses, is expected to be ready in early 2012. Soft launched in late March,  40% sales have been reported to date.

“Once the new highway is completed in about two years, it will offer residents seamless travelling from town to Senibong Cove. If this project is a success, it will not only open up the eastern coastline of Johor Baru, but there will also be copycat projects,” says Tan.

With the development of Iskandar Malaysia, Johor Bahru can expect more demand for housing as workers pour into the city. This in turn will bring about higher occupancy rates, increase in rents, higher sales and eventually, higher property prices, he adds.

This article appeared in City & Country, the property pullout of The Edge Malaysia, Issue 806, May 17-23, 2010.

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