Property: Positive outlook for year ahead

A poll by KGV Lambert Smith Hampton on selected developers in Johor shows that most believe the Johor housing market will be positive in 2010. They cited two main reasons — the spill over effect of Singapore’s Integrated Resort (IR) developments, and growing confidence in the market among investors and buyers. A small number, however, foresee a volatile market, believing that Malaysia’s falling foreign direct investment (FDI) and uncertainties in the global economy will have a negative impact.

Samuel Tan, director of KGV Lambert Smith Hampton Johor, agrees with the majority as several factors put into play over the course of 2009 are expected to change the landscape of the housing market in the next few years.

Tan says, the particular emphasis placed on infrastructure in the 2010 Budget — with an allocation of RM3.5 billion for infrastructure and basic amenities, along with training programmes and socio-economic projects in regional corridors — will have some positive impact for Johor, especially Johor Baru. A sizeable chunk of this budget will be spent on Iskandar Malaysia.

“Iskandar is a booming area, and many of the projects are moving ahead of schedule. Because of the infrastructure development, the housing market will feel the impact once these projects are fully completed in two to five years. Places where accessibility was a problem will see an increase in demand when accessibility improves,” says Tan, presenting The Edge/ KGV Lambert Smith Hampton Johor Baru Housing Property Monitor for 4Q2009.

As demand increases, so will prices, adds Tan. He foresees developers’ prices to move ahead of the secondary market as developers will take advantage of the new accessibility to up their prices. “I estimate the increase to be in the region of 10% to 20%, and the secondary market will follow but not necessarily within the same range,” he says.

The proposed capping of personal income tax at 15% for knowledge workers living and working in Iskandar will indirectly benefit the housing industry. The special income tax rate is applicable to those who apply to work in Iskandar before the end of 2015 and will be confined to certain sectors.

“The effect here is that the demand for housing will increase. This incentive will make Iskandar the focal point for knowledge and creative workers to reside, which means that houses in the market will be of a certain quality,” says Tan.

Also, he says, with the government allowing EPF contributors to use both current and future savings in account two to purchase houses, it will enable buyers to use the money to bridge the 5% or 10% needed for a downpayment.

Development in Singapore will also contribute to Johor’s housing market growth. Tan noted an increase in infrastructure work on the island, which will lead to more employment opportunities. “With development comes the need to procure labour, and we stand to gain,” says Tan.

The newly opened Singapore IR, developed in a move to boost the economy, may result in a higher cost of living in Singapore. Together with the targeted 17 million tourists by 2015 and increase in population, it is likely to create a very congested environment.

“Not everyone will welcome that kind of environment. There will be those who want a better quality of life and they’re likely to look at Johor Baru’s properties for a second home or as a weekend stay. This way, they can also stretch their dollars. It’s already happening and I expect the numbers to increase in the next few years,” says Tan.

Lastly, he says, in an uncertain economic climate, people would prefer to invest in something more tangible, like property, which is also a good hedge against inflation.

In 4Q2009, little change was seen in the secondary market with prices of properties sampled remaining flat. The primary market, on the other hand, performed well with the quarter being the best in 2009 for some developers.

Tan noted that even though prices in the primary market were higher than the secondary market, people were more willing to buy from developers because of the better design and quality of the houses.

“Gone are the days when developers would build houses with little thought to design and quality. Developers now are coming up with designs that are creative and liveable, thus upping their appeal,” explains Tan.

As with the trend in Kuala Lumpur and Selangor, more people are opting for a gated and guarded environment, mainly for security reasons. “Given half the chance, those who want to buy a new house would want a gated and guarded residence,” says Tan.

The method of selling has changed, he adds. More and more developers, in partnership with banks, are offering hassle free, zero cost purchasing, where the cost of entry is significantly reduced or waived and legal and stamping fees are borne by the developers. “These are great incentives to encourage home ownership. It’s fast becoming the only way to sell houses these days,” offers Tan.

The quarter under review also saw the signing of a definitive agreement between Khazanah Nasional Bhd (Khazanah) and the United Kingdom’s Pinewood Shepperton plc to develop Pinewood Iskandar Malaysia Studios (PIMS).

The RM400 million facility, scheduled to open in early 2013, will offer high-definition equipped TV studios and film stages, workshops, offices and post-production suites as well as a back lot. PIMS is targeting productions from the region.
The development will benefit the western side of Johor Baru, which should see an increased demand for housing and other amenities, says Tan.

This article appeared in City & Country, the property pullout of The Edge Malaysia, Issue 792, Feb 8-14, 2010.

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