Property slowdown more evident in Johor

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#1
Property slowdown more evident in Johor BY JOHN LOH

Country Garden's project site in Danga Bay. Property agents say country Garden hasn't raised its maximum discount beyond 21% since launch day.

CRACKS are starting to show in Iskandar Malaysia’s once-booming property market.

UEM Sunrise Bhd, considered a bellwether to Iskandar, this week slashed its sales target for 2014 to RM2bil from RM3.2bil, citing weakness in the market for homes in the economic corridor south of Johor.

This comes as a slew of high-rise apartments – many of them from the China developers, and many of them on the waterfront – are set to flood the market.

And things could get worse before they get better.

A report in the Financial Times on Wednesday says China Vanke Co, the country’s biggest developer, is offering up to US$325,000 (RM1.02bil) in discounts via e-commerce site Taobao, to entice homebuyers amid slackening demand.

Sluggish sales and an oversupply in the second and third-tier Chinese cities are driving prices lower, Bloomberg reported.

Here, the talk among property circles is that Country Garden Holdings Co, which last year rolled out a record 9,000 high-rise units on the coastline enclave of Danga Bay, could follow suit.

It is believed that about half of the condominiums in Country Garden Danga Bay remain unsold, and the Guangdong-based property giant is now looking increasingly desperate to unload its stock by either hiking discounts of dropping prices, although the exact quantum is unknown.

Company officials did not respond to text messages from StarBizWeek seeking comment.

The Danga Bay project was launched with much fanfare last year at an average of RM900 per sq ft.

Most of the real estate firms in Johor Bahru have been roped in to sell homes for Country Garden Danga Bay, and it is dangling commissions of up to 8% versus the typical 2%-3% as an added incentive, brokers tell StarBizWeek.

In fact, says an agent, three people were spotted carrying sandwich boards near a bank in Johor Bahru last month advertising units in Country Garden Danga Bay. It is not clear who they were representing, but property executives speculate they could be acting for Country Garden’s foreign buyers.

Channel checks with agents reveal that the Phase 2 units are going for the same price for all floors, a departure from the usual practice of pricing the topmost levels at a premium.

Buyers can opt for the promotion price, which in some instances adds up to a 40% discount, provided they pay for the property in cash over several transactions. Doing so will shave RM300,000 off the price of a single-room unit measuring between 400 to 500 sq ft, which would normally cost RM800,000.

Country Garden hasn’t raised its maximum discount beyond 21% since launch day, say agents familiar with the matter, but it may not be long before the company has to dump prices.

Right next door, China’s state-owned Greenland Group will soon launch 2,478 units of apartments and townhouses, according to PA International Property Consultants Sdn Bhd executive director V. Sivadas.

R&F’s Princess Cove project will introduce about 3,000 units of apartments in the first phase, and another 30,000-plus units thereafter.

“There are also a few other projects in the Danga Bay area being prepared for similar types of developments,” he tells StarBizWeek via e-mail.

The problem here is clearly one of mismatch between demand and supply, Sivadas points out.

Demand remains strong for affordable homes costing below RM400,000, yet much of the new supply is heavily skewed towards high-rises.

“Our records indicate that slightly more than 100 high-rise projects scattered throughout Johor Bahru and Iskandar Malaysia, comprising a little over 100,000 units, are expected to come onstream in the next few years.

“One third of that is within the R&F site, and another 10% within known projects at Danga Bay, where Country Garden and Greenland are based.

“We expect more high-rise projects to be planned within waterfront areas in the Danga Bay region, such as Stulang Laut, Bayu Puteri and Puteri Harbour. The proposed Forest City at the Second Link in Nusajaya is another huge project on the horizon,” he quips.

All that has led to a visible slowdown over the past 10 months.

“Many investors, particularly foreigners (the main target for high-rise projects in the waterfront areas), appear to be adopting a wait-and-see attitude.

“We have not helped ourselves by changing policies and the price threshold limits. We, however, do not expect to see a crash in the market unless there is a catastrophic failure at the national, regional and global levels,” Sivadas notes.

“In property development, success is predominantly driven by demand, not supply. There is an urgent need to boost demand and facilitate ease of purchase by locals as well as foreigners.

“There needs to be more employment generators in Iskandar Malaysia and facilitated migration and immigration to ease or solve acute labour shortages across many sectors. There is also a need to seek a balance to ensure controls on speculative activity, which were prevalent for the past few years up to end-2013.

“In the meantime, the question almost everyone is asking is, who will occupy the vast numbers of high-rise, high-priced waterfront units which were mainly purchased for investment?” he asks.

“We are not sure at the moment.”

But there are bright spots, says Landserve (Johor) Sdn Bhd executive director Wee Soon Chit.

“I believe that value-for-money products will still see demand. For example, Botanika@Bayu Puteri (by Tebrau Teguh Bhd) is doing well because their prices range from RM430 to RM500 per sq ft.

“We expect the industrial sector to grow further due to demand from Singapore industrialists, especially the Jurong area. The Singapore government recently announced that the Jurong area will be re-zoned, and the victims will be industrial companies who have no choice but to relocate,” Wee reasons.

A number of recent Iskandar launches, like Sunway Bhd’s Citrine office suites and Eastern & Oriental Bhd’s Avira Terraces, were snapped up.

But sentiment could get worse in 2015-2016, when a large number of the high-rises sold during 2012 and 2013 are handed over, according to Maybank IB Research analyst Wong Wei Sum. The problem is especially acute in hotspots such as Nusajaya, Medini and Danga Bay.

“We welcome foreign direct investment into Johor, but not at the expense of the local players,” laments one industry executive.

“It was going so well until a couple of years ago. Now they seem to have killed the goose that laid the golden egg.”

While the Chinese may be accustomed to building thousands upon thousands of apartments, the Malaysian market simply can’t take that kind of volume, the executive says.

“I hope the market will cool just enough to make them realise that. The state government also needs to take a good, hard look at the situation.”

Source: The Star
“risk comes from not knowing what you’re doing.”
I don’t look to jump over 7-foot bars: I look around for 1-foot bars that I can step over.
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#2
"“We welcome foreign direct investment into Johor, but not at the expense of the local players,” laments one industry executive."

Your JB govt is the one who shot itself in the foot....with the min Rm 1m price and Causeway toll fight with SG...
"... but quitting while you're ahead is not the same as quitting." - Quote from the movie American Gangster
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#3
Dun think the market will cool loh, more like gonna be frozen with half completed projects littering the coastline.

Building expensive high rise apartments in areas where you have cheap ex-oil palm plantation land is one thing, building those things on expensive "Reclaimed land" at Danga Bay is just ridiculous.

There are no fundamentals in terms of rental to support those expensive million ringgit apartments so just a matter of time for prices to "revert to mean" , which in JB would be half that or less.

Once the demand from China runs out, governments which had allowed too much penetration of Chinese interests will wish they had been much firmer on foreign investment rules.

Once again, greed causes people to do stupid things..
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#4
Best case scenario, prices drop to a point where locals can afford.(which is a huge drop of about 40-50%)
Worst case, china developers pack up and go leaving half completed projects. Either way it is a lose-lose situation.

There is absolutely nothing going for the ridiculous number of houses being built around there.
Except for a few small factories, Johor isnt even half as vibrant as K.L. There isnt enough high paying jobs to support
high housing prices. I used to frequent JB for work a couple of times a week....nah, I would not stay at JB.

I would however, consider buying a quality durian plantation in msia if it's not too far away. Even if it does not make any money, at least I would be happily eating the durains.
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#5
Those Malaysian living in KL , how many of them will buy ?
How many Johoreans can afford the price ?
Foreigners will form the big pool of buyers , from China and Singapore ?
How many foreigners who buy will really stay there ?
Who will be the potential tenants if these houses are not owner occupied ?
“risk comes from not knowing what you’re doing.”
I don’t look to jump over 7-foot bars: I look around for 1-foot bars that I can step over.
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