Slowdown in second half expected to continue…

Following a marked slowdown in demand for property in Iskandar Malaysia, property players expect further signs of a slowdown in the second half of the year, when marginal investors begin to take delivery of their units, especially those in the high-rise luxury segment.

Johor is expected to face a housing glut, the result of developers launching numerous projects in response to unprecedented demand; Chinese developers, in particular, have been aggressively pumping out units by the thousands.

The oversupply will be aggravated by a huge pipeline of incoming supply in 2015/2016. The number of units under construction rose 18 per cent between 2012 and 2013, Maybank IB noted in a property report a week ago.

KGV-Lambert Smith Hampton (Johor) executive director Samuel Tan, noting that the average time taken for a project to be completed and delivered in Johor was four years on average, said: “By the second half onwards, the trend will be more obvious.”

Data from the National Property Information Centre (Napic) indicated that there were 719,421 existing residential units in the state as at the fourth quarter of last year; 142,567 units were classified as “incoming supply”, that is, under construction, and 193,271 units were labelled “planned supply”, meaning these were units which had received approval but on which work hadn’t begun.

The service-apartment segment is probably of greatest concern.

Some 80,000 units have been approved in Iskandar, and about 10,000 are now being built, but it is unclear how many units have been sold.

This is despite housing minister Abdul Rahman Dahlan having promised to give home buyers access to sales data under a web exchange which was to have been set up by his ministry a year ago. This information is still publicly unavailable.

Property transactions in Johor have been hit hard, slumping in the last quarter by a third, quarter on quarter; nationally, the contraction was only 7 per cent.

Napic data noted, however, that prices had dipped only 1 per cent.

Kuala Lumpur registered 12 per cent fewer transactions; in Selangor, transactions grew 2 per cent, and in Penang, 8 per cent.

For the full year 2014, average home prices rose 9 per cent to RM290,116 (S$108,541), from RM266,304 in 2013.

Transactions continued to slip in the first three months of 2015, falling by about 6 per cent to 88,000 units from 92,900 units for the corresponding period last year.

With lending much tighter and consumers wary of economic uncertainties, realtors say that asking prices – while not heavily discounted, especially in the more populous and dynamic Klang Valley and Penang – are now more realistic.

Malaysia Institute of Estate Agents (MIEA) president Siva Shanker said he expects the “newly-completed speculative property” segment to come under pressure this year, with low take-up rates in the secondary market. Johor, being more exposed, could be more affected.

The chairman of MIEA’s Johor branch S Vadeveloo added that young Johoreans or those working in Singapore had bought these units in the belief that they could be “flipped” for a fat profit when completed – and this was before last year’s ban of the developer interest bearing scheme.

If a resale on the secondary market proves difficult or if tenants are hard to come by – Mr Vadeveloo thinks there aren’t enough expatriates in Johor willing to pay between RM4,000 and RM5,000 monthly to rent a high-end apartment – the owners will have to accept lower prices, rather than juggle mortgage payments.

“If one or two units go under the hammer, it’ll affect the price of others in the project,” KGV’s Mr Tan warned.

Auctions of high-end properties could be on the rise, said the local weekly Focus Malaysia, which recently reported a 5 per cent increase in the segment in general; it said that auctioneers are projecting the figure to hit a fifth in the second half of the year.

Notwithstanding the confirmation of the High Speed Train by PM Lee and PM Najib has provided the impetus for the demograpgic and business shifts into Nusajaya in the coming medium to long term. Stay tuned.

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