What’s in store for us in 2016

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Petronas Twin Towers in KLCC. 2016 will be a tough year for the Malaysian property market. Photo: Khalil Adis Consultancy

 

The brew of the weakening Ringgit, oversupply in the property market and political climate could impact buying sentiments for this year.

By Khalil Adis

Malaysia faces a delicate balancing act in 2016 in providing affordable homes for locals while trying to lure foreign investors to its property market. The announcements of Budget 2016 clearly dictate that the mass market segment will drive its property market ahead.

However, there have been no revisions to the Real Property Gains Tax (RPGT), minimum purchase price and state levies in popular states like Johor and Kuala Lumpur.

This would make it even more challenging to attract foreign buyers despite the falling Ringgit.

In addition, negative sentiments from the political developments in the country and the perceived oversupply in the market may have spooked potential investors and could result in a “wait-and-see” situation.

With developers marketing high-end projects, they are faced with a difficult situation of finding the right group of buyers in an already small and niche market.

With the pressure to move their existing stocks, they may offer further discounts and other attractive packages.

This would certainly spell good news for buyers with plenty of good deals to be found in the market.

The secondary market will be especially attractive in 2016 as there will be those who are desperate to sell, especially with so much supply in the market.

With this in mind, bargain hunters looking for already completed properties will be spoilt for choice.

Household debts across Malaysia are also on the rise.

This, combined with the increased cost of living, will mean some cannot service their mortgages and will have their homes repossessed.

Therefore, auction properties are expected to rise accordingly, presenting very good buying opportunities for savvy investors.

Here’s a breakdown of the outlook for 2016 by the different popular markets.

Iskandar Malaysia

Iskandar Malaysia received very little interest in Budget 2016 with the exception of the Eastern Gate – in the corridors of Pasir Gudang and Pengerang.

In all, RM18 billion has been allocated for the massive oil and gas Pengerang RAPID project that is expected to have a spillover impact in Pasir Gudang.

In addition, the Budget had also allocated for a new public hospital in Pasir Gudang to cater to its growing population.

While analysts and market watchers are feeling somewhat disappointed with the allocation of budget for Iskandar Malaysia, it also confirms what many have been saying – the Eastern Gate is poised to be the next growth centre in Iskandar Malaysia.

As more jobs are being created, this will fuel demand for homes in and around the Eastern Gate.

The great thing is property prices here are still relatively affordable for locals averaging around RM300 toRM400 per sq ft.

In addition, the state and federal government had allocated spending for public infrastructure.

These include the upgrading of the Pasir Gudang Highway.

In fact, Dato’ Mohamed Khaled Nordin, Chief Minister of Johor had announced that 865 units of affordable housing will be built here by 2018.

Therefore, Johoreans hunting for their first home should target this area.

As for foreign buyers, although they are far and few between, I would say this is the best time to buy a property in Iskandar Malaysia as some developers are desperate.

It is best to get a home for your own stay rather than for investment.

If you are buying for investment, hotel suites are a good choice especially those in JB Sentral and Nusajaya.

Kuala Lumpur

Despite the falling Ringgit, the property market in Kuala Lumpur is admittedly quiet.

Foreign investors are few and far between, while locals feel that they are priced out of the market.

PR1MA homes that are planned around transport hubs and train stations, is a good opportunity for locals to start their property hunts.

A total of 5,000 units of PR1MA and PPA1M houses will be built in the vicinity of LRT and monorail stations in 10 locations, including Pandan Jaya, Sentul and Titiwangsa.

In my opinion, Bangsar is a “to-go-to” location as it has an affluent neighbourhood with plenty of amenities, trendy cafes and shopping malls.

While rentals in Bangsar have remained relatively flat since 2014 remaining at RM3.35 up to the first quarter of 2015, in the secondary market, the capital values based on transacted price has strengthened to RM898 per sq ft.

Thus the secondary market is where all the good deals are.

Selangor

Government linked companies (GLCs) are planning to build 800 affordable homes near MRT lines.

With the Ampang LRT Extension Line now open from Sri Petaling all the way to Putra Heights, plus future extensions along the Kelana Jaya Line, locals should look for housing projects in and around the vicinity.

Kwasa Damansara is also a hot area to watch ou他 for as it will contain two stations within the township.

Penang

The RM27 billion Penang Transport Master plan will drive the property market on the island.

The LRT line will comprise a 17.5km elevated line stretching from Penang International Airport all the way to Menara KOMTAR.

Penangites buying their first homes should look to the Bayan Lepas and Gelugor area near the LRT station.

Those who are priced out from the island should look to Seberang Prai.

For foreigners, avoid the Gurney and Batu Ferringhi area as a massive project being planned will result in massive traffic congestions.

Instead look to properties along the LRT line. I particularly like the Georgetown area due to the heritage sites and abundance of delicious local food there.

Malacca

Hotel suites is a good product to consider in Malacca due to the shortage of quality hotel rooms.

Due to the increasing number of visitors to Malacca, hotels and shopping centres have benefitted immensely from the spill over in the tourism industry.

There is strong pent-up demand among tourists for 4 to 5-star hotels in the city centre due to its convenience and easy access to tourism hot spots like the UNESCO World Heritage Site, Jonker Street and shopping belt.

When investing in hotel suites, make sure to go for mixed-use development with hotels, shopping centres and residential components.

This will ensure good traffic to maximise on your return of investment.

 

This story was first published in the January 2016 issue of iProperty.com Malaysia.

Jurong East and Nusajaya

Property values around Jurong Lake Distict and Gerbang Nusajaya are expected to rise thanks to the iconic High Speed Rail (HSR) project.

 Jurong Lake District is fast taking shape as a decentralised CBD with almost 500,000 sq m of office space plus 200,000 sq m of retail, food & beverage and entertainment space called Jurong Gateway with plans for 2,800 hotel rooms. Photo: Courtesy of the Urban Redevelopment Authority (URA)

Jurong Lake District is fast taking shape as a decentralised CBD with almost 500,000 sq m of office space plus 200,000 sq m of retail, food & beverage and entertainment space called Jurong Gateway with plans for 2,800 hotel rooms. Photo: Courtesy of the Urban Redevelopment Authority (URA)

By Khalil Adis

Jurong East in Singapore and Gerbang Nusajaya are set to enjoy further growth as they become new regional centres thanks to the iconic High Speed Rail (HSR) between Singapore and Malaysia although there will be a delay by two years to 2022 for that to fully materialise.

First announced in 2010, the project is the first of its kind in the region which will cut travel time from Singapore to Kuala Lumpur to a mere 90 minutes.

This is expected to spur cross-border investments on both sides of the causeway and enhance property values at the eight HSR stops spanning from Sungei Besi in Kuala Lumpur all the way to Jurong East in Singapore.

At the recent Leaders’ Retreat in Singapore, Singaporean Prime Minister Lee Hsien Loong revealed that Jurong East has been chosen as the site for the Singapore terminus which will tie in with the government’s overall plans to transform the area into the country’s second Central Business District (CBD).

Noting that the project has received great attention both domestically and internationally, Lee and Malaysian Prime Minister Datuk Seri Najib Tun Abdul Razak said the HSR project will be a game-changer.

“Both Leaders were encouraged by the support and attention from the global community and looked forward to further progress on this game-changing iconic project which will boost connectivity, facilitate travel between Kuala Lumpur and Singapore, enhance business linkages and improve people-to-people ties,” read a statement from the Prime Minister’s Office (PMO).

Singapore’s new gem in the making

Back in 2008, the Urban Redevelopment Authority (URA) had announced the Draft Master Plan for Jurong Lake District which comprised a new CBD and commercial hub along with retail malls and hotels.

The area is fast taking shape as a decentralised CBD with almost 500,000 sq m of office space plus 200,000 sq m of retail, F&B and entertainment space called Jurong Gateway with plans for 2,800 hotel rooms.

Once a sleepy neighbourhood blessed with a lake, Jurong East is now buzzing with life and currently home to a Grade ‘A’ office tower. Called Westgate, this is where CapitaLand, one of Asia’s largest real estate companies, now calls home. Meanwhile, Genting Hotel became the first hotel to make its mark in the district in April 2015.
This growth is set to receive a further boost from tourists and business travellers from Malaysia once the HSR project is completed as it will enhance the area’s desirability.

A property values booster
With the announcement of the HSR station within the area, property values are set to rise even more especially in the current bearish market.

If we follow historical trends in Singapore, properties which are located within close proximity of transportation hubs such as MRT stations tend to appreciate between 5 to 10 per cent over a long period of time.

Further boosting the property market in the vicinity is the demand to live in and around Jurong Lake District, thus leading to higher asking prices.

Homes near the terminus such as those in the neighbourhoods of Jurong East, Lakeside and Taman Jurong are already reporting a 1 per cent increase in asking prices despite the weakening market which is the result of the various cooling measures in place.

These neighbourhoods are 5 minutes away from Jurong Country Club which has been identified as the site for the terminus location

A matching CBD in Nusajaya

Gerbang Nusajaya's press conference. This township will serve as the gateway to Malaysia with a HSR station and mixed-use development. Photo: Courtesy of UEM Sunrise.

Gerbang Nusajaya’s press conference. This township will serve as the gateway to Malaysia with a HSR station and mixed-use development. Photo: Courtesy of UEM Sunrise.

While the station in Nusajaya has not yet been announced, government officials have indicated that it will be located close to Motorsports City near East Ledang.

In April 2015, Nusajaya’s master developer UEM Sunrise Berhad further revealed its comprehensive development plans for Gerbang Nusajaya which will have its own CBD similar to Jurong Lake District.

“Gerbang Nusajaya is the gateway to Iskandar Malaysia and will serve as the commercial and business engine for Nusajaya,” said the company in a statement.

Spread across 4,551 acres of land, this second phase of Nusajaya’s development will be designed with catalytic industries similar to the various economic drivers in Nusajaya and Medini.

Both these areas are home to tourism, logistics, finance, information communication technology and creative industry establishments just to name a few.

In anticipation for the HSR terminus in Gerbang Nusajaya, a number of catalytic developments have been planned.

They include Nusajaya Tech Park, a 519-acre integrated eco-friendly tech park and FASTrack Iskandar which is a 300-acre ‘motorsports city’.

This is the closest hint we can get on the possibility of the Nusajaya HSR station being located here.

With a gross development value of RM42 billion, property values for existing homes in Nusajaya and Medini will enjoy a boost from the economic spillover.

As it stands, condominium prices here range from RM800 to RM1,000 per sq ft.

In the near future, it could possibly increase by 5 to 10 per cent as the area will be developed over a period of 25 years.

An estimated 76,000 direct job offerings and 137,000 indirect job offerings are expected to be created as a result.

UEM anticipates Gerbang Nusajaya to have an estimated 220,000 population upon its completion, tying it nicely with its site for Nusajaya’s HSR terminus.

This article was first published by iProperty.com in its June 2015 issue.

A word of caution

While agents and developers say demand is somewhat lukewarm right now, they
are expecting a rush in last-minute sales. However, there are still some areas that
need greater clarity.

Petronas Twin Towers in Kuala Lumpur. Photo by Khalil Adis.

Petronas Twin Towers in Kuala Lumpur. Photo by Khalil Adis.

By Khalil Adis

There is a saying among my friends in Malaysia that things over here usually happen “slowly but surely”.

I did not realise this until I made a casual observation when I was recently in Kuala Lumpur with a group of investors from Singapore.

The investors were looking for investment opportunities in the city before the Goods and Services Tax (GST) kicks in on 1st April this year.

The introduction of the tax which was first announced by Prime Minister Najib Razak during the Budget 2014 means that those who are looking to purchase commercial properties in Malaysia will need to pay an additional 6 per cent GST charge after it is implemented.

As foreigners, we can only purchase properties above RM1 million so the cost saving works out to RM60,000 which is quite a lot.

While the urge to buy was quite apparent among foreigners, it appears to be a different case among locals. A quick check with local agents and developers during the site visit seemed to suggest that there was no buying frenzy among locals as yet as according to them, “Malaysians will take time to react until it is close to the deadline.”

Coming from a Singaporean’s perspective, we found it rather strange as we in Singapore are generally very ‘kiasu’ (afraid to lose) and would rush to buy as the cost savings are quite substantial.

This is especially true in regards to the current market as properties in Singapore are relatively expensive and are affected by the various cooling measures such as the Total Debt Servicing Ratio (TDSR).

In fact, only the well-to-do can afford to invest in them.

As such, for those who are adversely affected by the various cooling measures in place, Malaysia is the next closest market to invest in.

Additionally, the strengthening of the Singapore dollar versus the Malaysian ringgit has made it an even more attractive option.

An ambiguous situation

In a recent news report citing Deloitte Malaysia, tax consultants were reported as saying that five out of 10 buyers are “not in a rush to buy”.

The rest, they say, see “no point in rushing to buy now”.

If so, why are 50 per cent of Malaysians not rushing in to purchase or looking to purchase property after the GST kicks in?

Perhaps there is more than meets the eye which can help explain the reluctance among locals.

Firstly, you still need to pay the GST charge even if you had bought your property before the cut-off date.

While it appears on paper that the tax does not apply should you sign your Sales and Purchase Agreement (SPA) before 1st April 2015, it is actually not that clear-cut.

Experts and property developers who I have spoken to saythe GST being payable on commercial properties depends very much on the progress of the project’s construction.

For example, should you sign your SPA before 1st April 2015 when the property is only 10 per cent completed which would typically put it at the piling stage, there is no GST charge.

However, there is still a GST charge on the remaining 90 per cent or RM900,000 on the property after that date.

This works out to RM36, 000.

Other grey areas

The Meridin@Medini which has SOVO units. Picture: Courtesy of Mah Sing Group.

The Meridin@Medini which has SOVO units. Picture: Courtesy of Mah Sing Group.

Secondly, there are still grey areas surrounding certain property types.

Several kinds of ‘hybrid properties’ have been introduced in Malaysia over the years which blur the line between commercial and residential developments.

While small office home offices (SOHOs) and serviced suites in Singapore are considered commercial properties, this is not the case in Malaysia.

In fact, during the site visit to Kuala Lumpur, I came across a development that is in a commercial zone but has a residential zoning use under the Housing Development Act (HDA).

Such units include serviced apartments, serviced suites, SOHOs, small office flexible offices (SOFOs) and small office versatile offices (SOVOs).

Will fools rush in?
What about the remaining five out of 10 investors?

Are they considered foolish or savvy if they rush to buy a commercial property before the stipulated deadline?

Depending on how you look as the situation, “there is always room for negotiation” according to my Malaysian friends.

Regardless of what your decisions are, it is perhaps best to do your homework by writing in to the relevant government bodies or engaging a lawyer to get some clarification on the
issue before you proceed with your purchase

This article was first published in the March 2015 issue of iProperty.com Malaysia.

Malaysia property outlook 2015

2015 is expected to be a challenging year ahead for the Malaysian property market. Still, there are opportunities to be sought by both locals and foreign investors.

Petronas Twin Towers in Kuala Lumpur. Photo by Khalil Adis.

Petronas Twin Towers in Kuala Lumpur. Photo by Khalil Adis.

By Khalil Adis

The mass market and mid range property sector will continue to drive the domestic market this year due to the loan curbs imposed by the Malaysian government in 2014 for multiple property owners.

In a recent survey, iProperty.com, citing statistics from Bank Negara, said there was a decline of 4 per cent from a peak of 15.8 per cent in “credit-fuelled speculative purchases of residential properties from borrowers with three or more outstanding housing loans.”

They now make up for only 3 per cent of housing loan borrowers.

As such, the market will favour first timers as they are able to get up to 90 per cent loan and are considered as genuine home owners.

In addition, major urban centres across the country are expected to see strong demand for affordable homes due to the federal initiated PR1MA scheme.

Under this scheme, individuals or households earning between RM2, 500 to RM10, 000 can qualify for homes ranging from RM100, 000 to RM400, 000 that spans from Johor all the way to Penang and even Sabah and Sarawak.

“Malaysia’s relatively young population and labour force, increasing urbanisation, and general inclination to own a house, are factors that are expected to sustain strong demand for affordable residential properties in major urban centres, likely outstripping supply over the near and medium-term,” said iProperty.com in its second half of 2014 survey.

Kuala Lumpur

Most homes in the Klang Valley area are already out of reach for first time homeowners averaging more than RM600, 000.

Therefore, this market will primarily be driven by middle income and well-to-do locals as well as foreign investors.

Properties in prime areas are priced from RM2, 000 per sq ft onwards.

Last year, Kuala Lumpur’s prime areas witnessed a flurry of high-end condominium launches last year in Bukit Bintang and KLCC like Harrod’s and Banyan Tree averaging at RM3, 000 per sq ft.

Despite the prestige of such brand names, many locals tend to shy away from such projects due to overall quantum price.

However, high net worth Malaysians may still snap up such projects as these are considered “trophy properties”.

Even so, they are not likely to live in the area, preferring to rent it out or use it as their holiday homes.

For foreigners, these projects will be very popular due to the increase in minimum purchase price and their location right smack in the city centre.

On 1 March 2014, the minimum purchase price for foreigners buying properties in Kuala Lumpur was increased from RM500, 000 to RM1 million.

Hence, if we use RM2, 500 per sq ft as a price gauge, a studio apartment of 500 sq ft can easily fetch RM1.25 million.

Supply

According to DTZ Research, the third quarter of 2014 saw a healthy amount of new supply with the completion of another five high-end residential projects adding a total of 574 units to the market.

For the first three quarters of 2014, a total of 1,892 units have been completed.

The new completions in the third quarter were mostly located in the city centre, namely Brunsfield Residence@U-Thant (93 units), Madge Mansions (52 units), One@Bukit Ceylon (354 units) and an unnamed high-end residential development at UThant by Bandar Park Sdn Bhd (12 units).

Only one development, Kenny Hills Residence (63 units) is located outside the city centre.

Data from DTZ Research also shows that another 4,604 high-end residential units are expected to enter the market by the end of 2014.

Amongst the major developments expected to be completed in the fourth quarter of 2014 are The Elements (1,040 units) by Elite Forward, Sky Residence-Phase 2: Celesta & Divina (450 units) by SP Setia and Icon Residence (260 units) by Mah Sing Group.

For locals who are thinking of buying a home in the Klang Valley area, it is best to get small units like a studio as they can be easily rented out and sold to both locals and foreigners as their quantum price will be within the range for both locals and foreigners.

In addition, such units are limited in supply making them a rare find.

According to DTZ Research, the high-end residential market in Kuala Lumpur saw marginal growth in the rental values.

Average rents increased 0.7 per cent quarter-on-quarter, from RM3.59 per sq ft per month in the second quarter to RM3.61 per sq ft per month in the third quarter,

Moving forward, average rents are expected to fall due to the almost 6, 000 supply of new units will be coming on-stream in city centre from 2016 onwards.

Also, data from National Property and Information Centre (NAPIC), showed that Kuala Lumpur has an existing stock of 427,231 units with an incoming supply of 51,104 units.

All these factors will put pressure on rental yields.

For those who are thinking of renting out their properties, it is best to take a long-term investment horizon by focusing on capital appreciation.

The luxury sector also saw marginal growth in capital values.

According to DTZ Research, average capital values increased 0.7 per cent quarter-on-quarter, from RM758 per sq ft in the second quarter of 2014 to RM763 per sq ft in the third quarter.

This is expected to increase marginally, barring any economic crisis.

Selangor

Areas near the MRT extension, spanning from Sungei Buloh to Kajang Line are expected to be popular among locals as it will ease their commute time to Klang Valley, where many jobs are located at.

In addition, there are still affordable properties that can be found here from below RM600, 000 – well within the affordability price range for locals.

For locals, buying a property near the upcoming MRT stations will increase the overall desirability, rentability and capital values of your property as they will be in demand once the MRT line is completed in 2017.

For foreigners, they might skip Selangor altogether,

This is because there seems to be some sort of anomaly in Selangor’s property market as the minimum purchase price for foreigners has been increased to RM2 million effective 1 September 2014 in Zones 1 and 2.

The two zones include the Petaling, Gombak, Hulu Langat, Sepang, Klang, Kuala Selangor and Kuala Langat districts.

This is rather odd as the entry price in these areas are well below RM1 million.

As Selangor is located outside the Klang Valley area, the minimum purchase price here should follow Kuala Lumpur’s as not many foreigners will need a big space just to qualify for the RM2 million ruling.

In view of this, foreigners may be better off buying a property in Kuala Lumpur instead where the entry price is around RM1 million.

Supply

OLYMPUS DIGITAL CAMERA

According to data from NAPIC, Selangor will have the largest incoming supply for new homes in Malaysia as at the second quarter of 2014 bringing it to a total of 156, 296 units.

Those who are thinking of renting out their units will face great competition once these units come on-stream in 2016 to 2017.

Therefore, properties that are located close to the MRT lines will be very much in demand and can command higher asking price.

Properties near to upcoming MRT stations with interchange stations such as Kwasa Damansara in Kota Damansara, Sungei Buloh and Kajang will be highly sought after.

Kwasa Land Sdn Bhd is currently building a township in Kwasa Damansara for bumiputeras measuring 2,330 acres.

The township will be served by two MRT stations and four expressways – NKVE, Guthrie, NSE and the proposed Dash Highway.

In Kajang, a PR1MA housing project near the Kajang KTM and MRT stations are in the supply pipeline to be launched in the future starting from around RM158, 000.

Properties near to MRT stations generally command a five to 10 per cent premium in pricing compared to others.

Penang

Charming shophouses with Peranakan influences in Georgetown, Penang. Photo: Khalil Adis.

Charming shophouses with Peranakan influences in Georgetown, Penang. Photo: Khalil Adis.

Penang will continue to be popular among locals and foreigners as it is a major tourism destination with plenty of good food and old world charms unique only to the island.

In January, Penang scored a major feat when Britain’s respected newspaper, The Guardian listed the island as number 8 in the Top 40 global destinations.

This, in addition to Georgetown listed as an important UNESCO World Heritage Site, has resulted in increasing tourist arrivals and a popular destination for retirement.

According to media reports, citing Chief Minister Lim Guan Eng, Penang saw international and domestic arrivals increasing by 8 and 33 per cent respectively in 2014.

This is expected to have a positive impact on its property sector, particularly under the Malaysia My Second Home (MM2H) programme.

Penang is one of the top retirement destinations under this scheme.

Since March 2013, more than 21, 000 applicants have been approved and Penang has always come out top.

Due to its booming tourism industry and island effects, Penang has the second highest price index in Malaysia after Kuala Lumpur according to data from NAPIC,

For locals who find property prices here too expensive but still want to live on the island, fret not.

PR1MA homes in the pipeline include one in Bayan Lepas, not far from the airport and another in Bukit Gelugor.

In fact, Bayan Lepas is the next hot spot as it is close to the second bridge, free trade industrial zone and the airport.

However, the federal government has yet to announce their indicative prices for the PR1MA housing projects.

Other new hot spots where developers have been acquiring land parcels include those near the second bridge on the mainland.

Since the announcement of the second bridge in 2006, land prices have grown by leaps and bounds.

Data from Henry Butcher showed that land prices were around RM8 per sq ft in 2006 but has since moved up significantly to RM50 per sq ft.

EcoWorld and Mah Sing Group are developing projects at Batu Kawan and Seberang Prai respectively, not far from the second bridge.

The traditional prime areas of Gurney Drive, Georgetown, Tanjung Tokong, Tanjung Bungah and Batu Ferringhi will still be popular among foreign investors.

However, expect traffic congestions from Gurney Drive all the way to Batu Ferringhi in the future due to new projects that have been approved and future land reclamations for Eastern & Oriental Berhad’s project at Tanjung Tokong.

Supply

According to data from NAPIC, Penang has an existing stock and incoming supply of 383,017 and 64,224 residential units respectively.

Majority of the incoming supply will be on the northern part of the island where future land reclamations for Eastern & Oriental Berhad’s project is located at.

In addition, almost 1,500 residential units will be coming up in Batu Ferringhi

According to media reports, the Penang government recently approved an increase in density for an upcoming development here from 15 units per acre to 30 units in January.

Traffic congestion has always been a problem in Penang, particularly from Gurney Drive to Batu Ferringhi.

Previously, it was a one way road but the state government has since changed that so that vehicles can ply both ways.

Still, traffic congestion remains a problem, especially during public holidays and weekends.

The next mixed use development overlooking Ferringhi Park will dwarf other developments in the area and will add to the notorious traffic jams.

The area is popular among foreigners and there will be a high likelihood of vacant units as most foreigners view their investment here as holiday homes.

This will put pressure on rental yields.

In view of this, the property market will be challenging for investors.

Affordable to medium priced homes will see transactions in the resale and rental markets as they are geared towards locals.

High-end homes will be better off for your own stay and capital appreciation.

On the overall, the “island effect” will continue to see capital appreciation on Penang as majority of the areas that can be developed on the island are located in the coastal areas.

However, the incoming huge supply, especially in northern Penang will be a cause for concern.

Iskandar Malaysia

Named after the Sultan of Johor, Kota Iskandar is the administrative capital of Iskandar Malaysia. Photo: Courtesy of Iskandar Regional Development Authority (IRDA)..

Named after the Sultan of Johor, Kota Iskandar is the administrative capital of Iskandar Malaysia. Photo: Courtesy of Iskandar Regional Development Authority (IRDA)..

The residential property sector will be challenging and primarily driven by local buyers.

There are four projects of choices for bumiputeras spanning from Tebrau to Pasir Gudang with

The starting prices for the projects in Tebrau and Pasir Gudang start from RM180, 000 to RM185, 000 respectively onwards.

There is no indicative pricing yet for the projects in Masai and Pulai.

Pasir Gudang and Masai will be the new hot spot as it will enjoy the economic spillover from the largest oil and gas hub in Pengerang.

In addition, a new mixed-use development that will be coming up in Taman Seri Albion by UM Land is expected to create some 12, 000 jobs.

In other developments, the Bus Rapid Transit (BRT) line is expected to commence their service this year.

Therefore, areas along the BRT lines spanning from Bukit Chagar to Tebrau, to Senai and Nusajaya are worth looking into.

Foreigners will still look to Medini and Nusajaya as the latter is exempted from the minimum purchase price and Real Property Gains Tax (RPGT) while Nusajaya has better infrastructure and is well-planned.

JB Sentral is also expected to be popular as it will serve as a gateway to Singapore once the cross border rail service connecting Johor Bahru’s Rapid Transit System (RTS) connects to Singapore’s MRT by 2018 to 2019.

Expected to be in Bukit Chagar, the area will be popular among Singaporeans and Malaysian Permanent Residents (PRs) they can buy a freehold property in JB Sentral with full condo facilities whereas in Singapore, they can only buy an HDB flat.

In addition, the opening of Sungei Segget by end 2015 and various Johor Bahru rejuvenation projects will result in a positive impact on property prices in JB Sentral.

This, together with the newly refurbished Menara Komtar JBCC and Angry Birds Theme Park will further add vibrancy of the area especially the tourism and retail sectors.

Supply

Commercial properties will be popular as they are in limited supply compared to residential properties.

Data from NAPIC showed that as of the second quarter of 2014, the existing stock and incoming supply for shop units are 70,792 and 14,657 units respectively.

In comparison, there is currently an existing stock and incoming supply of 710,324 and 131,994 residential units respectively.

The main driver for the buying activity in the commercial sector will be the GST on commercial properties to be implemented on 1 April 2015.

Thus, some investors will look to buying commercial properties before the ruling kicks in.

Oversupply in the residential sector has been a huge concern and it appears the state government is acting on it.

It recently announced it will be putting a freeze on the supply of serviced apartments.

For investors who are thinking of selling their properties, it is best to take a long term investment horizon due to the huge supply coming on stream in 2016 to 2017.

This will put pressure on rental yields and result in high vacancy rates, especially in the Danga Bay and JB Sentral area.

In addition, as a foreigner, you will need to pay for Real Property Gains Tax (RPGT) should you sell your property in the first five years at 30 per cent.

On the overall, the strength of the Singapore dollar versus the weakening Malaysian ringgit will continue to spur investment across the causeway.

However, sales volume will not be as robust as before.