A Singaporean in Iskandar Malaysia

Living across the causeway has its advantages and disadvantages. Take it from a fellow Singaporean who now calls Iskandar Malaysia home.

The expansive view of Nusajaya from Wayne Wong's apartment in Ujana. Wong now considers Iskandar Malaysia home. Photo: Courtesy of Wayne Wong.

The expansive view of Nusajaya from Wayne Wong’s apartment in Ujana. Wong now considers Iskandar Malaysia home. Photo: Courtesy of Wayne Wong.

By Khalil Adis

Back in 2009 when Nusajaya was still very much an undeveloped green field, one Singaporean braved his way there by purchasing the very first condominium to be launched there – Ujana by UEM Sunrise.

Wayne Wong, a retiree, was among the few Singaporeans who saw the potential of Iskandar Malaysia and wanted a simpler life.

“I bought the property because the location was the nearest to my residence in Clementi where it is very easy to travel to and fro by car, bus and motorbike. I also needed a retirement home because Singapore has become really too crowded and expensive for a then-working-class person,” said Wayne Wong, a retiree.

At a time when many were still wary about the potential for Iskandar Malaysia, Wong’s bold move has paid dividends.

Being a pioneer, Wong was among the few who witnessed his property value appreciate.

Asking prices for units at Ujana are now around RM700 per sq ft thanks to improved infrastructure such as the Coastal Highway and the many federal launched projects spanning from EduCity to Legoland Theme Park.

“It was affordable back then. I paid for it in cash from savings that I had accumulated, from my car-use budget. I had decided not to use my car for daily work-commute and the funds saved over a few years allowed me to afford Ujana,” said Wong.

The push factors from Singapore to Iskandar Malaysia were many.

Among them – the high population density as well as the many rules and regulations, just to name a few.

“Firstly, despite the better living standards in Singapore, I feel that our intrinsic living quality has dropped. Secondly, Singapore has become over-regulated and over-enforced, over the smallest issues. One example is my motorcycle’s In-Vehicle Unit (IU) device. To live in Singapore, I need to remember about 200 different rules, procedures, thus adding to the mental stress,” said Wong. “In comparison, when live in Malaysia, and all I have to remember is to be observant to the surroundings, respectful and to be friendly to everyone”.

Indeed, the laid back lifestyle and the slower pace of life that Iskandar Malaysia offers can be seen as a sort of an “escape valve” for stressed out Singaporeans crammed within a tiny city-state of 5.4 million population on a 714 sq km island.

Money can’t buy happiness

Singapore, a city with a population of 5.4 million crammed into 714 sq km.

Singapore, a city with a population of 5.4 million crammed into 714 sq km. Photo: Shutterstock.

Despite not having natural resources, Singapore has overcome the odds and is considered one of the richest nations in the world.

According to Forbes, in 2012, Singapore is the third richest country in the world behind Qatar and Luxembourg.

Using available data from the International Monetary Fund (IMF), Forbes cited Singapore as having a GDP (PPP) per capita of nearly US$56,700.

In contrast, however, in 2011, international pollster Gallup’s survey showed that Singaporeans were the unhappiest and most emotionless people in the world.

Gallup ran a survey based on some 150,000 individual surveyed worldwide conducted in 2011.

In 2014, a survey by Randstad, an international recruitment and human resource service provider, concluded that employees in Singapore are the unhappiest in the Asia Pacific.

Randstad 2013/2014 World of Work Report showed that 64 per cent of employees planned to leave their jobs in the next 12 months.

In fact, try saying “hello” or “good morning” to a stranger in Singapore and you will most likely get an odd stare in return.

On the other side of the straits, however, people seemed a little bit warmer.

“Malaysians generally are easier-going people, compared to overly-prejudiced Singaporeans,” said Wong, who has been to many road trips across the Malay peninsular and made friends with locals along the way.

Wide open spaces

View of EduCity from Wong's apartment. Photo: Khalil Adis.

View of EduCity from Wong’s apartment. Photo: Khalil Adis.

With a land size of 2,217 sq km and a population of 1.6 million, Iskandar Malaysia is three times the size of Singapore and less densely populated, giving Wong ample space to breathe and surround himself with nature.

“One of the more immediate advantages when living in Nusajaya is the wide open spaces and much fresher air – intangible things you cannot get in Singapore. There’s also a heightened awareness that I have towards nature. From my apartment, I see Gunung Pulai on my left and the Straits of Johor on my right,” said Wong.

When Wong gets restless, he would take his Malaysian car for a road trip with his wife as they brace for the adventures that lie ahead, be it in Desaru or various small towns in, Kota Bahru, Kelantan.

“Here, I have the ability to simply visit the many rustic towns, beaches and waterfalls anytime,” said Wong who purchased his Perodua Viva for RM27,600.

The lower costs of living here mean Wong can keep his car for life and wifi is readily available here at many establishments.

Indeed, take a drive through any regular coffee shops in Johor and you can immediately log onto their network.

The cost? Well, buy a teh tarik and a roti canai or two, at least, to keep the shop owner happy.

“Almost every F&B establishment, including the Indian Muslim coffee shops have free wifi. In my opinion, this is a more practical internet ecosystem, compared to Singapore, whereby one has to follow more procedures and pay more costs,” said Wong.

While at first glance, Iskandar Malaysia offers a much needed breathing space, Wong admits, the grass is not always greener on the other side.

“There are some inherent cultural differences and things work at a much slower pace here,” said Wong.

Not a bed of roses

One example is the language barrier.

Wong does not speak Bahasa Malaysia.

However, he has picked up a smattering of the language over time.

“The living experience gets better once you can speak the language,” he said.

Another is the slow response time from management staff at the condominium.

“The developer was and still is extremely slow, to attend to my queries and feedback. I have to persistently push the developer to get things done,” said Wong who has to be tactful so as not too be seen as too aggressive.

According to him, the committee’s focus is to make money rather than ensuring a better living environment,

There’s also a sense of loneliness amid the slower pace of life.

“As the place that I am staying in is an expat enclave, many residents exhibit the pretentious behaviour of being well-to-do or “keeping up with the Joneses”, which is not really genuine. There’s also less social activities here compared to Singapore,” said Wong.

And while you can take the Singaporean out of Singapore, one bad habit still remains – kiasuism (being afraid to lose).

This is something Wong had encountered with fellow Singaporeans living in Ujana.

“Some Singaporean neighbours exhibit the “kiasu” mentality of wanting only to take something from me, but not helping me in any other way,” he laments.

Others disadvantages include the peak hour traffic jams at the Second Link and the banning of bicycles from crossing the causeway.

Undeterred by negative press

The Singapore government has recently issued warning to its citizens warning of an oversupply situation in Iskandar Malaysia.

This has been picked up by both press from across the pond and shared widely on social media.

Still, Wong who considers himself a traditional investor is undeterred.

“Yes, it is a short term concern because of the frequent noises that the media makes. Such “noises” affect the sentiment. Sadly, most people fail to think independently and simply follow the herd,” he said.

According to the latest investment figures from Iskandar Regional Development Authority (IRDA), despite the negative press, Singapore remains the top foreign investor in Iskandar Malaysia.

“We continue to see strong support from Singapore, China, the United States of America, Spain and Japan. However, it is the domestic investments which truly reflects the confidence our local society have in the region’s development,” said Dato’ Mohamed Khaled, chief minister of Johor and Iskandar Regional Development Authority (IRDA) co-chairman.

Majority of the investments are in the manufacturing sector which accounts for 31 per cent of RM50.82 billion of the total investment.

While oversupply is a valid concern, it will only affect those who are buying for investment or to flip their properties.

“I bought my property for my own use and not as a speculator. Being old-fashioned, I bought with cash, and am therefore not exposed to any lending interest rates risks,” he said. “The problem may be exacerbated by the many property speculators, who buy multiple properties, all based on banking loans.  This creates a false sense of “market success”. However, what happens if the installments are not serviced? These loan defaults will damage the market in a disproportionate way,” he said.

Tips for Singaporeans

Wong’s advice for fellow Singaporeans is to be conservative in their investment which is to buy for your own use, buy with cash, or with minimum loan and to not be greedy.

“Johor welcomes legitimate investors who enter to contribute to the betterment of the place and hopefully uplifting society. The over-emphasis on “making money” using easy methods of leverage – is an immoral, opportunistic act that distorts the market,” he cautions.

In addition, the way the property market works in Malaysia is very different from Singapore.

While in Singapore, investors may be able to find a tenant after the project is completed, it is not the same in Iskandar Malaysia where the population is much less compared to Singapore.

“Malaysian properties are for own long-term use. The business model of rental income between Singapore, and Johor, really is very, very different,” said Wong.

He also advised Singaporeans to buy when sentiment is bad as there are many good deals in the market.

“The media reported many good news in 2012 to 2013, and as a result, many people bought properties priced at the peak. When we buy or invest into such items, we have to take a really long-term view,” he said.

From an oil palm plantation to an exciting new city

View of East Ledang from Ujana. Photo: Khalil Adis.

View of East Ledang from Ujana. Photo: Khalil Adis.

 

Indeed, when Singaporeans stayed away from Iskandar Malaysia in 2008, the following years saw property price appreciate for Horizon Hills from a launch price RM288, 000 to asking prices ranging from RM800, 000 to RM1.2 million for a landed terrace home.

Wong, who now considers Iskandar Malaysia home, is here for the long-term.

“Here, you get that “once in a lifetime experience” of witnessing the birth of a fast rising, new city which is more well master planned,” said Wong who had witnessed for himself the price appreciation due to the improved infrastructure in Nusajaya as well as the various economic drivers such as in tourism, education and logistics, just to name a few.

Now that Nusajaya is fairly developed, Wong is now looking to sell his unit at Ujana below the market price of RM700 per sq ft.

“I am selling it at this price in order to allow the prospective buyer a better chance to enjoy capital gains in the future,” said Wong who has a landed home nearby at Eco Botanic and do not need the additional space.

Indeed, come 2022, Nusajaya is set to be a buzzing satellite city, much like Jurong Lake District in Singapore with an exciting new CBD called Gerbang Nusajaya

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

The highly anticipated High Speed Rail station is expected to be located here.

With a gross development value (GDV) of RM42 billion, property values for existing homes in Nusajaya and Medini are set to rise further as the area becomes highly accessible in the near future.

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

“In order for Iskandar Malaysia’s success to be realised faster, we need to forge a community of like-minded individuals who can genuinely collaborate in the same direction,” he said.

Any takers?

If you are interested to view his unit, email investorsclub@khaliladis.com

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Tips and strategies when investing in Kuala Lumpur and Selangor in 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

View of Petronas Twin Towers in KLCC. Photo: Khalil Adis.

View of Petronas Twin Towers in KLCC. Photo: Khalil Adis.

By Khalil Adis

I was walking around KLCC and Bukit Bintang one night  and noticed that despite the bright lights emitting from Malaysia’s iconic Petronas Twin Towers, it stands in stark contrast to the many vacant units at the nearby luxurious condominiums.

I recall covering the KL property market back in 2008 when some of the units in KLCC were launched as ‘bungalows in the sky’.

One particularly iconic development that I had visited has units as big as 4,000 sq ft

While living in such apartments is definitely a dream for many, alas, it is out of reach for the majority of Malaysians.

Coupled with the Lehman’s Brothers crisis during the same year,  developers suddenly realised that such units were indeed hard to move as they aren’t affordable to locals while foreign buying had somewhat waned.

Still, there were some high net worth Malaysians and foreigners who had purchased units there as ‘trophy properties’ and to rent them out.

Sadly, that didn’t quite happen.

In this article, I will be sharing with you tips and strategies should you wish to invest in Kuala Lumpur or Selangor in 2015 in the hope that you will minimise your mistakes.

Kuala Lumpur

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

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 around 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.

According to DTZ Research, the third quarter of 2014 saw ahealthy 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 locatedin the city centre, namely Brunsfield Residence@U-Thant (93units), Madge Mansions (52 units), One@Bukit Ceylon (354units) 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 highend 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 KlangValley 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 andforeigners.

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 434,484 units with an incoming supply of 53,394 units as of thefourth quarter of 2014.

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, rental attractiveness, 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

According to data from NAPIC, Selangor will have the largest incoming supply for new homes in Malaysia as at the fourth  quarter of 2014 bringing it to a total of 157,450 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.

Download KL/Selangor Infographic here

This article was first published on Property Insight in its June 2015 issue.

Can Iskandar Malaysia succeed without Singapore?

With waning interests from Singaporeans, will it be boom or bust for the special economic zone?

View of the Woodlands Causeway from Johor Bahru. Photo: Khalil Adis

View of the Woodlands Causeway from Johor Bahru. Photo: Khalil Adis

By Khalil Adis

The history between Singapore and Johor is a long and interesting one spanning centuries and one that is often intertwined.

With a history spanning back since the 14th century when Singapore was once the seat of governance for the Johor Sultanate to the signing of the treaty with the British in 18th century, our history and economy are often inextricably linked although we are now a sovereign state.

What changed the course of history was the signing of a treaty that Sultan Ali had signed in 1855 with the British to transfer his power in Johor to Temenggung Daeng Ibrahim.

Temenggung Daeng Ibrahim subsequently moved his seat of governance from its old capital in Teluk Blangah in Singapore to Tanjung Puteri which is now known as Johor Bahru.

While the imposing palace in Singapore still remains today, it has been converted to a mosque housing the Johor Royal Mosouleum and where members of the royal household are laid to rest at a nearby cemetery – a reminder of its glorious past.

Over the other side of the causeway, however, is where Johor’s exciting future lies – Iskandar Malaysia.

Home to the current Sultan of Johor, it appears our history is set to intertwine yet again with Iskandar Malaysia as a sort of hinterland for Singapore, as the Sultan admits.

“The future is in Johor because Singaporeans, not just Chinese, will be buying homes in Johor. Homes are already beyond the reach of ordinary Singaporeans over there. It is a political issue when the middle-class find themselves squeezed,” Sultan Ibrahim Ibni Almarhum Sultan Iskandar told a paper recently

From sceptism to optimism – the Singapore factor

When Iskandar Malaysia was first mooted in 2006 by former Malaysian Prime Minister Abdullah Badawi, Singaporeans were very skeptical about it.

It was only after the land swop deal was concluded in 2010, did sentiment turned positive.

Led by both the Singapore and Malaysian government, both countries had agreed to jointly develop two iconic projects in Medini via Temasek Holdings and Khazanah Nasional.

Subsequently, Temasek Hodings via CapitaLand entered into a joint-venture agreement with Iskandar Watefront Holdings to develop a land parcel at A2 Danga Island.

These factors gave Iskandar Malaysia the much needed confidence booster among Singaporeans to snap up properties just across the causeway.

At the peak of the market in 2013, almost 74 per cent of non-Malaysian property buyers were from Singapore, according to data from UEM Sunrise.

Figures from Iskandar Regional Development Authority (IRDA) also showed that Iskandar Malaysia has secured RM24.87billion in new investments from January 2014 to October 2014.

From 2006 to October 2014, Iskandar Malaysia has recorded RM156.51 billion in total cumulative committed investments.

Of this total, 51 per cent or RM79.17 billion represent investments that have been realised.

Singapore remains the top foreign investor.

Has Iskandar Malaysia lost its appeal among Singaporeans?

Site visit to Iskandar Malaysia. Photo: Khalil Adis.

Site visit to Iskandar Malaysia. Photo: Khalil Adis.

While Singaporeans will still look to Iskandar Malaysia to buy a property, buying activity is admittedly, not as robust as before.

Anecdotal evidence on the ground shows some developers are having problems moving units while property launches are not as well-received as before.

Various factors such as property cooling measures announced during Budget 2014, the flurry of project launches by Chinese developers and the recent toll hikes on both sides of the causeway are causing some to stay away.

One Singapore-based investor who has a home in Iskandar Malaysia said the toll hikes in particular will impact investment sentiment.

“This news will be good and bad news to different people. It will be good news to real business owners (such as factory owners) as it will mean faster travelling time even with the higher tolls, as those business owners value their time more than the toll paid. However, it will be bad news for regular visitors to petrol kiosks, cheap car washing facilities and so on,” said William Liong.

With Singapore as the top foreign investors, will this spell the end for Iskandar Malaysia?

Singapore investments include Ascott Somerset Puteri Harbour, Puteri Cove, Motorsports City and Vantage Bay, just to name a few.

Already, AsiaOne Business is reporting that CapitaLand’s investment in Danga Bay as well as other developers had hit a snag.

CapitaLand has said it is “waiting for the relevant regulatory approval for (its) Danga Bay project’s masterplan”.

Iskandar Malaysia too big to fail

The Urban Redevelopment Authority (URA) masterplan for the new Woodlands Regional Centre include a cross border rail link service linking Woodlands North MRT Station to the RTS station in Johor Bahru. Photo: Khalil Adis.

The Urban Redevelopment Authority (URA) masterplan for the new Woodlands Regional Centre include a cross border rail link service linking Woodlands North MRT Station to the RTS station in Johor Bahru. The RTS-MRT project will be the game changer for Iskandar Malaysia. Photo: Khalil Adis.

While the Singapore factor may have given Iskandar Malaysia a boost on the international stage due to Singapore being a global city, it is unlikely Iskandar Malaysia will fail.

Here’s why.

While Singapore may be the top foreign investor, majority of the investment are still driven by the domestic market.

Data from IRDA showed that RM99 billion or 63 per cent of the total cumulative investment were from Malaysia while the rest – RM57.5 billion (or 37 per cent) – were contributed by foreign investors.

In addition, the residential property sector forms only RM38.59 billion of the total cumulative investments.

Majority of the investments were driven by the manufacturing sector at RM50.97 billion.

This includes investment from the sectors of Electrical & Electronics, Petrochemical & Oleo-chemical and Food- & Agro-processing.

Perhaps the biggest catalyst will be the cross-border rail link service linking Singapore’s MRT to Johor Bahru’s RTS system.

Once completed in 2019, it will result in more investments in Iskandar Malaysia and this is something the current Sultan of Johor had noted.

“Once the links are in place, it will become the norm for Singaporeans to live in Johor and work in Singapore. That is the future,” he told a paper.

Likewise, investors are looking forward to the link.

“The RTS will impact my investment decision, but only within Johor Bahru or Zone A of Iskandar Malaysia,” said Liong

This has spurred him to look at other developments which are within a one km radius area from the RTS station.

Like siblings, blood is thicker than water and is what best describes the relationship between Singapore and Johor.

Both has had its fair of ups and downs with its history of rivalry and on-and-off close relationship.

As the RTS-MRT link shows, even as we brace towards the future, our history and economies remain inextricably intertwined.

Like it or not, Singapore still needs Iskandar Malaysia as much as it needs Singapore.

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

Under pressure

The luxury market saw little transactions this year while developers are faced with a deadline to move unsold units.

The property cooling measures have worked and developers are feeling the bite as they are under pressure to move unsold units. Photo: Courtesy of Shutterstock.

The property cooling measures have worked and developers are feeling the bite as they are under pressure to move unsold units. Photo: Courtesy of Shutterstock.

Developers are feeling the heat from the property cooling measures in Singapore and are calling for the government to ease the Additional Buyers’ Stamp Duty (ABSD).

Just last February, the local real estate body, Real Estate Developers’ Association of Singapore (REDAS) repeated their calls for the abolishment of the ABSD that has impacted the luxury sector severely.

“Not many Singaporeans are buying into this segment, and prices have indeed come down substantially. The imposition of ABSD on this segment runs counter to the Government’s efforts to encourage foreign investment flows into the country, to activate the economy, grow investments and create jobs for Singaporeans,” REDAS President Augustine Tan was reported as saying in the media.

Indeed, Singapore appears to be losing its shine among foreigners as they now have to pay a 15 per cent ABSD while transaction volume has dropped significantly.

According to CIMB, foreign demand has fallen considerably.

Foreigners now make up less than 10 percent of new sales compared to 15 percent two years ago.

What defines the luxury market in Singapore?

Kasara - The Lakeside by YTL located within the prime area of Sentosa Cove. Photo: Courtesy of YTL.

Kasara – The Lakeside by YTL located within the prime area of Sentosa Cove. Photo: Courtesy of YTL.

Often defined as the prime areas of the Lion City, the luxury market includes Sentosa Cove, Orchard Road, Marina Bay, Newton, Tanglin and the CBD where condominiums are priced from S$2,500 upwards.

It also includes Good Class Bungalows (GCBs) and bungalows on Sentosa Cove where average prices are now around S$1,400 and S$1,600 per sq ft respectively.

There are altogether 39 GCB areas in Singapore that spans from Belmont Park to White House Park.

Typically, they are defined as houses with a minimum land plot size of 1,400 sq m and a building height of two-storeys only.

Planning guidelines also prevent high density developments in these areas giving it an air of exclusivity.

Primarily the address of choice for high net worth local and foreign investors, the high-end segment, however, has taken a beating as the property cooling measures take its bite.

Buyers’ market as transaction volumes dropped

According to the latest data from CBRE Singapore, a total of 136 caveats were lodged last year by the Urban Redevelopment Authority (URA).

This was a 44 per cent drop from the 243 caveats lodged in 2013.

The caveats tracked transactions involving luxurious condominiums priced from S$5 million onwards in the core central area of Singapore.

As transaction volume dropped, so did prices, indicating that it is a buyers’ market as sellers become more realistic and are willing to sell below their asking price.

For example, according to CBRE Singapore, the average price of luxury apartments in the resale market fell 6.7 per cent year-on-year from S$2,825 per sq ft as at the end of 2013 to S$2,650 per sq ft during the same time last year.

The GCB market also saw a further slowdown in the second half of 2014 with 13 caveats lodged compared to 15 recorded in the first half of last year.

Data from CBRE showed that there was an 8.2 per cent decline in investment quantum in 2014 at S$626.14 million compared to the S$681.98 million figures recorded in 2013.

The average price also saw a marginal decline in 2014 at S$22.36 million compared to the average price of S$23.52 million recorded in 2013.

While average prices are showing a decline, the average per sq ft however is still holding up, recording a 6.7 per cent increase from S$1,338 per sq ft in 2013 to $1,428 per sq ft in 2014.

Over on Sentosa Cove, only three transactions were recorded as foreign investors stayed away from the market.

Data from CBRE showed that there was a 20 per cent drop on the average transacted price recorded at S$1,676 per sq ft in 2014.

Developers under pressure

With some developers stuck with unsold units in the primary market, CBRE notes that they are “likely to adopt innovative sales schemes to cut prices to market these homes in 2015”.

Indeed, developers face a deadline to move unsold units, failing which they have to pay a levy, calculated at 8 per cent, 16 per cent and 24 per cent of the property purchase price for the first, second and third extra years respectively.

One case in mind is Goodwood Residences which CBRE said was sold at an average price of S$2,450 per sq ft.

It notes that “the developer sought to beat the deadline of June 2015 when it has to pay a premium to extend the sales period

During the peak of the market back in 2010, such properties in the exclusive Bukit Timah enclave could command prices of around S$3,000 per sq ft.

As more luxury units come on-stream this year, others may also follow suit to cut prices to move unsold units.

Seven luxury projects totaling 467 units that were completed in 2014 included Ardmore 3, Hana, Le Nouvel Ardmore, Nouvel 18, Sculptura Ardmore, Tomlinson Heights and TwentyOne Anguilla Park.

Moving forward, the luxury market will favour those with deep pockets as it will mean more choices for them as developers scramble to find such niche buyers.

Remaking Melaka

While tourism may be the major economic driver in Melaka, the city is fast attracting investments in the other sectors.

By Khalil Adis

River cruise in Melaka. Photo: Khalil Adis.

River cruise in Melaka. Photo: Khalil Adis.

If you are a first time visitor to Melaka, you’d be forgiven for thinking tourism is the main industry here.

On the surface though, it appears tourism is its major economic driver since this is a more visible industry judging by the many places of attractions and tourists who flock to the city.

However, Melaka also has burgeoning mining and manufacturing sectors that have contributed significantly to its economy.

“Other than tourism, Melaka is coming up in other ways. There is a body set up called Invest Melaka where they invite other bodies to come in to invest in Melaka,” said Cassandra Tio, head, marketing and sales property division of the Hatten Group.

Indeed, data from Invest Melaka showed that in 2012, Melaka’s economy grew by 5.7 per cent led by four major industries – mining, manufacturing, construction, agriculture and services.

Mining accounted for 46.9 per cent of the market share while manufacturing, construction, agriculture and services accounted for 43.5 per cent, 2.9 per cent, 6.5 per cent and 0.1 per cent of its economic growth respectively.

A state government body formed in 2003, Invest Melaka has over the years attracted key multinational companies such as Petronas and SunPower Infineon to set up their base here.

Fastest growing state

Melaka is slowly waking up from its slumber and is now a buzzing city, driven by tourism. Photo: Khalil Adis.

Melaka is slowly waking up from its slumber and is now a buzzing city, driven by tourism. Photo: Khalil Adis.

As if reliving its history during its golden era as the preferred port of call, Melaka looks set to rise once again.

Government data showed that Melaka is the fastest growing state in Malaysia in 2011 and 2012, beating Kuala Lumpur.

Key factors that have drawn Petronas and SunPower to invest here include Melaka’s strategic location between Port Klang and Port of Tanjung Pelepas (PTP) as well as between three airports –  KLIA, Melaka International Airport and Senai International Airport.

Petronas is Malaysia’s largest oil and gas company and wholly owned by the Malaysian government.

Its Melaka Refinery Complex houses two refining trains which have the capacity to process 100,000 barrels and 170,000 barrels per day of sweet and sour crudes.

SunPower, which opened its plant in 2010, has so far invested US$600 million for its first phase of its fabrication plant and created 1,100 jobs.

In 2011, it invested a further US$600 million for the second phase of its development.

Medical tourism

Mahkota Medical Centre in Melaka is one of the designated hospitals in Malaysia where Singaporeans can use their CPF Medisave for medical treatment. Photo: Courtesy of Mahkota Medical Centre.

Mahkota Medical Centre in Melaka is one of the designated hospitals in Malaysia where Singaporeans can use their CPF Medisave for medical treatment. Photo: Courtesy of Mahkota Medical Centre.

Melaka is also fast becoming a centre for medical tourism, as Indonesians and Singaporeans flock to hospitals such as Mahkota Medical Centre for medical treatment.

According to data from International Medical Travel Journal, the city saw 168,000 Indonesians coming to Melaka due to the lower costs of medical treatment as opposed to Singapore.

In fact, Mahkota Medical Centre is one of the designated hospitals that Singaporeans can use their CPF Medisave, explaining Melaka’s rising attractiveness as a medical centre.

One Singaporean who recently sought medical treatment there is Bryan Teo.

“I decided to do my knee surgery here in Melaka as the cost of medical treatment here is affordable yet the quality of healthcare is comparable to Singapore. The favourable currency exchange rate also means significant cost savings,” said the marketing manager.

The sports enthusiast has been nursing a knee injury since early this year.

He decided to give Melaka a try after reading about the quality of treatment there.

“Being able to use my CPF Medisave at Mahkota is the key factor. I am sure our government will only recommend the best hospitals for medical treatment in Malaysia,” said Teo.

Spillover in the property market

Harbour City at Pulau Melaka by Hatten Group. This mixed use development comprises residential, retail and hotel components. Photo: Courtesy of the Hatten Group.

Harbour City at Pulau Melaka by Hatten Group. This mixed use development comprises a theme park, shopping mall and hotel components. Photo: Courtesy of the Hatten Group.

With the new found vibrancy injected into Melaka, this has led to an economic spillover in its property market.

Being a major heritage site for tourism and new destination of choice among medical tourist, the Hatten Group is offering investors hotel suites which offer you returns on your investment,

At Harbour City, for instance, there are various hotel suites to choose from to fill demand from tourists and medical tourists.

Investors at Harbour City will be able to get their returns every three month based on the tenancy agreement with the hotel management arm.

“At Hatten Group, we have out hotel management arm where we undertake hotel suites from our buyers to run it as a hotel. We give the purchasers the option such that when they purchase the suites, they can empower us to manage it for them,” said Tio.

Historic city comes of age

Move over Iskandar Malaysia, Melaka is fast becoming the city of choice for sophisticated investors drawn by its rich heritage sites, vibrant tourism industry and affordable cost of healthcare.

Heritage town attracting significant interests from Singaporean investors. Photo: Khalil Adis.

Heritage town attracting significant interests from Singaporean investors. Photo: Khalil Adis.

By Khalil Adis

The historic city of Melaka was once a thriving port city serving as an important international spice trade route since the 14th century.

Founded by Parameswara, Melaka was then colonised by the Portugese in the 15th century.

That, however, marked the decline of Melaka as an important trading centre as it became a hostile city causing many ships to bypass the route.

It subsequently fell under the control of the Dutch and British Empires in the 16th and 18th century respectively but it never quite regained its dominance in the region.

As the winds of change blew across the Straits, Melaka soon became part of the Crown Colony alongside Penang and Singapore.

Today, what remains of the city is its many imposing historic architecture serving as a nostalgic reminder of its glorious past – from the iconic red Christ Church building to the ruins of St. Paul’s Church on top of St. Paul’s Hill.

View of Dataran Palawan, developed by Hatten Group. Photo: Khalil Adis.

View of Dataran Palawan, developed by Hatten Group. Photo: Khalil Adis.

Remaking Melaka

As we speak, however, Melaka is slowly waking up from its long slumber as it braces forward to the 21st century.

Enter the Hatten Group which is helping to restore the city to its former glory.

Like Parameswara, its chief executive officer, Datuk Wira Eric Tan, stumbled upon Melaka in 2004 by chance and saw an opportunity to develop the city.

“We saw an abandoned project there and Datuk saw opportunity in that piece of land. Unfortunately, the rest of the people in Melaka did not see it. This piece of land is like how Ngee Ann City in Singapore was like. If you recall, it used to be completely empty land next to Wisma Atria. That’s how Datuk saw the potential and he created this Dataran Palawan in Melaka,” said Cassandra Tio, head, marketing and sales property division of the Hatten Group.

Indeed, the developer’s many iconic developments such as Imperio, Elements and Silverscape have won four major titles at the South East Asia Property Awards 2014.

This major feat has not only helped to reshape the city’s architecture but also create a much needed buzz in Melaka.

As a result, Melaka is now back on the radar as an investment destination of choice among local and foreign investors.

Indeed, during the recent launch of its project called Harbour City in Pulau Melaka, Hatten Group, reported over 60 retail and hotel units being snapped up by Singaporeans at its two road shows in Singapore.

“When we introduced this, we are actually simulating what the other cities like in KL and Singapore have. We see that as a general demand for Melaka,” said Tio. “Integrated projects have been a growing demand. We are building the retail centre where above it will be the residences. This will attracts already a standard catchment of population for retail malls.”

Melaka is slowly waking up from its slumber and is now a buzzing city, driven by tourism. Photo: Khalil Adis.

Melaka is slowly waking up from its slumber and is now a buzzing city, driven by tourism. Photo: Khalil Adis.

Tourism boom

Since 2008, Melaka has witnessed a boom in tourist arrivals thanks to it being listed on the UNESCO World Heritage site.

Data from Tourism Melaka and NAPIC showed that tourist arrivals witnessed a 200 per cent increase from 2006 till 2012.

In 2013, for instance, there were 4.11 million and 2.92 million tourist arrivals from the overseas and domestic markets respectively.

Expecting a sleepy town, I witnessed first hand the buzz as I took the bus from Melaka Sentral to the city centre at Dataran Palawan.

“We came from Thailand for the long weekend to soak in the historic city of Melaka. We arrived by coach to Melaka Sentral Bus Terminal and decided to take a bus to the city centre. We just can’t believe how packed it is,” said Surasak Thonorwan from Bangkok.

From the top of Hatten Hotel where the Alto Sky Lounge is located at, you could see slow moving traffic as tourists from all over thronged the streets at Jonker and the mall at Hatten Square.

Hotel rooms, ranging from budget to five-stars, were reportedly all running at full occupancy.

“Tourism doesn’t just fall over the weekend. For the weekends it is mainly locals who come in. For the weekdays it will be the tour group from Taiwan, Hong Kong, Japan who come in with the tour group,” said Tio who noted that tourists from China have been coming in strongly on a weekday. “That explains why hotels from the budget to three-star and no frills are fully booked throughout the whole year.”

With the opening of the high speed rail project come 2022, tourist arrivals are set to rise even more once the station in Ayer Keroh is completed.

“Melaka will become like a checkpoint where tourists can do national conferences and exhibitions near to the Ayer Keroh area and yet enjoy the historic town and the facilities in Melaka,” said Tio.

This is part one of the story. Stay tuned for part two.

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.