By Khairul Khalid
Sales of properties in Iskandar, Johor could suffer as a result of the ongoing tit-for-tat between the Malaysian and Singaporean governments in hiking VEP (vehicle entry permit) rates and CIQ (customs, immigration & quarantine) toll charges.
“Both rate hikes could definitely have a negative effect on Iskandar. Huge property developments, especially those by the Chinese companies in Iskandar, are already having problems selling units. They are targeting many Singaporean buyers who buy properties in Iskandar as investments or second homes. The toll hikes would further deter buyers, especially those who shuttle regularly between Singapore and JB for work,” said Andy Mohan, a property adviser in Johor Bahru (JB).
Iskandar’s property market has already slowed down significantly this year, reportedly by as much as 30% due to several cooling measures implemented by the federal and state governments, as well as concerns of an overhang in the market due to oversupply.
According to authorities, Iskandar’s property buyers are split at an estimated 65% domestic against 35% foreign purchases but many industry observers feel that the foreign numbers are much higher. An estimated 75% of total foreign purchases in Iskandar are by Singaporeans.
Last week, KiniBiz visited the JB sales galleries of Country Garden and Guangzhou R&F, two of the biggest property developers in China with massive projects in Iskandar. Their sales representatives informed KiniBiz that currently between 30%-50% of their customers are Singaporean.
“Most of Country Garden’s and R&F’s properties are premium priced. Very few ordinary JB residents can afford them. If the Singaporeans stop buying, they will be in deep trouble. I feel their sales are already suffering, although no official figures have been released,” said Mohan.
R&F and Country Garden’s developments in JB have been mired in controversy mainly due to the large land reclamation involved and their connections with the Sultan of Johor. For example, R&F’s developments are on a 116-acre tract of land near the causeway it bought from the Sultan of Johor last year for RM4.5 billion.
The influx of major Chinese developers in Iskandar include Country Garden, Guangzhou R&F, Agile Property Holdings and Greenland Group that have invested a combined US$6 billion (RM20 billion).
In 2013, Chinese institutional and retail investors poured US$1.9 billion (RM6 billion) into Malaysia properties, more than the US$867 million (RM2.8 billion) invested in Hong Kong and US$1.8 billion (RM5.9 billion) in Singapore, according to real estate consultancy Savills.
Some feel that a slowing down of the “Singapore effect” on JB’s property market could be a good thing in the long run, especially for the locals.
Lim Boon Ping
“JB has to stop being the “low-cost housing scheme” for Singaporeans. Statistics show that close to 40% of average household income in JB is approximately RM5000 per month. I believe that more than 70% of the locals’ property purchasing power is for houses below RM1 million. Iskandar’s growth may slow down but in the long run, this could be the only way for it to be sustainable,” said Lim Boon Ping, vice president of Malaysian Institute of Estate Agents (MIEA).
V Sivadas, executive director of PA International Property Consultants echoes Lim’s sentiments, although he is also concerned about the mixed messages that the government is sending to foreign investors.
“There have been changes such as the foreign purchase limit and levy, as well as supposed controls on developer launch pricings. On one hand we know we need the support from Singapore for Iskandar to flourish, yet we seem to be sending all the opposite signals and actions to discourage them,” said Sivadas.
Veena Loh
Others such as Veena Loh, general manager of Malaysia Property Incorporated (MPI) claims that the impact of the CIQ toll hike will be minimal.
“For a Singaporean to go for a holiday in Malaysia, it is still cheaper to travel by car than to fly elsewhere. If you are talking about property investments for foreigners in the price range above RM1 million, it is unlikely that there would be an impact on these buyers with high purchasing power,” said Loh.
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