By Khairul Khalid
Property developers in Iskandar, Johor might experience some short-term sales decline due to the Chinese backlash related to the recent disappearance of Malaysia Airlines’ flight MH370.
“It might affect sales to Chinese buyers for the next couple of months due to bad sentiments against Malaysia now. Developers might avoid doing property exhibitions in China until the dust has settled,” Lim Boon Ping, chief operating officer of Tiram Realty told KiniBiz.
Nevertheless, the COO believes that it will not affect the long-term growth of Iskandar.
Malaysia has been receiving severe criticism from the Chinese government and public since MH370 mysteriously disappeared last month. Of the 239 people missing on the Kuala Lumpur to Beijing flight, 153 are Chinese nationals.
In recent years, more Chinese property developers have been flocking to Iskandar. The major Chinese developers in Iskandar include Country Garden Holdings, Guangzhou R&F Properties, 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.
The strong Chinese backlash from Malaysia’s handling of the ongoing MH370 investigations has also affected the tourism industry with many Chinese cancelling their trips to Malaysia. It has also forced Malaysia to discontinue Visit Malaysia Year 2014 promotional campaigns in China.
Now there are concerns that the “MH370 effect” might hit the property market as well, especially in Iskandar.
Investments in Iskandar are split 65% domestic against 35% foreign investments. With market sentiment mixed on the property market for 2014, some recent property launches in Iskandar have achieved lukewarm sales.
An estimated 75% of foreign purchases in Iskandar are by Singaporeans, although Chinese buyers have steadily increased with the recent participation by big Chinese developers.
Veena Loh
“Sentiments are naturally weak. The property market is already facing the effects of cooling measures by the government and the negative news (of the MH370 incident) is not helping,” Veena Loh, general nanager of Malaysia Property Inc (MPI) told KiniBiz.
The cooling measures that Loh refers to was the announcement in last year’s Budget 2014 to clamp down on property speculation such as the increase in RPGT (Real Property Gains Tax), the increase of minimum property purchases of foreigners from RM500,000 to RM1 million and a property levy of 2% for foreign purchases in Johor.
“Based on market sources, there was an estimated 20% to 30% drop-off in purchase bookings with the developers since the measures were announced,” said Tan Ka Leong, Director of WTW (CH Williams Talhar & Wong).
Nevertheless, a local Iskandar property developer who did not wish to be named said that he is confident that the MH370 tragedy would have little or no impact on property deals in Iskandar.
“Business and investments decisions are based on calculated risks and not easily swayed by emotions. Last I checked, there are still busloads of prospective Chinese buyers coming to Iskandar,” said the industry player.
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