By Khairul Khalid
The wave of large Chinese property developers flocking to Iskandar, Johor recently is starting to worry local developers, according to an analyst report by Kenanga Research.
“It is definitely a concern to local players as these Chinese based developers have the financial strength to buy large tracts of land and complete large amounts of projects within a short period of time,” said Kenanga.
Recently, one of China’s biggest state-owned companies Greenland Group bought almost 14 acres of prime waterfront land in Iskandar from Iskandar Waterfront Holdings (IWH) for RM600 million. The joint venture (JV) between IWH and Greenland is a mixed development with a gross development value (GDV) of RM2.2 billion to be completed in five years.
Kenanga states that many have mixed feelings about the real motives of these Chinese developers.
“Some believe that it may just be a means for China-based firms to transfer wealth out of China, while others believe there is a ‘bigger picture’ which have clearly eluded most of us. Malaysian properties are among the cheapest in the region and this could be a long-term driver,” said Kenanga.
The report also states that potential over-flooding of the Iskandar property market, especially by big Chinese developers, can be mitigated if the state government controls the supply of new property launches every year.
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.
Iskandar’s property buyers are split at an estimated 65% domestic against 35% foreign purchases. 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.
Nevertheless, recently the market was bracing for some sales decline in Iskandar partly due to the Chinese backlash after the MH370 incident. Malaysia received severe criticism from the Chinese government and public since flight MH370 mysteriously disappeared last month. Of the 239 people missing on the Kuala Lumpur to Beijing flight, 153 are Chinese nationals.
The backlash is compounded by an overall lethargy in Johor’s property market this year. Earlier this year, some analysts had predicted that Iskandar’s property market would cool-off in 2014.
“Johor’s property demand is still lukewarm. The number of bookings is seeing higher attrition rates of 30%, compared to 5%-10% previously because of stricter lending requirements. The slowdown is noticeable, especially for the high-rise residential market where many of the Chinese developers are focusing on. Some developers have also held back launches. However, landed residential developments are seen to be more resilient while the affordable market is driven by locals,” said Kenanga.
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