By Khairul Khalid
Worried about the oversupply in Iskandar’s property market dampening rental yield and property prices, as well as other external economic factors, many Singaporean property investors are now more cautious about putting their money in Iskandar.
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The Singaporean government has previously acknowledged that Iskandar is strategically important for both countries. So why have doubts started creeping into Singapore property investors in Iskandar?
Iskandar’s proximity to Singapore has proven to be both boon and bane for the nascent economic zone.
Singapore is the top foreign investor in Iskandar with committed investments of an estimated RM11 billion up to April this year. Iskandar’s property buyers are split at an estimated 65% domestic against 35% foreign and an estimated 75% of total foreign purchases in Iskandar are by Singaporeans.
Unfortunately, several turns of events this year have conspired against Iskandar and its investment appeal to Singaporeans.
Dropping property prices
Residential property prices in Singapore have dropped almost 4% in the past year due to several cooling down measures implemented by the Singaporean government to check soaring prices and speculative buying.
Although exchange rates are still very favourable to Singaporean buyers, the fact that home prices are cheaper might deter some buyers from looking abroad.
The Malaysian federal and state governments have also implemented its own cooling down measures, some of which are targeted at foreign buyers. These policy changes have been seen to be sending mixed signals to foreign buyers.
Toll increase mutes Singapore interest
Khalil Adis
According to Khalil Adis, founder of Khalil Adis Consultancy Pte Ltd in Singapore, interest among Singaporean investors has become somewhat muted.
He attributed this to the recent toll hikes on both sides of the causeway as well as the various cooling measures, such as the increase in the minimum purchase price and Real Property Gains Tax (RPGT).
“There was still some interest post Malaysia’s cooling measures as some projects were exempted from the RM1 million minimum purchase price ruling as well as the exemptions that can be found in Medini.
“However, once the toll hikes were announced, interest waned as it has become much more expensive to cross the border. This was a double whammy to the overall sentiment currently in Iskandar Malaysia. Still, there are Singaporeans who are looking to invest but it is more of a “wait-and-see” situation,” said Khalil.
The Singaporean property consultant also adds that news reports on delays of CapitaLand’s project in Danga Bay and Singapore’s protests on land reclamation for the controversial Forest City project have also raised doubts about Iskandar’s overall plan again, much like the apprehensions Singaporeans had when Iskandar was first announced in 2005.
Khalil also shares the sentiments of many market observers who are wary of the oversupply in Iskandar’s property market especially with the massive waterfront projects by Chinese developers such as Country Garden and Guangzhou R&F.
“It seems to be the case of too much, too soon,” says Khalil.
Softening impact on yields
He goes on to compare Singapore which is a densely packed island of 714 square kilometres with a population of 5.4 million and Iskandar’s 2,217 square kilometres with 1.6 million population.
“Supply of condominiums in Singapore is around 20,000 units each year whereas developers in Iskandar are introducing such a huge supply (with units by the thousands) within a short period of time. This will have a various repercussions.
“Firstly, it will have a softening impact on the rental yields whereby you may not be able to cover your mortgage, in the event you manage to rent your property. Secondly, it will be challenging to rent out your property. Thirdly, there are concerns of who will inhabit these units as the property prices are geared towards the foreign market and not Johoreans,” Khalil explained.
Nevertheless, despite the negative sentiments about Iskandar currently, it still remains an appealing option, especially to budget conscious Singaporean buyers.
“Although property prices in Singapore are on a decline due to the various cooling measures and the oversupply in both the public and private markets, it would still be cheaper to buy a property across the causeway. This is due to the strength of the Singapore dollar versus the Malaysian ringgit.
“If one is to purchase a condominium in the suburbs say Jurong, it would be around S$800 (RM2,062) per square foot, not including stamp duty and other calculations. Whereas in Iskandar, you can own freehold condominium for around RM800 per square foot on average,” said Khalil.
A few months ago, KiniBiz visited the Johor Bahru (JB) sales galleries of Country Garden and Guangzhou R&F, two of the biggest property developers in China with massive projects in Iskandar, and we were informed that currently between 30% and 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 Andy Mohan, a property agent in JB.
Tomorrow: Tighter leash on Iskandar’s foreign developers?
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