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Iskandar needs economic activity for housing market to take off

SINGAPORE — With rising concerns over a housing supply glut in Iskandar Malaysia, property experts say the onus is now on the authorities to realise their vision for the southern economic corridor in order to promote jobs and migration that will create demand for homes there.

Prospective buyers at the sales launch of the Country Garden Danga Bay condominium development in Johor Baru. 
Photo: Don Wong

Prospective buyers at the sales launch of the Country Garden Danga Bay condominium development in Johor Baru.
Photo: Don Wong

SINGAPORE — With rising concerns over a housing supply glut in Iskandar Malaysia, property experts say the onus is now on the authorities to realise their vision for the southern economic corridor in order to promote jobs and migration that will create demand for homes there.

The escalating worries over the oversupply of homes in the region come after several mega launches by Chinese developers in the past year.

That, coupled with the lack of clarity over the implementation of property cooling measures there, has resulted in waning interest from Singaporean investors, one of the largest groups of foreign homebuyers in Iskandar.

“There seems to be a demand and supply mismatch … It takes such a short time to introduce all these supply, but the population is not there yet. Looking at the pricing, the units are not geared towards the local market, they are geared towards the overseas market. Maybe developers are very optimistic about the prospects of Iskandar, but there may be too much supply too soon,” said Mr Khalil Adis, the founder of property firm Khalil Adis Consultancy.

Bilateral bickering over the Causeway toll charges and vehicle entry permit fees, as well as delays in Singapore developers’ projects in Iskandar, have also added to the uncertainties over the residential landscape there.

There is no available property data specific to the Iskandar region, but a report earlier this year by Malaysia’s Ministry of Finance showed there were 118,191 residential units under construction in the state of Johor — where Iskandar is located — and another 168,371 units planned as of the final quarter of last year. Iskandar has accounted for most of the new developments in Johor in the past few years.

The scale of new supply dwarfs the prevailing number of transactions. Official data also showed a 6.8 per cent drop in residential property sales in Johor to 8,493 units in the first quarter this year, compared with the previous three months.

Within Iskandar, media reports on stagnating developer sales have also emerged, saying the take-up for Country Garden’s Danga Bay is expected to hover at about 70 per cent after its launch in August last year, when the Chinese developer put about 9,000 homes on the market.

To be sure, Iskandar has continued to attract investments, securing another RM9.72 billion (S$3.8 billion) in the second quarter to bring the total committed investment to the economic zone to RM146.2 billion since 2006.

The challenge now is to take steps, such as boosting commercial activity, to power the region and turn it into the international metropolis and economic centre that it is envisioned to be.

“I think the bigger challenge right now is for both Singapore and Malaysia governments to work together to really drive the Iskandar story, now that there is infrastructure in place — roads that really do exist, good properties. So we should start looking at the commercial element,” said Mr Gerard Kho, country manager of real estate portal PropertyGuru in Malaysia.

“If commercial activities do come in the next decade or so, the residential development will go into the next phase of growth because there will be real demand in Iskandar again,” he added.

Over the long term, Malaysia’s relatively young population and the rising migration from rural to urban areas bode well for the property market, said Ms Hoe Mee Ling, the chair of Johor’s Real Estate and Housing Developers’ Association. Iskandar also stands to benefit from the planned rapid transit link between Johor Baru and Singapore, she added.

“Infrastructure is crucial and it has been enhanced tremendously. The provision of a good public transport system is a must … With increasing migration and job creation in Johor, it will only help the property market improve,” said Ms Hoe.

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