City & Country: Muted growth in JB in the third quarter

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PRICE growth on the subsale property market was largely arrested in the third quarter of this year, according to KGV International Property Consultants (Johor) Sdn Bhd executive director Samuel Tan, in presenting The Edge-KGV International Property Consultants Johor Baru Housing Monitor 3Q2014.  

Based on the properties sampled, some 2-storey terraced houses and high-rise homes appreciated during the period.

The 2-storey terraced houses that rose in value were in Taman Nusa Bayu (up 11.6% to RM430,000), Taman Sutera Utama (up 9.1% to RM550,000) and Taman Setia Tropika (up 5.7% to RM550,000).

High-rise units that rose in value included those at Suriamas (up 1.3% to RM385,000) and Lagenda Tasek (up 5% to RM420,000). Meanwhile, rents have remained the same, translating into lower yields.

Notable new launches
On the primary market, a number of noteworthy property launches took place during the quarter. In the landed residential segment, Keck Seng (M) Bhd launched its 1-storey homes in Taman Daya. Priced from RM368,000 to RM559,520, the intermediate units have land areas of 1,680 sq ft, the end-lots, 1,680 to 2,703 sq ft, and the corner units, 3,672 to 4,570 sq ft. Built-ups of the intermediate units are 1,389 sq ft and the end-lots, from 1,389 to 1,521 sq ft.

A few developers also launched 2-storey houses. These include UM Land Bhd, which opened for sale such homes at its Seri Austin township. The terraced houses have lot sizes of 22ft by 75 ft and 24ft by 75ft. The ones with the smaller lot sizes have land areas of between 1,650 and 3,309 sq ft and built-ups of between 2,227 and 2,494 sq ft. They are priced at RM716,800 to RM932,800.

The ones with the larger lot sizes have land areas of between 1,800 and 3,188 sq ft and built-ups of between 2,507 and 2,793 sq ft. They are priced at RM804,800 to RM1.02 million.

Meanwhile, EcoSpring by Eco World Development Group unveiled its EcoSummer and EcoSpring 2-storey terraced houses, cluster houses and 2-storey semi-detached homes in Tebrau. EcoSummer terraced houses have land areas of 1,600 to 5,279 sq ft and built-ups of 1,890 to 2,480 sq ft. They were priced between RM650,000 and RM1.1 million during the soft launch in April, but prices of the larger units were raised to RM1.58 million during the official launch in late May.

The EcoSummer cluster homes have land areas of 2,560 to 3,887 sq ft and built-ups of 2,360 to 3,120 sq ft. They were priced between RM940,000 and RM1.36 million during the soft launch.

EcoSummer semidees have land areas of 3,360 to 5,087 sq ft and built-ups of 3,680 to 4,030 sq ft. They were priced at RM1.7 million to RM2.3 million.

What happened in 3Q?
The third quarter was highly eventful for Johor. Foremost was the raising of the Causeway tolls by Malaysia and Singapore, followed by the hiking of the vehicle entry permit (VEP) cost for foreign cars by Singapore and the imposition of a VEP by Malaysia on foreign cars entering Johor.

This not only strained bilateral ties but also raised concerns over Singapore’s investments in Malaysia, including its real estate sector. Besides offering more affordable and value-laden housing choices for Singaporeans — many live in landed homes in Johor that cost as much as HDB flats and apartments in the island republic — Iskandar has also positioned itself as a cheaper option for Singaporean companies to extend their operations into. The many business parks that have opened are examples of developers looking to cash in on this trend.

“In the spirit of development of Iskandar Malaysia, this new measure is most unfriendly and it defeats the purpose of synergising the two economies efficiently,” Tan says.

Based on his calculations, the increase in tolls for trips to and from Singapore is between 195% and 455%. “The additional cost will certainly be passed on to the consumers,” he says.

Previously, the toll for cars leaving Singapore was S$1.90, while heavy vehicles were charged S$2.60. For vehicles entering Malaysia, the tolls were RM2.90 and RM6.10 respectively. The new tolls for cars are S$4 per entry into Singapore and S$5.80 per exit, and RM14.70 per entry into Malaysia and RM10.20 per exit. As for heavy vehicles, the charges are S$5.30 per entry and S$7.70 per exit, and RM19.70 per entry and RM13.60 per exit.

“Small and medium enterprises (SMEs) that rely on goods vehicles will find the increase a burden. It may even be a factor for the relocation of SMEs from Singapore to Iskandar Malaysia if many trips are to be made in a month,” Tan says.

He adds that many foreign-registered cars are driven by Malaysians working in Singapore. He estimates the VEP cost per day at RM27.17. Over 26 days, that adds up to RM706.42. Malaysian-registered cars will have to pay S$35 per day, or S$910 per month. “That is a large sum,” he says.

“Many may opt to work and stay in Singapore. This will have an adverse effect on the property market in Iskandar Malaysia and conversely grow the rental market in Singapore. They earn in Singaporean dollars and have higher spending power. With fewer Singaporeans coming to Johor as it is, many businesses in Iskandar will be affected, especially those in the food and beverage, entertainment and retail sectors. I hope this revision will be revisited so that both countries will benefit.”

In the third quarter, Johor had also introduced new measures to address home ownership problems. The state’s investment arm Johor Corporation (JCorp), via its unit Johor Land Bhd, plans to build 8,000 affordable and low-cost homes in the state by 2020.

In addition, JCorp will take over the earlier-privatised Tebrau army camp site to develop a residential project that includes affordable homes.

Meanwhile, the state has raised the number of affordable homes it plans to build within the next four years to 37,000 units from 28,000 previously.

“The new measures are to ensure that the development of low-cost housing for the targeted segment of society is not abused. It is a noble task that should be implemented effectively,” Tan says.

On the primary market, he says there had been delays in new launches, and developers are instead conducting registrations of interest and allowing bookings of their properties.

“I think they are testing the market, until it reaches a threshold that merits an official launch. It is a wise move in light of the launches over the last few years,” Tan says. “Although there appears to be a mismatch between supply and demand, such measures taken by developers will ensure that their units will be substantially taken up upon launching.”

Meanwhile, the government has confirmed that the rapid transit system (RTS) complex in Malaysia will come up at the site of the former Bukit Chagar flats. The station will also have its own Customs and Immigration clearance facilities.

“The announcement has put to rest all speculation. TriTower Residence at JB Sentral and other projects near the proposed RTS site will benefit,” says Tan.

However, he raises the possibility of the acquisition of homes or land in nearby Kim Teng Park should the site be too small for an integrated RTS complex.

On Budget 2015, Tan says it is mostly unexciting as far as the property market is concerned, although he lauds certain initiatives to further promote home ownership among the youth and civil servants.

However, he stresses that there is a need to reinstate the developer interest bearing scheme — but only for first-time homebuyers — and abolish the stamp duty as the Goods and Services Tax (GST) will be implemented on April 1, 2015.

“I had called for this move when Budget 2014 was first announced as this is the only way for first-time buyers who are qualified to own a house. To avoid double taxation, the stamp duty should be abolished for commercial properties,” says Tan.

“Also, residential properties should be re-categorised as zero-rated rather than exempt-rated under the GST scheme. In the former, no output tax will be passed on to the consumers, and the developers and contractors need not bear any input tax. If placed under exempt-rated, the developers cannot pass the cost on to the consumers and yet they cannot claim for the input tax. The alternative for them is to increase the selling prices of residential properties. This will defeat efforts to make residential properties cheaper.

“There is a need to know that because demand depends on the forces of supply and demand. If demand is dampened, prices will be adjusted downwards or developers will delay their launches. On the contrary, in popular areas, if prices increase, demand will remain strong. If supply is delayed for too long, it may create a pent-up demand, which in turn will push prices up.

“Stamp duty exemption should be applied to first-time house buyers and properties priced below RM250,000. For those priced between RM250,001 and RM500,000, a 50% exemption will be good to revitalise the market.”

Meanwhile, total transactions for residential properties in Johor Baru declined 8.8% on a quarterly basis during 3Q to 5,428 units, underpinned by cautiousness over Budget 2015.

However, total transaction value rose 6.6% to RM2.24 billion during the quarter. “The inference is that there was a slowdown in sales volume but prices had actually gone up,” says Tan.

He expects transaction volume to thin out in 4Q after the tabling of Budget 2015, repeating what happened in 4Q2013 and 1Q2014.

“[The lower transactions] were compounded by Budget 2014 last year, where the developer interest bearing scheme was abolished, the Real Property Gains Tax was increased and so on. The state had also imposed additional measures. It was a combination of many negative measures that dampened the market sentiment, and the effect was felt in the subsequent quarter.”

This article first appeared in City & Country, The Edge Malaysia Weekly, on December 15 - 21, 2014.