City&Country: The Edge/KGV-Lambert+Smith Hampton Johor Baru housing property monitor (4Q2010)

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Positive trend in JB expected to continue
Johor Baru is a city in transition as developments in Iskandar Malaysia enter the implementation stage, says Samuel Tan, director of KGV-Lambert Smith Hampton.
“A lot of things have happened in the last 6 to 12 months; we saw new joint ventures, investments, launches and such,” says Tan when presenting The Edge/KGV-Lambert Smith Hampton Johor Baru Housing Property Monitor for 4Q2010. “We have entered a major transition period but the question is, at what rate?”
The numbers tell an interesting story.  According to the National Property Information Centre’s data, transaction volume for 4Q2010 rose to 5,147 units from 2,105 in 3Q2010, representing an increase of 144.5%. Transaction value too rose significantly, hitting RM1.13 billion in 4Q2010 compared with RM397 million in the previous quarter.
“Those are big jumps and I believe 10 out of 10 developers will tell you that 4Q2010 was one of the best quarters in a long time,” remarks Tan, adding that he expects the positive trend to continue.He believes that positive news about Iskandar and its investments and developments, improving ties between Singapore and Malaysia as well as the physical sight of infrastructure being constructed have helped boost market sentiment in Johor Baru.
“There is another factor — money is getting smaller and property is a good hedge against inflation. Some people have been waiting for property prices to go down but the opposite has happened; many figure they might as well buy now before prices rise further,” says Tan.
Condominiums and apartments showed the biggest jump in terms of volume, rising from 12.1% in 3Q2010 to 15.4% in the quarter under review.
This is another sign of a changing property market as more and more Johoreans opt to live in high-rises instead of landed properties, Tan points out.
The prices of serviced apartments, which are gaining popularity, have been heading up. Nearly all of these are located in the suburbs.
“Serviced apartments in the suburbs used to go for around RM200 to RM250 psf. But in the past year or so, big developers such as S P Setia have been pricing theirs at RM300 to RM350 psf and sales are growing,” says Tan.
The most expensive serviced apartments are in Danga Bay where the first block of one such development — Azea Properties — was fully sold within a month of its preview for a starting price of RM697 psf. Danga Bay is located about 7km from the JB city centre, a distance Tan considers as within the city.
He expects prices for serviced apartments in Danga Bay to reach RM700 psf.
“Such developments in Danga Bay are meant more for foreign investors looking for investments or a second home due to their high selling prices,” he observes.
However, Tan believes conventional marketing for these properties can only go so far to attract foreign investors.
“I think we will start to see investments through private equity funds or investment clubs where investors come together to pool their money or buy properties individually.”
He cites Singapore-based Azea Property Investment Club as an example. Azea is the joint developer of Azea Properties with Danga Bay Sdn Bhd and Pembinaan Sahabatjaya Sdn Bhd. Almost all units in Azea Properties were sold to investors in the Azea Property Investment Club. “These are mostly people with excess funds. The same has happened in major cities such as Kuala Lumpur,” says Tan.
As for landed properties, the days of 1-storey terraced, 1½-storey terraced and 1-storey semi-detached homes are over, he adds.
“What we see now are 2-storey terraced homes and 3-storey semidees. But very soon, you can expect to see more bungalows being built,” Tan comments.
He puts the price of 2-storey terraced homes and 3-storey semidees at RM300,000 to RM400,000 and RM700,000 to RM800,000 respectively while bungalows are going for RM4 million and above. “There are two groups of buyers for bungalows — those that buy land and build and those buying direct from the property developers. Bungalows are likely to be the new trend.”
However, things are not as rosy on the secondary market, which stayed flat in the last two quarters after a slight climb earlier in 2010.
Infrastructure development and confidence in a recovering economy at the beginning of 2010 brought about an increase in transactions and prices on the secondary market. But the upward movement lost its momentum due to increasing choices and attractive financing plans from developers on the primary market.
“Developers are offering not just good financing plans but also lifestyle developments that are secure. That’s not to say the secondary market will not recover in time,” says Tan.
Commenting on the rising prices of properties, he says this cannot be avoided because the cost of materials, construction and, most importantly, land is on an upward trend.
“You cannot buy cheap land in Johor Baru anymore. Land is worth about RM10 psf and above; developers cannot afford to sell cheap,” he reasons.
At the present time, most of the  new developments are on the fringe of the city centre.
“The city is quiet, but one good thing has come of this — the government has finally realised that it has to do something, hence the announcement of the Johor Baru city transformation plan,” says Tan.
The master plan for the RM1.8 billion transformation is expected to be unveiled in 2Q 2011 and will take about five to seven years to be completed.
Tan is optimistic about the Johor Baru housing market. “Developers are coming in to buy land while foreigners, especially Singaporeans, are investing in our properties. The locals are buying as well. After so many years, Johor Baru seems to have come alive again.”

This article appeared in City & Country, the property pullout of The Edge Malaysia, Issue 848, Mar 7-13, 2011