Values rise more modestly in 3Q

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IN Johor Baru, the price of houses on the secondary market has risen further over the last quarter with some areas showing a double-digit percentage rise.

However, one can expect a quieter market in the next few months due to the year-end holidays, says KGV International Property Consultants (M) Sdn Bhd executive director Samuel Tan when presenting The Edge-KGV International Property Consultants Johor housing property monitor for 3Q2012.

The monitor showed 2-storey terraced houses in almost all parts of the Tebrau/Kempas area appreciating in value. The price of a 1,600 sq ft unit in Taman Gaya rose 6.25% q-o-q to RM340,000, while the average price of a 2-storey house in Taman Setia Indah increased by 22.2% to RM330,000. Meanwhile, houses in Austin Perdana maintained an average value of RM320,000 for the third straight quarter.

Values of all 2-storey semi-detached homes in Tebrau/Kempas also rose in 3Q at between 4% (2,080 sq ft unit in Blue Sky — from RM600,000 to RM650,000) and 12.07% q-o-q (Taman Setia Indah — from RM580,000 to RM650,000).

According to Tan, values are moving up thanks to better physical connections and demand from upgraders. Higher prices of new launches have also propped up prices in the secondary market, he tells City & Country.

In the Nusajaya/Skudai area, values of 2-storey terraced houses rose between 9.1% (Horizon Hills — from RM550,000 to RM600,000) and 17.6% q-o-q (Taman Impian Emas — from RM340,000 to RM400,000) except for Nusa Idaman and Taman Sutera Utama. Meanwhile, the price of 2-storey semi-detached houses increased between 4.84% (Taman Impian Emas — from RM620,000 to RM650,000) and 6.25% (Horizon Hills — from RM800,000 to RM850,000).

In East Ledang and Horizon Hills, furnished homes that are typically targeted at expatriates are fetching strong rentals. For instance, in East Ledang, furnished 2-storey terraced houses can command RM4,000 to RM5,000 per month while 2-storey semidees can be rented out for RM12,000.

At Horizon Hills, 2-storey terraced houses can be rented out for RM3,500 to RM4,000 while cluster homes can go for RM4,000 to RM6,000. Two-storey semidees can command rents of RM15,000 per month.

Nusajaya continues to reap the benefits of the Western Coastal Highway while Tebrau/Kempas continues to be popular thanks to upgraders, says Tan.

In the Plentong/Pasir Gudang area, 2-storey terraced houses and 2-storey semidees in Bandar Baru Permas Jaya and Taman Molek saw their values rise. In Bandar Baru Permas Jaya, prices of terraced homes rose by 6% q-o-q to RM350,000 while semidees rose by 6.6% to RM1.6 million. Meanwhile, values of terraced house in Taman Molek rose by 5% to RM630,000 while semidees jumped 16.6% to RM700,000.

Almost all the apartments sampled registered higher prices of between 6.6% (1,040 sq ft units in Lagenda Tasek — from RM300,000 to RM320,000) and a staggering 37.9% q-o-q (1,600 sq ft units in Petri Condominium — from RM580,000 to RM800,000).

"The higher prices on the secondary market are a result of higher selling prices of new serviced apartments in Johor Baru," Tan explains.

He notes, however, that sales in the primary market have slowed recently even as prices continue to rise. "After a hectic run in 2Q, the property market in Johor Baru appears to be taking a short breather with many developers reporting slower take-up rates. I believe the market is still trying to absorb the number of units launched."New developmentsIn 3Q, there were several catalytic projects in Iskandar Malaysia, such as Legoland in Medini, Nusajaya, and Marlborough College Malaysia in EduCity at Nusajaya.

About 10,000 people thronged the 76-acre Legoland and enjoyed its 40 interactive rides and attractions when it opened on Sept 15. It is the first international theme park in Malaysia and also the first Legoland in Asia. As part of Legoland's eventual transformation into Southeast Asia's largest destination resort, a water park is scheduled to open in 2013 while a themed hotel is expected to open in 2014.

"The opening of Legoland marks the beginning of Iskandar Malaysia as the destination for theme parks and leisure. One of the problems faced by Iskandar Malaysia in the past was the lack of recreation destinations. What we had were merely 'excursionists' who basically made day trips to popular tourist spots," says Tan.

Citing the Johor Tourism Department's statistics, he says the state has seen a steady increase in the number of tourists — 3.5 million in 2009, 3.6 million in 2010 and 3.7 million in 2011.

"There will definitely be a major increase in tourist arrivals this year due to the completion of Legoland, Johor Premium Outlets and the Puteri Harbour Indoor Family Theme Park [which opened in October]. The estimated tourist arrivals for 2013 is about five million. Business is expected to benefit from this influx, resulting in improved purchasing power."

He adds that Budget 2013 will give Johor tourism a further boost as income tax exemptions for tour operators handling at least 750 foreign tourists or 1,500 local tourists were extended by another three years.

"The overall effect of this is the increased employment opportunities for locals and expatriates. This will lead to demand for housing, which is already happening in Nusajaya."

This is coupled with the opening of more campuses in EduCity, which will draw students and foreign lecturers, with 25,000 students expected to live in Bandar Seri Alam when all of the campuses are operational, Tan says.

Meanwhile, developers have also signed leases for land in Iskandar or acquired parcels of land in Johor. For instance, Dijaya Corp Bhd's subsidiary Aliran Peluang Sdn Bhd acquired 11 parcels of land in July measuring 55.07 acres along the Western Coastal Highway for RM105.7 million or RM43.80 psf.

Going back to Budget 2013, Tan notes that property-related announcements, such as the revised real property gains tax (RPGT), had little effect on the property market. To rein in speculation, the RPGT was increased to 15% for property disposals done within less than two years from the date of acquisition and 10% within two to five years.

"Iskandar is at the stage of 'catching up' after a lull of over a decade. While other major cities saw major increases in house prices, Johor Baru's property market was unexciting. Only in the recent two to three years has the property market started to move. Most investors do not mind the 5% increase in tax if this is offset by a perceived high capital appreciation.

"In fact, those who have invested in properties over the past two to three years have seen substantial capital appreciation. This boosted their confidence to buy more regardless of the higher RPGT. In any case, most landed houses require two years to be developed while high-rise properties will take between three and four years. By the time the houses are completed, and the purchasers decide to sell the properties, the tax bracket will be lower," Tan explains.

He points out that prices have risen to a point where most homes, except for serviced apartments, are out of reach for most middle-income earners, especially potential first-time homebuyers.

The federal and state governments have announced some moves to promote affordable homes. In Budget 2013, the federal government raised the maximum salary to be eligible for the My First Home Scheme to RM5,000 for individual applicants and RM10,000 for joint applications from married couples. The state government in April required developers to allocate 20% of their homes to be priced at between RM120,000 and RM150,000. However, Tan says the government agencies behind these moves should make a more coordinated effort to ensure affordable housing is available, as some of these efforts might be hampered by high land cost and other development cost.

"The state government could look into building affordable homes on land that it would otherwise privatise. These homes should not be located too far away as it would be inconvenient and we don't want to divide people according to their wealth like that.

"With the growth of Iskandar, the social sector must not be neglected, if not the middle-class will be displaced from the cities. They may not even be able to afford living in the suburbs in the future."OutlookAccording to Tan, the market is expected to be quieter in the next quarter due to the holidays and festivities and pick up only sometime in 2Q2013 after the Chinese New Year break. This will coincide with more catalytic developments taking off and pushing the housing market into its next phase of growth, he adds.

One such project is Pinewood Iskandar Malaysia Studios. The studio is scheduled to open next year and is expected to generate not just RM2.2 billion in revenue for the local film industry, but also housing demand from its 5,000 workers.

On the longer term, projects to look forward to are the oil and gas hub in Pengerang and the proposed 500-acre business park that will be jointly developed by Ascendas and UEM Land Bhd.

The Pengerang project is expected to employ some 40,000 workers during construction and 4,000 permanent staff when it is completed. Most of them will opt to stay in Johor as it is convenient to travel via the Senai-Desaru Highway, says Tan.

Meanwhile, the business park will bring more people into the western part of Iskandar. Tan expects homes in Nusajaya and the western part of Johor Baru to benefit from this development.

"The government's plan to fast-track SME development to meet the demand of catalytic projects is the right move. It will create more employment opportunities and attract more SMEs, both local and regional, to Johor Baru."This story first appeared in The Edge weekly edition of Dec 3-9, 2012.