Still space for real estate growth in Johor
NO BUBBLE: Healthy demographics, HSR project to sustain market, says analyst
JOHOR’S real estate sector may be slowing down but it is not a bubble market, said market experts.
MIDF Research property analyst Alan Lim Seong Chun ruled out that Johor is being overbuilt and property prices may fall drastically because of new supply.
“We have yet to see a sharp drop in property prices in Johor as most buyers still have the holding power. We agree that the Johor property market is slow but it is not a bubble market,” he told Property Times.
Lim expects prices to remain at the current level.
According to data from the National Property Information Centre (Napic), more than 350,000 private houses are being planned or under construction in Johor.
However, Napic did not indicate when these private houses would enter the market.
Lim said the fundamentals in Johor that could sustain the property market for the next five years were the expectations of the Kuala Lumpur-Singapore high-speed rail (HSR) materialising, healthy demographics and good economic growth.
Johor has also seen an influx of multinational firms expanding or relocating to Iskandar Malaysia, owing to the ease of doing business in the state, the weaker ringgit and proximity to Singapore.
This has created a demand for properties.
“Developers have slowed down their launches this year and reduced supply, and that serves as a natural defence against falling prices.
“If one takes a long-term view of Johor, and assuming that the Kuala Lumpur-Singapore HSR materialises, we do not think that Johor is being over-built.
“We expect HSR to boost demand for Johor property as improved connectivity with Singapore will cause global property investors to benchmark the Johor property market against Singapore’s.
“If that happens, there is a lot of potential for price upside, considering the huge price difference between the two markets,” said Lim.
He said demand for new houses in Johor Baru would be spurred by the younger generation and interest from foreigners who were entitled to purchase properties priced more than RM1 million.
“We need to look at the demand to see the full picture. Malaysia has good demographics with median age of around 26 years old, which is considered relatively young.
“We believe that the long-term demand remains favourable. Household formation growth is likely to continue and support demand for property,” added Lim.
There is huge concern that Chinese developers, such as Country Garden Holdings Co, Greenland Group and Guangzhou R&F Properties Co, are overbuilding in Johor.
In 2013, Country Garden launched a waterfront development in Danga Bay, Johor Baru, comprising more than 9,000 apartment units which were reportedly sold out.
The developer is also building the US$100 billion (RM446 billion) Forest City, which is four times the size of New York City’s Central Park, on four artificial islands.
Forest City will encompass office and residential towers, parks, hotels, shopping malls and an international school. It was reported that about 8,000 apartment units had been sold in Forest City.
Greenland, meanwhile, is building office towers, apartments and shops in Tebrau, about 20 minutes from the city centre, while Guangzhou R&F has started Phase 1 of Princess Cove, consisting of about 3,000 houses.
Bloomberg reported that the influx of Chinese competition has affected local developers such as UEM Sunrise Bhd, Sunway Property and SP Setia Bhd, which have been building projects around Johor Baru for years as part of a government plan to promote the area.
For UEM Sunrise, which is the largest landowner in Johor Baru, its first-half profit fell 58 per cent this year.
Lim said local property developers with good balance sheet could hold on to their land and strategise their next launch despite the slow market.
“Most of the local developers under our coverage are in Johor for the long run. As a result, we do not think there will be any major movement
out of Johor any time soon.”
Lim said both the Malaysia house price index (HPI) and Johor HPI were registering positive growth up to June, based on the latest data from Napic.
In fact, during the second quarter of this year, Johor HPI’s increase of seven per cent year-on-year was higher than Malaysia HPI’s growth of 5.3 per cent, he added.