The game-changing project has been hit with a series of delays since the newly minted Pakatan Harapan government took power last May. With the property market in Iskandar Malaysia already in doldrums, we analyse the possible impact this may have on real estate on both sides of the causeway.
By Khalil Adis
When Pakatan Harapan took power in a landslide victory at the Malaysian general election last May, the ruling coalition government went to work by immediately addressing one of its election manifestos - reviewing major infrastructure projects which involve a foreign country.
Singapore was no exception.
Iskandar Malaysia, which was already feeling the heat from the sluggish property market, saw the High Speed Rail project at first being cancelled and then postponed.
Meanwhile, the controversial Forest City project bordering Singapore was initially announced as off-limits to foreigners but was subsequently changed to build affordable homes for locals.
The former is an important impetus that many developers had banked on to move their inventory amid a severe housing glut the state is facing.
According to recent data provided by the Valuation and Property Services Department (JPPH), Johor recorded the highest number of residential overhang at 13,767 units followed by Selangor and Kuala Lumpur at 7,233 and 5,114 units respectively.
The mismatch in the supply for homes versus what Johoreans can actually afford plus their inability to get financing have further exacerbated the property market situation in Iskandar Malaysia.
The only saving grace is the cross-border rail link service linking Woodlands and Johor Bahru.
Although not cancelled, the Johor Bahru-Singapore Rapid Transit System (RTS) link project is "not progressing well” as Transport Minister Khaw Boon Wan puts it.
Just last week, Acting Transport Minister Dr Vivian Balakrishnan gave an update in Parliament that “further delays” are likely as Malaysia had missed the deadline in confirming its partner three times - first until September 2018, then until December.
However, on December 28, Malaysia had asked to be given until February 28 this year to do so.
It had missed this deadline as well.
As a result, this will delay the opening of the link which was initially scheduled to be ready by December 31, 2024.
Some developers, particularly in the JB Sentral area, had banked on the RTS Link, to move their unsold units.
With the project now in limbo, here are the possible impacts on the property market both in Singapore and Johor:
#1: Possible higher development cost around Woodlands North station
In May 2012, it was announced that AECOM Technology has been awarded a US$42m contract for the design and engineering study of the RTS Link by Malaysia’s Land Public Transport Commission and Singapore’s Land Transport Authority (LTA).
Under the deal, the company will provide an architectural and engineering consultancy study for the proposed RTS Link.
Construction is well underway for the Thomson-East Coast MRT Line (TEL) with a plot of land allocated for the link at Woodlands North station.
The station is slated to be opened in December this year.
The Urban Redevelopment Authority’s (URA) master plan for Woodlands North Coast shows a mixed-use precinct for office and business parks along signature green boulevards within the station’s immediate vicinity.
The delay could mean higher development cost for the terminus due to opportunity costs and inflation.
#2: Higher fares
The higher development cost arising from the construction delay could also mean higher fares for the RTS Link which may be passed on to consumers.
However, whether or not this happens, commuters will likely switch to taking the RTS Link across the causeway as it will mean greater convenience as opposed to driving in or taking the bus.
For example, commuters need to clear customs and immigration only once when they depart from either Singapore or Malaysia.
Using one’s own vehicle or taking the bus will require a two times clearance with the possibility of being stuck in traffic.
#3: Potential capital appreciation for existing housing developments near Bukit Chagar RTS station affected
The Bukit Chagar RTS station will be located at the open car park next to the Sultan Iskandar Building complex.
Surrounding the station are landed terrace homes and condominium towers TriTower Residence and Bukit Chagar Apartments.
According to data from Brickz, from May 2017 to Jan 2018, the average per sq ft pricing for the landed homes in the area was RM354 per sq ft.
Meanwhile, the average per sq ft transacted pricing for Bukit Chagar Apartments from Mar 2017 to Dec 2017 was RM395 per sq ft.
There is no data for TriTower Residence built by SKS Group, formerly known as Maha Builders Group or MB Group.
With the delay, the potential capital appreciation arising from the spillover impact from the RTS Link will take a longer period beyond 2024.
Despite this, market talk is SKS Group has plans to build a covered link to the Bukit Chagar RTS station.
If this is true, investors of TriTower Residence will stand to benefit the most.
#4: Developments around JB Sentral affected
The delay will also impact surrounding developments in JB Sentral as it will mean longer gestation period for the commercial, property and tourism sectors.
The game-changing project could provide a much-needed boost to complement Johor Bahru’s ambitious RM1.8 billion rejuvenation programme that was unveiled by former Malaysian Prime Minister Najib Razak in 2010.
This is because it will bring an inflow of investments from Singapore that will benefit the sectors mentioned.
Although the Sungai Segget rehabilitation is now completed, the project proved to be quite a letdown.
The project was spearheaded by the Iskandar Regional Development Authority (IRDA) with a reportedly whopping RM20 million consultation fee.
The entire cost is an estimated RM57 million.
The project was supposed to provide a booster to the nearby malls such as Johor Bahru City Square and KOMTAR JBCC as well as shophouses.
It was also supposed to be a tourist attraction much like Clarke Quay as it was modelled after South Korea’s Cheonggyecheon river restoration project in South Korea.
This explains why developers like UMLand had acquired land banks near to Jalan Wong Ah Fook for the opening of Suasana Iskandar Malaysia.
Given the high cost, naturally, the expectation among stakeholders was high.
However, some developers, shop owners and retailers were reportedly not very happy about the way the river cleaning project had turned out.
While the river no longer emits an odour, littering is still common.
The only saving grace for the river is a miserable small fish pond with a fountain in the middle of it.
Surely the river rejuvenation project can do much better.
#5: Ibrahim International District as the potential jewel of Johor
Delays and disappointments aside, there is a gateway district coming up in Johor Bahru that will mirror the one at Woodlands North station.
Called Ibrahim International District, the project is named after the Sultan of Johor.
Under his auspices and blessings, His Majesty has set the target of making Johor Baru the second biggest city in Malaysia after Kuala Lumpur.
As such, we can be sure the project will receive the state’s 110 per cent commitment to make it shine as the jewel of Johor.
With a gross development value of RM3 billion, Ibrahim International District is an ambitious mixed-use development that will comprise six towers -– a hotel, a hotel with residences, an office, medical suites high-rise and two serviced apartment towers and a mall with an estimated gross floor area of 80,000 sq ft.
The district is currently under construction.
There are plans to build a linkway from Persada Johor to Coronation Square at Ibrahim International District.
However, there is no word yet if the district will be connected to the future Bukit Chagar RTS station.
If it does, it will enhance property values in the area, albeit beyond 2024.
#6: One Bukit Senyum as the current property booster
Nevertheless, there is light at the end of the tunnel as the only property booster around JB Sentral is the One Bukit Senyum project by Singapore Exchange-listed Astaka Holdings Limited.
Home to the tallest residential towers in Southeast Asia, Astaka, One Bukit Senyum will be Johor Bahru’s new central business district when fully completed in 2021.
One Bukit Senyum will be developed in two phases.
The first comprises The Astaka, with a total of 438 units.
The development, which is Johor’s most luxurious condominium development by far, was completed late last year.
Phase two will comprise Johor Bahru City Council’s new headquarters, a 450-room five-star hotel, 1012 residences, 254-key serviced apartments, a 1.5 million square feet shopping mall and a Grade A office building.
The JB-Woodlands RTS Link is a complicated matter as it involves the state and federal governments.
Nevertheless, it will be a win-win situation for both Singapore and Malaysia to continue with the project as it will mean and inflow of investments, particularly for Johor.
It will also ease the daily commute among Johoreans who are working in Singapore.
The spirit of good neighbourliness should prevail.
Gear up for a bumpy ride next year in Malaysia’s property market as the number of unsold units continues to rise. Despite the challenges, there are some opportunities for investors and rent-seekers.
By Khalil Adis
According to the Valuation and Property Services Department’s (JPPH) latest figures, the number of unsold completed residential units rose from 20,304 units to 30,115 units year-on-year as at 30 September 2018.
This represents an increase of 48.35 per cent.
Meanwhile, the total value was RM19.54 billion, representing a 56.44 per cent rise from RM12.49 billion a year ago.
However, if JPPH were to also include serviced apartments and small offices home offices (SoHos), this would bring their overhang value to 40,916 units valued at RM27.38 billion.
According to JPPH, Johor has the largest number of unsold completed serviced apartments and SoHo units at 7,714.
JPPH notes that it rose a whopping 191 per cent from the 2,647 units recorded a year ago.
The overhang in serviced apartments is valued at RM6.16 billion compared with its residential overhang of RM4.44 billion.
This means the total overall value of its unsold serviced apartments is 1.5 times that of residential housing.
In summary, Johor has the highest number of completed unsold units in Malaysia at 6,053.
This is a 55 per cent increase from the 3.901 units a year ago.
With an overhang in supply spanning from Johor to Selangor, here are some of the likely property trends to emerge next year.
#1: Renter’s market
The new supply of the completed units plus the those from existing units will lead to a downward pressure in the rental market causing rentals to fall.
This is because rent-seekers will be spoilt for choice while landlords will be fighting for tenants.
This will make it ideal for rent-seekers as landlords will most likely be open for price negotiations.
Meanwhile, it is bad news for landlords should they be able to find a tenant or not.
In the former, the rental will most likely not be able to cover the mortgage resulting in negative cash flow.
In the latter, landlords will have to cover the mortgage themselves.
Those who cannot will have no choice but the let go of their units.
#2: Buyer’s market
The property market will also favour buyers as sellers will be desperate to offload their properties, especially those who have multiple units.
Therefore, buyers will be in a more stronger position to bargain in a market flooded with so many units.
#4: Buy properties in the secondary market
If you urgently need a roof over your head, then the secondary market is the way to go as you are buying a completed property.
Sellers are also more willing to negotiate on the terms of payment and will likely cut a flexible payment deal via their agents if you do not have a sufficient deposit in hand.
In addition, the supply overhang also mean that properties in the secondary market are priced 20 to 30 per cent cheaper than new launches.
However, do bear in mind that you need to pay a 10 per cent deposit.
#5: Overhang in supply means good deals in the auction market
Unfortunately, there will also be distressed properties which will be auctioned off in court.
If you are looking for a below market value (BMV) property, then this will present a very good opportunity for you.
When buying a BMV, you will need to attend an auction in court and prepare a bank draft in advance to show of interest.
This will cost you around 10 per cent of the reserve price.
For example, if the property is being auctioned off at RM50,000, you will need to prepare RM5,000 in bank draft.
If you have successfully bid for the property, you will need to settle the balance of the payment within 120 days.
However, there are a lot of hidden costs, for example, legal, quit rent (cukai pintu), unpaid utilities and maintenance fees, assessments and so on.
Perhaps, the biggest risk is this - while the property is legally yours, you may find it hard to evict the tenants or owners.
You may have to apply for a court order, through a lawyer, to evict the occupants.
This process can take you up to four weeks and costs you between RM1,500 to RM2,000. Even so, there are no guarantees they can be evicted as Malaysian laws favour occupiers.
When buying a BMV property, it is best to find out if the property is occupied by tenants or owners.
#6: It also means good deals from the primary market
Developers have to move their unsold inventory as each unit means added cost for them.
As such, developers will be coming up with creative schemes like zero downpayment and such to lure buyers.
Speak to a good developer and check if they have a good master plan to ensure your property values are protected.
Remember the 5Cs I always talk about?
Check against them before you commit to buying a property,
#7: More restrictions on Airbnb accommodations
Making money from your short stay travellers may prove to be even harder even if the government legalises Airbnb.
This is because we are seeing trends of management committees barring Airbnb-type of accommodation due to security and safety issues.
So before you decide to list your untenanted unit on Airbnb, it is best to check with your management committee if this is allowed.
However, if you happen to own a serviced apartment, this will not be an issue as it falls under a commercial title.
#8: Transit-oriented developments (TODs) along SSP Line
The Sungai Buloh-Serdang-Putrajaya Line (SSP Line) is one of the few major infrastructure projects that will be continued under the newly elected government.
In fact, the project is currently under construction and is fast taking shape.
Some developers have already acquired land banks along this line to build TODs.
Areas to watch out for include Kwasa Damansara, Kwasa Sentral, Sungai Besi, Bandar Malaysia and Cyberjaya City Centre
An independent analysis from yours truly