With 10,000 affordable homes in the pipeline, Bandar Malaysia is both a boon and a bane for Kuala Lumpur’s sluggish property sector. We analyse how this development will impact the market.
By Khalil Adis
The recent announcement by the Malaysian government that it is reviving the shelved Bandar Malaysia project is a piece of welcome news as it gives some clarity to investors on the status of the Kuala Lumpur-Singapore High Speed Rail (HSR) project.
Since winning the 14th general election, Prime Minister Mahathir Mohamad had reviewed several mega infrastructure projects including Bandar Malaysia and the HSR.
In the face of the country’s mounting debt, both projects were at first announced as cancelled in May 2018.
This prompted Singapore’s Ministry of Transport to issue a statement stating that it “will wait for official communication from Malaysia”.
However, the Malaysian government backtracked on this subsequently.
Instead, it announced in June 2018 that the project was “postponed”.
This created a lot of confusion on both sides of the causeway.
After many months of speculation, the market finally received some clarity in September 2018 when representatives from both governments met in Putrajaya.
In a joint-statement, both Singapore and Malaysia announced that they had signed an agreement to suspend the project until 31 May 2020
“Malaysia will bear the agreed costs in suspending the HSR Project. If by 31 May 2020, Malaysia does not proceed with the HSR Project, Malaysia will also bear the agreed costs incurred by Singapore in fulfilling the HSR Bilateral Agreement. During the suspension period, Malaysia and Singapore will continue to discuss on the best way forward for the HSR Project with the aim of reducing costs,” the statement read.
The HSR project is now expected to commence service by 1 January 2031, instead of the original commencement date of 31 December 2026.
With Bandar Malaysia now being revived, we list down the possible implications on Kuala Lumpur’s property market.
#1: Boost for the construction sector
The construction sector is currently in the doldrums due to the lacklustre property market in Malaysia.
Loan rejections from buyers and the demand-supply mismatch mean developers are faced with unsold inventory leading to cash flow problems with contractors.
In March, for instance, Bursa listed engineering and construction company, Zeland Berhad filed a statement with the Malaysian stock exchange that it was initiating arbitration proceedings against NRY Architects for RM305.4mil and other contract breaches for the construction of buildings of International Islamic University Malaysia in Kuantan.
It also announced that it is claiming RM3.34mil in outstanding payment for construction works from BBCC Development Sdn Bhd located at the former Pudu jail near Hang Tuah monorail station.
With Bandar Malaysia now back on track, contractors will be willing to bid at a much lower price to stay afloat amid the challenging market condition.
Subcontractors will also benefit.
#2: 10,000 new housing units will likely worsen overhang in Kuala Lumpur’s property market
Initially, DBKL had announced that Bandar Malaysia will house around 30,000 affordable homes.
However, a recent announcement puts the figures to 10,000 units.
Kuala Lumpur City Hall (DBKL) had previously indicated that it has set a development guideline for developers to build such homes at around 800 sq ft but priced below MYR450,000.
Meanwhile, Bank Negara’s figures showed that 80 per cent of homes, or 146,196 units priced above RM250,000, remained unsold as of end March 2018.
While Bank Negara did not break down the figures according to each state, recent data provided by the Valuation and Property Services Department (JPPH) showed that Kuala Lumpur recorded the third highest number of residential overhang at 5,114 units.
So unless the homes are priced below RM250,000, we are likely to see Kuala Lumpur’s housing glut worsen.
#3: Boon for first-time homebuyers
Bandar Malaysia has been cited by DBKL as a case study for government and private developers in building transit-oriented development (TOD).
Bandar Malaysia will house two MRT stations – Bandar Malaysia North and Bandar Malaysia South – which will form part of the alignment for the Sungai Buloh – Serdang – Putrajaya Line (SSP Line).
Bandar Malaysia will also possibly serve as the interchange to the MRT Line 3, which has now been postponed.
If indeed Bandar Malaysia will build affordable homes according to DBKL’s guidelines, then it will be a boon for first-time homebuyers as the entry price in Kuala Lumpur is easily above RM600,000.
It will also mean young Malaysians will no longer have to buy a car first after completing their education and thus improve their chances of getting their home loans approved.
Currently, many young Malaysians are trapped in the debt cycle due to various financial commitments such as their National Higher Education Fund (PTPTN), cars, personal and credit cards loans.
So while demand is strong, loan rejections remain an issue further worsening the cash flow for developers.
#4: Bane for landlords and sellers
If indeed 10,000 new housing units will be coming on stream, Bandar Malaysia’s surrounding areas such as Pudu, Brickfields, Cheras, Bandar Tun Razak, Sungai Besi and Taman Desa will be badly affected.
As such, landlord and sellers will likely see their asking prices fall even further as consumers will soon have more choices.
Landlords will also find difficulty in doing short-term accommodations as the Malaysian government will be regulating this market segment.
Therefore, rent-seekers and buyers are the clear winners as they are in the position to haggle for the best price.
#5: Sluggish commercial and office market ahead
The initial projection for Bandar Malaysia stated that it will have a gross development value (GDV) of RM150 billion.
Measuring around 196 hectares, Bandar Malaysia’s master plan indicates that it will be a mixed-use development with commercial and office buildings.
With so many mega malls and office buildings in Kuala Lumpur, Bandar Malaysia will add on to more floor space in Kuala Lumpur’s already weak commercial and office markets.
Despite this, Bandar Malaysia will likely attract multinational companies to set up their operations here as it is located within the Digital Free Trade Zone (DFTZ).
Located within the Eastern Gate Development Zone of Iskandar Malaysia, Bandar Seri Alam boasts a number of good schools and is dubbed the 'City of Knowledge'.
By Khalil Adis
Bandar Seri Alam is one of Johor's best-kept secrets.
Home to 16 educational institutions and located in between Pasir Gudang and Permas Jaya, the township has a growing young population of around 220,000.
We list down some of the attractive points about living in Bandar Seri Alam.
#1: Located in the growth corridor of Flagship Zone D of Iskandar Malaysia
Also known as the Eastern Gate, this is the third phase of Iskandar Malaysia's next growth.
There are a few catalytic projects currently happening here, namely Iskandar Halal Park (formerly known as Johor Halal Park) and the Pengerang RAPID Project.
First announced on 19 November 2015 by the former Chief Minister of Johor Dato' Khaled Nordin during the Johor Budget 2016, it is part of the state government's effort to promote entrepreneurship in Johor.
A 50:50 joint venture collaboration between UMLand and the Johor State Government via Johor Biotechnology & Biodiversity Corporation (J-Biotech), the private-public initiative aims to put it as an international halal park and is one of the catalyst projects in Eastern Iskandar Malaysia.
Recently, IHP scored a major coup among when US based-company, Chocolat Moderne from New York, picked JHP as the manufacturing site to set up its first business in Asia.
Meanwhile, the Pengerang RAPID Project will be the largest oil & gas hub in Malaysia that will create around 40,000 to 50,000 job creation in the construction industry, 400 jobs for engineers and 4,000 jobs for trained technical.
#2: Education is a recession-proof industry
One of the attractive factors about Bandar Seri Alam is it is home to a number of higher learning institutions such as Universiti Teknologi Mara campus, Universiti Kuala Lumpur campus, the Masterskill University College of Health Sciences campus as well as international schools.
While the Iskandar Puteri/Medini and Johor Bahru/Danga Bay areas boast a number of catalytic industries such as tourism and finance, they are not immune to economic down cycles.
Bandar Seri Alam is 100 per cent focussed on education, particularly among the local population.
This makes it even more attractive as education in an evergreen industry.
One of the oldest and biggest schools in Malaysia, Foon Yew High School is set to open its third campus in Bandar Seri Alam in 2021.
#3: Homes are still affordable with the potential for capital appreciation
According to data from Brickz, prices of homes here were transacted at a median price of RM320 per sq ft from Jan 2018 to Dec 2018.
In comparison, homes in Iskandar Puteri/Medini and Johor Bahru/Danga Bay are priced at around RM900 per sq ft.
Being a relatively new township surrounded by various property booster will give room for capital appreciation for homes here.
This, plus the price point, make it suitable among first-time homebuyers.
#4: Master planned by a reputable developer
Bandar Seri Alam is one of United Malayan Land Bhd's signature projects developed by its subsidiary company Seri Alam Properties Sdn Bhd.
Thoughtfully developed across 3,762 acres by its subsidiary, Bandar Seri Alam has been planned as a self-contained township with a mix of freehold residential, commercial, industrial and hospitality offerings.
At the centre of this township lies a bustling commercial arena with various exciting and attractive retail features and green elements.
Some of the world's best brands can be found here including Starbucks, KFC, Burger King and Subway.
#5: Growing population
Bandar Seri Alam is a thriving township which boasts a population of more than 220,000.
As Iskandar Halal Park and the Pengerang RAPID project are currently being developed, we can expect the population to increase in the next 10 to 15 years as more jobs are being created.
As we speak, a new RM500 million Pasir Gudang Hospital will also be constructed as part of the government's announcement under Budget 2016.
The Draft Master Plan 2019 which was announced last week and is fast taking shape to take Singapore ahead into a vibrant yet liveable city.
By Khalil Adis
A decentralisation strategy to bring jobs closer to homes in the next 10 to 15 years, here are the five growth areas to watch out for:
Woodlands Regional Centre: Woodlands Central
Woodlands Regional Centre: Woodlands North Coast
Punggol Digital District
Scaled model of the Punggol Digital District. It will be a hub for innovation with industry clusters such as cyber security, artificial intelligence, data analytics and Internet of things. It will also be a transportation hub linking Punggol Coast MRT station to Jurong Lake District and Changi by around 2030 via the Cross Island Line (CRL). Photo: Khalil Adis Consultancy.
Paya Lebar Central
Jurong Lake District
Greater Southern Waterfront
An independent analysis from yours truly