Iskandar - Still a good buy now?

Red speckles of danger have surfaced in Malaysia's hot zone Iskandar on the back of frenzied building by gungho developers from China, stirring some agitation over the sustainability of what was once a buoyant property scene in Malaysia's southern growth corridor. Amid a housing slump back at home, China's real estate giants with great financial muscle and aptitude to finish projects in record time, are set to flood the Iskandar area with huge supply of homes.

 

If anything, the plans are lofty; from a sweeping media blitz in Malaysia and Singapore to trumpet their project launches, to reclaiming large swathes of land to raise a man-made island on the Johor strait, and building a gobsmacking 15 towers of 35-storey apartments under a single project.

 

But the timing is starkly inopportune as Iskandar's property sector is in consolidation mode after ripping through record transaction volumes last year of RM30 billion (S$11.6 billion), up by a stomping 80% from a year earlier.

 

Pounding further on that soft patch is a string of property curbs, particularly for foreigners, this year that turned bullish foreign buyers of properties there - the majority of whom are Singaporeans - a tad weary. The signs are acutely evident. Brisk sales for new property launches that made developers gleeful are faltering. Nowhere is that clearer than the case of Malaysian firm UEM Sunrise's luxurious 34-storey block Almas Suites in Puteri Harbour, launched last December and priced on the conservative end.

 

The project has so far drawn anaemic bookings of under 10%, indeed somewhat heart-breaking for the developer who only a year earlier was euphoric that its high-end project, Teega, in the same area, was almost fully snapped up within the very first month that it was launched.

 

But now Iskandar, which last year turned Johor into Malaysia's sweetest property spot, outdoing Klang Valley and Penang with an over 20% rise in property prices, faces another test - can it keep steady amid the mammoth projects that threaten to smoother its space?

Source: excerpts from a BT report

 

The above report has somewhat affirmed our concerns about putting money in Iskandar. There has been much marketing hype over the past 2 years (at least) about the attractiveness of owning apartments/houses in Iskandar. Prices are generally a fraction of what one will typically need to pay for similar units in Singapore. And given the close proximity, Singaporeans can actually opt to live in Iskandar and drive across the causeway to work in Singapore. The high-speed rail linking Iskandar to Singapore, targeted to be ready by year 2020, will further increase the convenience of commute.

And with the rapid development of the region, many of those who had invested in Iskandar properties earlier on had supposedly made decent money from capital appreciation.
That is one version of the story.

The other version points to the fact that those who had actually bought residential properties in Iskandar are only sitting on "paper gains". With new residential project launches continue to flood the market, supply already seemed to have outstripped demand. So the wife and I understand that it is a real tough sell in the resale market.

And unlike Singapore where land is scarce (in comparison, the whole Iskandar region is about 3 times the size of Singapore) and developers generally disciplined, we wonder if  developers (especially the marauding Chinese) will start falling over themselves to drop prices just to move units in Iskandar. If this happens, existing owners/investors may soon find that even their "paper gains" will evaporate...

If any of our readers have experiences with Iskandar properties that you like to share, the wife and I will be most interested to hear them.