This comes against a backdrop of roll-out of mammoth projects by big Chinese developers
Anita Gabriel 17 July 2014
The rosy narrative on Malaysia’s hot spot Iskandar development region is wilting on a looming supply glut. No thanks to overzealous building by mainland Chinese developers.
Adding to the flux is that Iskandar’s property boom - partly led by buyers across the Causeway who were lured by sprawling homes amid rolling hills, and in some cases, a spectacular sea view at a lower cost - is taking a breather after prices trooped upwards by 25 per cent last year.
But the edginess about oversupply and the downbeat prognosis that asset values could slip in Malaysia’s bustling Johor state may be overdone - that is, if one believes what the boss of Iskandar Waterfront Holdings (IWH), the master developer of Danga Bay where many Chinese developers have homed in, has to say.
“To me, the worry that there is going to be a glut ... I don’t think that will happen. These developers are deep-pocketed enough to hold back their launches, if need be,” said IWH chief executive Lim Kang Hoo, one of the early backers of the Iskandar project, in an interview with The Business Times.
“Given their experience in China and in other parts of the world and the size of the Iskandar economic zone, they will be the first to know if there is a glut in the area and would be smart enough to hold back or stagger their launches,” he added.
The remarks are the first by Mr Lim on the state of affairs in Iskandar. Mr Lim is an Iskandar magnate who through a series of corporate engineering, ended up owning 60 per cent of IWH with the remainder held by the investing arm of the state government, indeed a useful partner for projects in the region.
As master developer of the Danga Bay region in Johor Bahru city, most of which involves the much- vaunted waterfront area, IWH has parcelled out 220 hectares out of 1,600 hectares under its care, a big portion or 65 per cent of which involves foreign firms, including Singapore’s investment agency Temasek Holdings, which has tied up with CapitaLand for a $3.2-billion township, Australia’s Walker Corp and several mainland Chinese real estate firms.
Concerns persist that the Chinese developers - with their financial muscle which gives them tremendous holding power - looking to escape a slumping real estate back at home, will flood the market with their products regardless of market vagaries.
“I am extremely concerned over what is happening there and the extent of the mismatch between supply and demand,” said Daniele Gambero, chief executive of REI Group of Companies, a Kuala Lumpur- based property marketing consultant. “One can’t build and say, they will come. What if they don’t? There will only be empty buildings,” he added.
He still however remains a firm believer in the Iskandar story, not least because of the upside in capital appreciation and the fact that Malaysia is the only country in South-east Asia where foreigners can scoop up freehold real estate.
There is proof of audacity; in August last year, the market was agog with Guangdong-based Country Garden’s maiden project in Malaysia when it launched 9,400 condominium units in one shot at Danga Bay, a starkly bold approach compared with other projects in the Iskandar region which tend to launch between 500 and 700 units each time.
But that was during the good times when the property market was still hot. The project has reportedly been 70 per cent sold but according to unverified market talk, the drop-off rate since has also been significant.
“Country Garden was the first one to walk in (to that area), so they took a very aggressive stance. There was also demand (then),” said Mr Lim. Country Garden bought the land from IWH. Much has changed since, the biggest one in the form of property curbs on foreign buyers.
Yet, there’s still no stopping the big builders; Guangzhou R&F Properties recently opened a sales gallery in East Coast Road in Singapore ahead of the launch of its high-rise condominiums, a lofty project which reportedly could involve a staggering 30,000 residential units in all.
Understandably, other developers in the surrounding area - Rowsley, part owned by Singapore billionaire Peter Lim and its $2.2-billion integrated Vantage Bay project, among them - are having major hebbie jeebies with timing the launch of their own projects, as the fear is the new supply could keep a lid on property prices or even dampen them.
The ground is already shaky with the house price index for the high-rise segment in the southern state having fallen 4 per cent in the first quarter of this year from a quarter ago - the sharpest decline compared to elsewhere in Malaysia.
Given a choice, some industry stalwarts like state-owned UEM Sunrise, the master developer of Nusajaya - one of five of Iskandar’s flagship zones - would prefer to set itself apart from the worrying pace of activity happening some 14 km away.
“Our projects are different and much more total than any other developer in this region. You can’t compare Danga Bay with Puteri Harbour,” says UEM group managing director and chief executive Izzaddin Idris, who is also chief executive of UEM Sunrise.
Nusajaya’s story, as is the rest of Iskandar, is not solely premised on real estate as it’s backed by an impressive array of other offerings - LegoLand, Pinewood Studios, EduCity, Motorsports City and Nusajaya Tech Park - dubbed the catalytic footfall projects in the area.
“I’m concerned, and yet, I’m not,” he said, when asked if the pace of developments in the zone is worrying.
But he warns that if the building boom is not done measuredly, there are big risks.
“High-density developments could create abandoned communities. If they (developers) can’t sell the units or they are sold to parties who are merely investors looking to rent them out, they can become abandoned. That’s my concern. I pray hard it doesn’t happen.”
2 comments:
Magnate allays fears of Iskandar building glut
This comes against a backdrop of roll-out of mammoth projects by big Chinese developers
Anita Gabriel
17 July 2014
The rosy narrative on Malaysia’s hot spot Iskandar development region is wilting on a looming supply glut. No thanks to overzealous building by mainland Chinese developers.
Adding to the flux is that Iskandar’s property boom - partly led by buyers across the Causeway who were lured by sprawling homes amid rolling hills, and in some cases, a spectacular sea view at a lower cost - is taking a breather after prices trooped upwards by 25 per cent last year.
But the edginess about oversupply and the downbeat prognosis that asset values could slip in Malaysia’s bustling Johor state may be overdone - that is, if one believes what the boss of Iskandar Waterfront Holdings (IWH), the master developer of Danga Bay where many Chinese developers have homed in, has to say.
“To me, the worry that there is going to be a glut ... I don’t think that will happen. These developers are deep-pocketed enough to hold back their launches, if need be,” said IWH chief executive Lim Kang Hoo, one of the early backers of the Iskandar project, in an interview with The Business Times.
“Given their experience in China and in other parts of the world and the size of the Iskandar economic zone, they will be the first to know if there is a glut in the area and would be smart enough to hold back or stagger their launches,” he added.
The remarks are the first by Mr Lim on the state of affairs in Iskandar. Mr Lim is an Iskandar magnate who through a series of corporate engineering, ended up owning 60 per cent of IWH with the remainder held by the investing arm of the state government, indeed a useful partner for projects in the region.
As master developer of the Danga Bay region in Johor Bahru city, most of which involves the much- vaunted waterfront area, IWH has parcelled out 220 hectares out of 1,600 hectares under its care, a big portion or 65 per cent of which involves foreign firms, including Singapore’s investment agency Temasek Holdings, which has tied up with CapitaLand for a $3.2-billion township, Australia’s Walker Corp and several mainland Chinese real estate firms.
Concerns persist that the Chinese developers - with their financial muscle which gives them tremendous holding power - looking to escape a slumping real estate back at home, will flood the market with their products regardless of market vagaries.
“I am extremely concerned over what is happening there and the extent of the mismatch between supply and demand,” said Daniele Gambero, chief executive of REI Group of Companies, a Kuala Lumpur- based property marketing consultant. “One can’t build and say, they will come. What if they don’t? There will only be empty buildings,” he added.
He still however remains a firm believer in the Iskandar story, not least because of the upside in capital appreciation and the fact that Malaysia is the only country in South-east Asia where foreigners can scoop up freehold real estate.
There is proof of audacity; in August last year, the market was agog with Guangdong-based Country Garden’s maiden project in Malaysia when it launched 9,400 condominium units in one shot at Danga Bay, a starkly bold approach compared with other projects in the Iskandar region which tend to launch between 500 and 700 units each time.
But that was during the good times when the property market was still hot. The project has reportedly been 70 per cent sold but according to unverified market talk, the drop-off rate since has also been significant.
“Country Garden was the first one to walk in (to that area), so they took a very aggressive stance. There was also demand (then),” said Mr Lim. Country Garden bought the land from IWH. Much has changed since, the biggest one in the form of property curbs on foreign buyers.
Yet, there’s still no stopping the big builders; Guangzhou R&F Properties recently opened a sales gallery in East Coast Road in Singapore ahead of the launch of its high-rise condominiums, a lofty project which reportedly could involve a staggering 30,000 residential units in all.
Understandably, other developers in the surrounding area - Rowsley, part owned by Singapore billionaire Peter Lim and its $2.2-billion integrated Vantage Bay project, among them - are having major hebbie jeebies with timing the launch of their own projects, as the fear is the new supply could keep a lid on property prices or even dampen them.
The ground is already shaky with the house price index for the high-rise segment in the southern state having fallen 4 per cent in the first quarter of this year from a quarter ago - the sharpest decline compared to elsewhere in Malaysia.
Given a choice, some industry stalwarts like state-owned UEM Sunrise, the master developer of Nusajaya - one of five of Iskandar’s flagship zones - would prefer to set itself apart from the worrying pace of activity happening some 14 km away.
“Our projects are different and much more total than any other developer in this region. You can’t compare Danga Bay with Puteri Harbour,” says UEM group managing director and chief executive Izzaddin Idris, who is also chief executive of UEM Sunrise.
Nusajaya’s story, as is the rest of Iskandar, is not solely premised on real estate as it’s backed by an impressive array of other offerings - LegoLand, Pinewood Studios, EduCity, Motorsports City and Nusajaya Tech Park - dubbed the catalytic footfall projects in the area.
“I’m concerned, and yet, I’m not,” he said, when asked if the pace of developments in the zone is worrying.
But he warns that if the building boom is not done measuredly, there are big risks.
“High-density developments could create abandoned communities. If they (developers) can’t sell the units or they are sold to parties who are merely investors looking to rent them out, they can become abandoned. That’s my concern. I pray hard it doesn’t happen.”
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