When someone shares with you something of value, you have an obligation to share it with others.
Thursday, 11 February 2016
Multiple headwinds for Chinese property developers in Malaysia
R&F’s Princess Cove, a 30,000 unit project, is in worst
shape. According to two local agents, it has sold less than half of the 3,000
units that went on pre-sale since 2014. R&F has declined to comment.
Multiple headwinds for Chinese property developers in Malaysia
Summer Zhen in Johor, Malaysia 11 February 2016
Crossing the border into Malaysia from Singapore, new buildings sprout along the frontier dividing the two countries came into view. Interestingly, most of them are made in China.
Mainland developers who had flocked to build homes in mainland China’s third or fourth tier cities years ago resulting in a glut have turned their sights to the overseas market.
Malaysia’s Johor state, just across the border from Singapore, has emerged as their target but developers are now facing the same challenge they face back home - an oversupplied market.
Guangdong-based Country Garden was the first to invest in Malaysia’s Iskandar development zone in southern Johor. The hot spot has soon attracted China’s leading developers like R&F Properties and Greenland Group which joined and invested nearly 50 billion yuan (HK$59 billion).
But three years after its presale in 2013, Country Garden’s first project of Danga Bay offering 45 high-rise condominiums with a total of 9,500 units has only sold 70 per cent.
R&F’s Princess Cove, a 30,000 unit project, is in worst shape. According to two local agents, it has sold less than half of the 3,000 units that went on pre-sale since 2014. R&F has declined to comment.
Other developers include China Vanke and the Greenland Group.
The quantity of new homes in Johor had raised concern by Singapore’s Minister for Culture, Community and Youth Lawrence Wong, who told the nation’s Parliament last year that the 336,000 new residential units currently planned for Johor already outnumber the 327,811 private homes in Singapore and would depress prices.
“These are not homes built for us. We can’t afford them,” said Kelvin, a driver in Johor. “Most local people prefer living in houses.”
According to Khazanah Research Institute, the median monthly wage in Johor is only RM 1,517 (HK$2,804), while Danga Bay is selling at RM 1,000 per square feet.
Indeed, these luxury flats are built for rich Singaporean and Chinese buyers.
Malaysia is aiming to attract foreign investment and homebuyers, especially from mainland China. Meanwhile Chinese developers want to take the advantage of loosened immigration policies and the unique location of Johor, whose prices are one fourth that of neighbouring Singapore.
The disappearance of Malaysia Airlines flight 370 and the shooting down of another Malaysian jet in Ukraine scared off scores of potential investors.
What made it worse is the glut in Johor has come much sooner than expected.
Johor’s supply of high-rise residential property increased 21 per cent in 2015 from a year ago to 40,776 units -- almost double the supply in 2011, resulting in prices falling 10 per cent to RM400 per square feet last year, according to property services firm C H Williams Talhar & Wong.
“Chinese developers have put a lot supply in the market, their projects are very large,” said Nicholas Holt, Asia Pacific Research Director at Knight Frank.
Property portal The Edge Property, citing a Malaysian developer, estimates the new supply in Iskanda is close to 60,000 units in the pipeline, with most Chinese developments that are to be completed in 2017 and 2018.
Singapore’s government has warned its citizens of the risks in investing in Johor.
“Lands are being reclaimed in Johor, there will be as much land as you want,” said Hoffman Tsui Kam-tim, executive director of Guangdong-based KWG Property. Tsui said they did field research in Malaysia and decided not to enter, adding that the depreciation of its Ringgit currency also piled on the pressure to the market.
Chinese developers have also encountered a series of policy risks.
Malaysia Government has raised the threshold of property buying for foreigners to RM1 million from RM500,000 to cool down housing market in 2014. It has also kept increasing the property tax for disposal in recent years.
Another big barrier is the units are out of the reach of most local buyers, making it very hard for Chinese developments to be welcomed by people on the ground.
Country Garden’s second mega project Forest City, which planned to build four man-made islands through reclamation at the junction of Singapore and Malaysia, was suspended by Johor state government in June 2014 due to environmental and political concerns from both sides. The project didn’t restart until last year.
According to Country Garden Malaysia senior management, their hiring of local staff is still at a very low level, about 20 per cent.
“The local people are complaining, these properties are just too expensive, what do we benefit?” said Datuk Phang Ah Tong, Deputy Chief Executive at Malaysian Investment Development Authority.
“Chinese developers bring almost everything from China. We want them to make full use of Malaysian products, suppliers and workers.”
“We are an open economy and welcome foreign investment. Still, you need get people to support you,” Phang said.
2 comments:
Multiple headwinds for Chinese property developers in Malaysia
Summer Zhen in Johor, Malaysia
11 February 2016
Crossing the border into Malaysia from Singapore, new buildings sprout along the frontier dividing the two countries came into view. Interestingly, most of them are made in China.
Mainland developers who had flocked to build homes in mainland China’s third or fourth tier cities years ago resulting in a glut have turned their sights to the overseas market.
Malaysia’s Johor state, just across the border from Singapore, has emerged as their target but developers are now facing the same challenge they face back home - an oversupplied market.
Guangdong-based Country Garden was the first to invest in Malaysia’s Iskandar development zone in southern Johor. The hot spot has soon attracted China’s leading developers like R&F Properties and Greenland Group which joined and invested nearly 50 billion yuan (HK$59 billion).
But three years after its presale in 2013, Country Garden’s first project of Danga Bay offering 45 high-rise condominiums with a total of 9,500 units has only sold 70 per cent.
R&F’s Princess Cove, a 30,000 unit project, is in worst shape. According to two local agents, it has sold less than half of the 3,000 units that went on pre-sale since 2014. R&F has declined to comment.
Other developers include China Vanke and the Greenland Group.
The quantity of new homes in Johor had raised concern by Singapore’s Minister for Culture, Community and Youth Lawrence Wong, who told the nation’s Parliament last year that the 336,000 new residential units currently planned for Johor already outnumber the 327,811 private homes in Singapore and would depress prices.
“These are not homes built for us. We can’t afford them,” said Kelvin, a driver in Johor. “Most local people prefer living in houses.”
According to Khazanah Research Institute, the median monthly wage in Johor is only RM 1,517 (HK$2,804), while Danga Bay is selling at RM 1,000 per square feet.
Indeed, these luxury flats are built for rich Singaporean and Chinese buyers.
Malaysia is aiming to attract foreign investment and homebuyers, especially from mainland China. Meanwhile Chinese developers want to take the advantage of loosened immigration policies and the unique location of Johor, whose prices are one fourth that of neighbouring Singapore.
The disappearance of Malaysia Airlines flight 370 and the shooting down of another Malaysian jet in Ukraine scared off scores of potential investors.
What made it worse is the glut in Johor has come much sooner than expected.
Johor’s supply of high-rise residential property increased 21 per cent in 2015 from a year ago to 40,776 units -- almost double the supply in 2011, resulting in prices falling 10 per cent to RM400 per square feet last year, according to property services firm C H Williams Talhar & Wong.
“Chinese developers have put a lot supply in the market, their projects are very large,” said Nicholas Holt, Asia Pacific Research Director at Knight Frank.
Property portal The Edge Property, citing a Malaysian developer, estimates the new supply in Iskanda is close to 60,000 units in the pipeline, with most Chinese developments that are to be completed in 2017 and 2018.
Singapore’s government has warned its citizens of the risks in investing in Johor.
“Lands are being reclaimed in Johor, there will be as much land as you want,” said Hoffman Tsui Kam-tim, executive director of Guangdong-based KWG Property. Tsui said they did field research in Malaysia and decided not to enter, adding that the depreciation of its Ringgit currency also piled on the pressure to the market.
Chinese developers have also encountered a series of policy risks.
Malaysia Government has raised the threshold of property buying for foreigners to RM1 million from RM500,000 to cool down housing market in 2014. It has also kept increasing the property tax for disposal in recent years.
Another big barrier is the units are out of the reach of most local buyers, making it very hard for Chinese developments to be welcomed by people on the ground.
Country Garden’s second mega project Forest City, which planned to build four man-made islands through reclamation at the junction of Singapore and Malaysia, was suspended by Johor state government in June 2014 due to environmental and political concerns from both sides. The project didn’t restart until last year.
According to Country Garden Malaysia senior management, their hiring of local staff is still at a very low level, about 20 per cent.
“The local people are complaining, these properties are just too expensive, what do we benefit?” said Datuk Phang Ah Tong, Deputy Chief Executive at Malaysian Investment Development Authority.
“Chinese developers bring almost everything from China. We want them to make full use of Malaysian products, suppliers and workers.”
“We are an open economy and welcome foreign investment. Still, you need get people to support you,” Phang said.
Post a Comment