Following a warning by Malaysia’s biggest bank on the risks of a housing glut in Iskandar, lawmakers in Johor said demand for prime houses in the region has lagged far behind supply.
“There is a misconception about the demand market here … there is a clear mismatch between supply and demand,” said Shahrir Abdul Samad, MP for Johor Bahru.
“There is an oversupply of premium properties, (but) the demand … is for medium- and low-cost ones, owing to people’s incomes,” the former Domestic Trade and Consumer Affairs Minister noted.
In its report, Maybank advised investors to be cautious of Iskandar due to the housing glut there, which it expects will be aggravated by huge incoming supply in 2015 and 2016.
It also predicts property values in Iskandar will come under greater pressure in the medium term, particularly with the value of property transactions in Johor having dropped 33 percent quarter-on-quarter in Q4 2014.
Shahrir noted that it was only natural for top-end residential property developers in Iskandar to be hardest-hit by the drop in prices and secondary sales since such projects were not the region’s focus.
“You have to be fair to Iskandar, as housing was never part of its main draft. The crux of its investment was more on services, hospitality and manufacturing, as well as allocations for small- and medium-sized enterprises. The investments we are interested in are not housing, and this is why we have called in Pinewood and Legoland to Iskandar,” shared the senior UMNO lawmaker.
“That is the main investment strategy, but because of all these, foreign developers think there is a demand for their properties, and that is not happening. This is what’s happening, and they have to live with it. If they are willing to take the risk, then we can’t stop them,” he added.
Meanwhile, Johor opposition leader and Skudai assemblyman Dr Boo Cheng Hau observed that several residential projects were being launched without sufficient supporting industries or services in place.
The Democratic Action Party (DAP) MP revealed that the region is yet to accommodate the surge in tourism or cater to the needs of foreign investors looking to take advantage of Malaysia’s second home schemes.
“There will be a sustainable demand for properties here, but not in the near future. It will take another five to 10 years to see a boom in sectors such as manufacturing, services and so on, (and) a more steady increase in demand for properties,” stated Dr Boo.
DAP’s Kluang MP Liew Chin Tong underscored that the rapid pace of property development within the region had no real legs to stand on.
“Johor is a case of killing the golden goose too fast, too greedily. The property market is not sustained by a genuine working population with income to support their investments, while borrowing rates are surging, waiting for the bubble to burst,” Liew said.
Despite this, UMNO’s Pulai MP Nur Jazlan Mohamed expects the upcoming RM53 billion Pengerang Refinery and Petrochemicals Integrated Development (RAPID) project to provide the much needed employment and spending capacity to revive Iskandar’s dwindling property market.
“Property in Iskandar is experiencing a down cycle, but (sales) will pick up once corporate businesses like RAPID kick-start. Once corporations set up businesses in Iskandar, things will pick up. When businesses come in offering higher job opportunities, only then will the supply (of residential property) be taken up. (Iskandar) will not become a white elephant,” he stressed.
Image: Scale model of future development in Iskandar, Malaysia.
Farah Wahida, Editor of PropertyGuru Malaysia, wrote this story. To contact her about this or other stories email farahwahida@propertyguru.com.my
