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The Johor Baru property market is hotting up. Public confidence is increasing in tandem with the improving economy in general, which in turn has positively affected the residential market there. Greater economic activity driven by Iskandar Malaysia may also have contributed to the more vibrant property market.
This is evident from the stronger take-up reported by developers for their new launches and the rising property prices in the secondary market. Even rents are on the uptrend, according to Samuel Tan, director of KGV-Lambert Smith Hampton when presenting The Edge/KGV-Lambert Smith Hampton Johor Baru Housing Property Monitor for 3Q2010.
In 3Q, the average selling price for the condominiums and apartments sampled saw a marked increase. Apartments in Aloha Towers rose to as high as RM370,000 from RM340,000 recorded in 2Q.
Standard 2-storey terraced houses in the mature housing areas sampled also saw price increases. In Taman Austin Heights, average prices rose to RM400,000 from RM380,000 in the previous quarter.
Prices of standard 1-storey terraced houses showed a marginal increase. Those in Taman Johor Jaya saw prices rise from RM115,000 to RM120,000.
Rents, which had been stagnant for over a year, jumped substantially during the quarter. Straits View condo in Permas Jaya recorded rents as high as RM2,500 per month (6.3% gross yield) in 3Q, compared with RM2,000 per month (5.3% gross yield) previously. Rents of standard 2-storey terraced houses in areas such as Taman Molek rose to an average RM850 per month (3.2% gross yield) from RM800 per month (3% gross yield) the previous quarter. Rents for standard 1-storey terraced houses also rose in areas such as Taman Setia Indah, where they rose to an average RM500 per month (4% gross yield) from RM450 per month (3.7% gross yield) in 2Q.
Tan attributes the improved market performance to the economic activity related to Iskandar Malaysia, which is nearing what the government refers to as its “tipping point” — the completion and convergence of catalytic projects in 2012.
Among the projects are the RM750 million, 70-acre Legoland Malaysia; the RM70 million, 82-bed private hospital by international healthcare provider Columbia Asia; the UK-based Marlborough College Malaysia, its first international venture; and the one million sq ft lifestyle retail mall, Iskandar Investment Bhd’s Medini North, in the western development zone of Iskandar, along with the coastal highway that links the area to Johor Baru.
The government has allocated RM339 million for Iskandar Malaysia under Budget 2011. The oil and gas industry has been identified as one of the National Key Economic Areas (NKEA), one of Johor’s key growth sectors. To date, Johor has secured more than RM50 billion in foreign direct investment in the oil and gas sector.
Tan believes that Singapore also plays a role. “Singapore has seen a resurgence in economic activity and its manpower has never been enough. This means more employment opportunities for Malaysians, and Johor as its closest neighbour stands to gain,” he says.
Tan adds that more Singaporeans and Malaysians working in the island republic are buying homes in Johor Baru, either as an investment or a second home.
Singaporean companies are not being left out. In May, Prime Minister Datuk Seri Najib Razak announced that Khazanah Nasional Bhd and Singapore’s Temasek Holdings Ltd would form a 50:50 joint-venture company to undertake the development of a 500-acre iconic wellness centre in Iskandar.
“All these activities and funding are helping to create more job opportunities, and that creates demand for housing. Also of importance is the visibility of infrastructure work all around Johor Baru. These factors help to build confidence in the economy and bring more people into Johor,” says Tan.
He also notices a gradual shift in housing supply from low and mid-end housing to higher-end housing in Johor Baru. “It is a trend we have observed in the past year, which has picked up in recent months.”
The range of mid to high-end housing is concentrated in three areas — Nusajaya, Skudai and Tebrau. While Nusajaya has been catering mostly for the upper-income market, Skudai and Tebrau have catered more for the low to middle-income market.
Tan notes that nearly all of the estimated 17 new housing launches in 3Q2010 are located in these three hot spots.
Developers are focusing on the upgraders and the mid to upper-income market in anticipation of an impending growth in these income groups in line with the development of Iskandar Malaysia.
“Some are more than just upgraders. They are middle-class communities looking for something beyond a roof over their heads. They are looking for prestige and lifestyle products, and some developers are selling exactly that,” he adds.
Another noticeable new trend is the development of more high-end serviced apartments and condominiums in the suburbs. According to Tan, in the past, hardly any developers built apartments priced above RM200 psf, especially in the suburbs. These days, many of the new high-rise developments are being built in the suburbs and priced at RM300 psf and above.
“It looks like mindsets have changed and Johor Baru is becoming an increasingly affluent and sophisticated society. This is reflected in the kind of properties that are being developed. The new products come with better designs, facilities and better security to meet the need for safer living environments. People have come to accept that high-end apartments in the suburbs are good investments and good places to live,” says Tan.
New high-end apartment developments include Austin Heights Sdn Bhd’s Degree Serviced Suites at Taman Austin Heights, S P Setia Bhd’s Sky Executives Suites at Taman Bukit Indah and Gamuda Bhd’s Fairway Suites Apartment at Horizon Hills.
Sky Executives Suites was launched in 2Q2010, while Fairway Suites Apartment and Degree Serviced Suites were launched in 3Q.
Land values in Johor Baru are also on the rise. As late as 1999, development land was priced only at an average RM2 psf, but today that has increased to RM7 to RM8 psf.
Rising land cost has prompted developers with deep pockets and good foresight, particularly those based in the Klang Valley such as S P Setia Bhd and Mah Sing Group Bhd, to acquire landbank in Johor.
“One thing that will never grow is land. With all the infrastructure and developments coming in, there will be less land for development so prices will just keep on increasing. For the developers that can, it is better to buy now and have their pick of prime land than to wait,” reasons Tan.
This article appeared in City & Country, the property pullout of The Edge Malaysia, Issue 832, Nov 15-21, 2010
