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Thread: Tough times ahead for Iskandar and Malaysia properties

  1. #1
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    Default Tough times ahead for Iskandar and Malaysia properties

    http://propertysoul.com/2014/09/26/t...ia-properties/

    Tough times ahead for Iskandar and Malaysia properties

    September 26, 2014

    Disclaimer:

    1. The following blog post is not likely to be reposted or republished in any online media or property portals – particularly those advertising Iskandar and Malaysia properties, or organizing property shows for these properties. Expect to read this in PropertySoul.com only.

    2. Without any new project to launch, any commission from buyers or any advertising dollar from developers, this blog is not compelled or incentivised to write about infrastructure development across the Causeway, property investment opportunities in Malaysia, or choices for homeowners in Iskandar.

    3. If you are marketing an Iskandar or Malaysia project, have just bought a new property or have decided to buy one over there, the following content may be disturbing to you. You might want to skip this post now and wait to read the next one.


    How bad are the numbers?

    I picked up a copy of The Star while traveling in Malaysia two weeks ago The article on the front page titled ‘Malaysia’s property sector cooling off‘ caught my attention. It quotes the findings of the first half 2014 Property Industry Survey conducted by the Real Estate and Housing Developers’ Association Malaysia.

    - Close to 90 percent of respondents experienced a slowdown in property sales due to cooling measures announced in Budget 2014.

    - While 84 percent of developers were able to get bridging financing for their projects, 53 percent of their buyers faced challenges getting financing to buy the properties.

    - Properties priced below RM1 million were left unsold because of buyers’ difficulty to get financing and a glut of unreleased bumiputra lots.

    - 31 percent of properties priced between RM500,001 and RM1 million, mainly in Selangor and Johor, were left unsold after completion in the past three years.

    - 34 percent of properties priced between RM250,000 and RM500,000, mainly in Perak and Pahang, were left unsold.

    - 10,189 units were launched in the first half of this year but only 49 percent were taken up.

    - Over 80 percent of respondents held a ‘neutral’ to ‘pessimistic’ outlook for the property market in the first half of 2015.


    How does it fare compared with Singapore?

    In Singapore, according to the latest figures from URA, as of end of 2nd quarter 2014, the vacancy rate of completed projects is 7 percent for private residential units and 12 percent for Executive Condominiums. For projects under construction, 15 percent of private residential units launched were still unsold while 34 percent of total number of units were unsold as of August 2014.

    Across the Causeway, the outlook of the property market looks even gloomier.

    It is the first time in recent history of the Malaysia property sector that less than 50 percent of units launched can be sold in a half-year period. For units completed in the past three years, over 30 percent are still left on the shelves.


    What seems to be the problems?

    There are four reasons behind the cooling property sector in Malaysia:

    1. Oversupply in the market

    According to Malaysia’s Valuation and Property Services Department, land prices and launch price of residential properties have doubled from 2011 to 2013. With so many projects launched during this period, there will be a huge supply of completed residential units flooding the property market in the next two to four years.

    From 2011, developers jumping on the bandwagon loaded Johor, Selangor and Penang with countless upscale residential projects. Even overseas developers, including China developers, rushed to the country to diversify their investment. There were frantic moves such as building a man-made island without proper planning. And there is no authority to keep overbuilding in check.

    Any industry can prosper with healthy organic growth. On the contrary, heavy dosage of growth hormones that promotes unnatural growth can result in many negative side-effects that ends up with premature mortality.


    2. Disconnect between price and budget

    There is huge injection of investment funds and impressive development plans in Iskandar. They contribute positively to the long-term economic growth in the area.

    However, it takes time to reap what you sow. Earning power of the common people takes time to catch up. The 70 percent loan-to-value ratio is now beyond the capability of many home buyers. In fact, there appears to be a widening gap between the escalating property prices and the affordability of the home buyers.


    3. Concerns of foreign buyers

    Of course the high-end residential projects built by foreign developers are not relying on take-ups by the locals. But foreign buyers are deterred by the property cooling measures of Budget 2014, including 1) doubling of the price threshold to RM1 million; and 2) higher Real Property Gains Tax of 30 percent for properties bought by foreigners sold within five years of purchase and 5 percent hereafter.

    For Singapore investors, they also find themselves at the mercy of the volatile relationship between the two countries on disputes over different issues like tolls, border or water.

    The weaker Malaysian currency is a double-edged sword. The current exchange rate makes it look very attractive to own a property in Malaysia. But no one can guarantee that the ringgit won’t continue to weaken and will work against you when you want to exit the market one day.


    4. Where is the resale market?

    According to Malaysia’s Ministry of Finance, in the first half of 2013, only 1.5 percent of property transactions was above RM1 million in the Johor state. Those bought before 2014 with prices lower than RM1 million will have to wait for their properties to rise above that magic value of RM1 million until they can sell to foreign buyers.

    Unlike Singapore, Iskandar is a testbed but not a tested market. Until recently, we have seen active buying but not active selling.

    If one day properties with prices over RM1 million drop below the magic number of RM1 million, with all foreigners ineligible to buy, even if the locals are interested to take over, how many of them can afford the high quantum of these properties?


    So stop asking me what I think of Malaysia or Iskandar properties. When everybody is talking about a hot market, it’s not the time to buy. It’s time to sell.

    And don’t ask me again which project there is a good investment. Properties in any country is a good investment. The key is the time and the price you enter the market. That is exactly the homework property investors need to do before they buy anything in any market.

  2. #2
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    Iskandar is to scam $ from signaporean lah...
    “Nothing in the world is more dangerous than sincere ignorance and conscientious stupidity.”
    ― Martin Luther King, Jr.

    OUT WITH THE SHIT TRASH

    https://www.facebook.com/shutdowntrs

  3. #3
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    Quote Originally Posted by minority View Post
    Iskandar is to scam $ from signaporean lah...
    shhh don t let everyone know! else market crash everyone will have too many bullets left to compete with us! lol....

  4. #4
    Banned

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    I already warned people about Iskandar, it is a case of risk without reward.

  5. #5
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    Quote Originally Posted by Patrickstar View Post
    I already warned people about Iskandar, it is a case of risk without reward.
    Don't go and post this at "retire in malaysia thread" they will say u are "naysayer""

    Ppl won't listen because they have too much good times. Some lessons must learn the hardway.

  6. #6
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    Quote Originally Posted by darkseed73 View Post
    Don't go and post this at "retire in malaysia thread" they will say u are "naysayer""

    Ppl won't listen because they have too much good times. Some lessons must learn the hardway.
    I am waiting to be taught a hard lesson for buying intermediate & corner terraces in MY for RM500k & RM700K respectively in the past 4 years.

    In the meantime, do you know if prices have fallen & anybody sold at a loss?

  7. #7
    OCR properties going to crash!

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    Wait for another 5 years, then you convert the property value by then in RM back to S$, you will know the lesson learnt!
    I am looking at Malaysia properties dropping 50% in around 2020.............

    Quote Originally Posted by Warren49 View Post
    I am waiting to be taught a hard lesson for buying intermediate & corner terraces in MY for RM500k & RM700K respectively in the past 4 years.

    In the meantime, do you know if prices have fallen & anybody sold at a loss?

  8. #8
    Ultimate Underdog

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    Quote Originally Posted by teddybear View Post
    Wait for another 5 years, then you convert the property value by then in RM back to S$, you will know the lesson learnt!
    I am looking at Malaysia properties dropping 50% in around 2020.............
    Honestly, I caution against this type of prediction as people do remember. If Malaysia property drops 50%, can you imagine the impact on SG property? It's kind of baseless unless you can back it with some kind of data or explanation.
    The three laws of Kelonguni:

    Where there is kelong, there is guni.
    No kelong no guni.
    More kelong = more guni.

  9. #9
    OCR properties going to crash!

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    Is a trader able to explain every step / buy and sell decision with data and explanation after making big money? Not that I know of.

    Experience And knowledge, and ability to digest world economic and geopolitical news and convert those to winning investment decisions are very important, and all these are highly subjective at the point The decision was made, based on opinion formed from his accumulated knowledge and experience.

    Let's not argue now, but wait for 5+ years to see what happened then. I am quite confident Malaysia properties would have crashed by then.....


    Quote Originally Posted by Kelonguni View Post
    Honestly, I caution against this type of prediction as people do remember. If Malaysia property drops 50%, can you imagine the impact on SG property? It's kind of baseless unless you can back it with some kind of data or explanation.

  10. #10
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    Quote Originally Posted by teddybear View Post
    Is a trader able to explain every step / buy and sell decision with data and explanation after making big money? Not that I know of.

    Experience And knowledge, and ability to digest world economic and geopolitical news and convert those to winning investment decisions are very important, and all these are highly subjective at the point The decision was made, based on opinion formed from his accumulated knowledge and experience.

    Let's not argue now, but wait for 5+ years to see what happened then. I am quite confident Malaysia properties would have crashed by then.....

    I think more than 50 %.

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