Iskandar region properties continue their price rise

News of increasing interest in properties in the numerous Iskandar regions have brought prices of resale homes up, up and up. Original buyers of landed properties in particular, have recently began selling their resale homes at dramatically higher prices, some as much as twice the buying price.

Horizon Hills in Nusajaya, Johor, Malaysia.

Horizon Hills in Nusajaya, Johor, Malaysia.

The high-speed Singapore-Kuala Lumpur rail link which is slated for completion by 2020, will largely increase traffic flow between the 2 countries and make working and living in either, or both, much more feasible. And that could be why owners of landed homes have been asking for prices up to RM500, 000 ($194, 000) above bank valuations. Are there any takers? Singaporean property investors are thinking twice, it seems.

Although Iskandar Malaysia has been gaining much newsworthiness and a rising profile in the investment market mainly through its rapid development in recent years. One of the major milestones include CapitaLand and Temasek Holdings’ involvement in the development of a $3.2 billion township in Danga Bay as well as Singaporean billionaire Peter Lim’s proposed Motorsports City. But one of the main reasons may not be such a positive one. The lack of transparency of transacted prices have left home owners setting their own prices, simply based on how much a home in the vicinity has sold for. This however has not stopped a rising demand for landed homes in gated communities and as current supply has not surpassed demand.

Horizon Residences Bukit INdahIn popular areas such as the Taman Bukit Indah, a two-storey semi-detached house now costs RM950,000. It previously sold at RM400,000 in 2008. Over at Horizon Hills, a RM400,000 property now sells for RM1 million, more than twice the original price tag.

Has this put off serious investors? Does this give the Iskandar region properties a diamond-in-the-rough image or an atmosphere of uncertainty which makes one think twice before jumping into the deep end?

90 per cent of Marina Bay Suites sold

Luxury properties may not be hogging industry headlines right now, but from the looks of it, sales of high-end apartments may not be slipping as much as we think. Buyers know what to look out for, if the 90% of units sold at Marina Bay Suites is anything to go by.

Marina Bay SuitesAThe residential private condominium development is situated next to The Sail @ Marina Bay and has already received its Temporary Occupation Permit (TOP). 198 of its 221 units have been sold at an average of $2, 700 psf. Singaporean buyers made up half of the owners of units in the establishment and Indonesians, Malaysians and Chinese made up majority of the other buyers.

Though Marina Bay Suites has yet to be launched, units sold have been through previews in Singapore as well as in Malaysia and Indonesia from as far as five years back. One of the highest priced units sold was a penthouse for $19.3 million. Out of the 23 units left are 2 four-bedders and 2 penthouses above the 48th floor. Mr. Thomas Tan, head of residential marketing at Raffles Quay Asset management is certain all will be sold by the end of this year.

Marina Bay Financial Centre

With the fast and furious development of the area since the inception of Marina Bay Sands, the Marina Bay Financial Centre and other private condominiums, prices of units of residential property in the area, such as Marina Bay Residences, have risen from $2,000 to as much as $3,000 psf since 2006. By the looks of it, the area could indeed be a money-making machine.

Know your Asia-Pacific Real Estate property restrictions

As the property buying-selling scene bubbles possibly into a timely frenzy, governments across the Asia-pacific region are tightening the hold on local properties. Foreign buying of property might be becoming more difficult, especially if you are unfamiliar with the ins-and-outs of the industry.

res280Countries with the most amount of restrictions include China, India, Indonesia and Vietnam. Australia and Thailand are in the middle tier and Hong Kong and Malaysia have the least amount of restrictions. Singapore straddles the middle and last tier, with some restrictions applying while in Sentosa Cove, there is almost no restriction where non-PR foreigners can purchase landed homes. On the mainland, foreigners can buy private homes albeit with a 15 per cent additional buyer’s stamp duty.

Melbourne ApartmentIn countries where Singaporeans frequent when looking at investing in real estate include Thailand, Malaysia and Australia. A brief outline of regulations in these countries are:

  • Malaysia – In general no restrictions apply, but foreign buyers can only purchase properties above the threshold value of RM500,000 per unit.
  • Thailand – Foreigners can purchase land with a 30-year lease period, with the option of renewing for two following 30-year periods. But foreign real estate buyers can buy freehold properties for up to 49 per cent of a single development. If exceeded, the purchase can only be leasehold.
  • Australia – While foreigners cannot purchase resale homes, all uncompleted properties or land earmarked for development can be purchased.

What are the advantages and disadvantages of these property restrictions? In countries where land is scarce, governments’ protectionist schemes are deemed as necessary to keep prices in check. But in places such as Singapore and Hong Kong, these schemes do not yet seem to keep foreign buyers away. Is there a reason behind the moves or merely a calculated and well-timed measure to buoy coffers and boost growth?

Migrating pool of property investors?

Last weekend’s new property curbs were targeted at property investors more than home buyers, according to the Ministry of National Development. So how exactly will property investors react against these new measures?

MAS

What the Monetary Authority of Singapore (MAS) has implemented is a Total Debt Servicing Ratio (TDSR) framework which not only applies to property loans but also all individuals. According to Barclays economist, Joan Chew, it is more a means of ensuring financial stability than a property cooling measure per se. Banks now also have to do more to ensure they have full knowledge of their clients’ borrowing capacity and any other financial commitments.

But there are still buyers with money to spend, possibly even an increasing number. Where will they head to then? Since this measure will be more likely to impact those looking to purchase their second or subsequent home and many are expected to opt for cheaper, smaller options.

Here are what the property analysts anticipating:

  • Sharper rise in property prices in
  • Property investors turning instead to foreign properties
  • Increased preference for smaller homes

Melbourne Australia propertyOverseas properties such as those in Malaysia, the United Kingdom, Australia, New Zealand and even New York have been in the radar of property investors and perhaps with this move, more will be heading for greener investment pastures.

 

Homes across the Causeway may now cost more

As the property game evolves globally, each country is picking up on the unique quirks and preferences of buyers and investors, both local and foreign. And Governments are catching on quickly now, with implementations of new rulings and taxation systems occurring more regularly, which changes the landscape of real estates all across the globe.

UDA Heights in Johor Bahru.

UDA Heights in Johor Bahru.

Singaporeans have always been fond of investing in homes in the neighbouring Malaysian state, Johor Bahru, and for some time, the sharp contrast in prices have drawn numerous buyers across the border. But now, a new taxation scheme will see future foreign property investors paying more in taxes. Johor state is planning to put higher tax rates on 130,000 foreign home owners starting end of 2013. Perhaps this is a means for the Johor government to rein in skyrocketing property prices spurred by foreign home buyers, 90 per cent of which are Singaporeans, but while time will tell whether this will deter buyers in the long run, the short term gains for the state through higher property returns may be substantial.

This property tax however does not apply for lower-priced properties, but with the restrictions already put in place, most foreign buyers may have to fork out an increased amount of property tax. Current tax for Johor properties are at 0.14 per cent of the property value. For example, a RM500,000 home will cost the owners RM700 a year in property tax. Foreign buyers are only allowed to purchase properties of a minimum of RM500,000, up from RM250, 000 a couple of years ago. Early up-takers may have benefited, but prices now will have more than doubled.

There is an additional charge of RM10,000 for government consent and if you choose to let go of your property, you will be charged a Real Property Gains Tax (RPGT) set by the Federal Government. RPGT Is set at 15 per cent of the net profit from sales of the property, is the property is held for less than 2 years. For properties held between 2 and 5 years, a 10 per cent RPGT is charged. And if the property is held above 5 years, no RPGT is charged. In general, owners of Malaysian properties are charged 2 types of property taxes:

  • Assessment tax – This is based on the renal value of the property
  • Quit Rent – This is based on the land size of the property
Condominium for sale at Penang's Batu Ferringhi.

Condominium for sale at Penang’s Batu Ferringhi.

In Penang, another state where foreign buyers popularly choose to invest in, the price limits for foreign buyers stand at RM1 million. Property taxes vary from one municipality to another, thus if you are looking to invest in properties in Malaysia, it would be wise to engage the expertise of a property agent or agency.

UK properties popular with Singaporean buyers

Highwood HouseSingaporeans are increasingly aware of the value in overseas property investments, with some properties in the United Kingdom seeing as much as 60 per cent of its buyers hailing from this little red dot. The 999-year leasehold 20-unit Highwood House is one such piece of real estate. Units range from 386 to 831 sq ft and start from £590, 000.

Overall, Singapore property investors made up 40 per cent of buyers in British private residential properties, spending an average of £700,000 ($1.3 million) per investor per property. Not unlike buying property in Singapore, in the UK, buyers also lean towards apartments which are near schools, universities, transport nodes as well as the prime London retail shopping zones and attractions such as the Thames.

The rise in the number of Singaporean investors in the UK could also be due to the increase in the number of launches here and in Asia. CBRE alone brought in 9 British property launches in 2011, and 11 more in 2012. This year, they are planning 18 launches to draw buyers to potential homes in the UK. The Singapore Dollar’s rise against the sterling, and the sheer number of new properties in the prime central London area are reasons enough to bring in the numbers for these residential developments.

Fulham Riverside in London. Photo by fulhamriverside.com.

Fulham Riverside in London. Photo by fulhamriverside.com.

Properties which have quickly been picked up by Singaporeans and Malaysians at their Asia launches include the 237-unit Fitzroy Place, the 214-unit Fulham Riverside and the 28-unit Regents Gate House which catered to a niche market of high net-worth investors. As the global and local property markets evolve and adjust to each other, it will be prudent for investors to keep a constant update on property news and new property launches as well as attend property talks and seminars.

Rise in property prices at Iskandar Malaysia

As planning, building and construction continue at the Iskandar Malaysia project development site, property investors are catching on quickly and lapping the residential properties all up. The recent hike in property prices definitely seem to say it all. Property agents from both sides of the causeway have reported an astounding and sudden spike in foreign interest and sale prices of property in the area.

Taken at the iProperty.com Expo: International Collection, Marina Bay Sands Expo Centre, Oct 2010

Taken at the iProperty.com Expo: International Collection, Marina Bay Sands Expo Centre, Oct 2010

Is it mere hype or can this activity be sustained and for how long? Will there be a time where investors find themselves holding on to lesser than they had hoped for?

Property agents have been busy showing potential investors the show houses and apartments in the territory and even in Singapore,  Malaysian property launches and expos have been garnering renewed interest. The fervent buying could also be due to various countries in Asia tightening their foreign property investor policies, countries such as Hong Kong, China and Singapore. This could be driving investors to look elsewhere in Asia and even in Europe and the States.
Puteri Harbour

The Puteri Harbour scheme, featuring luxury waterfront villas, apartments, serviced residences, hotels and commercial developments, have been one of the top picks so far. The promise of good international schools such as Malborough College in the vicinity has also helped rakes in some interest from expatriates. Waterfront properties in Danga Bay and Permas Jaya have done equally well.

A faint indication of how  the prices have changed since 2006 when Iskandar was first launched can be seen in the prices of bungalows in Ledang Heights:

  • In 2006 – RM25 to RM30 psf
  • In June 2012 – RM60 to RM80 psf
  • In 2013 – RM100 to RM120 psf

Prices have risen more than five times the initial launch. Pure speculation or true reflection of what future the Iskandar development holds? Will you be looking to invest in Malaysian properties and do you know where to begin? Don’t forget to keep a lookout for useful tips and learn how to plan your finances for long term investment from industry analysts and experts at property events, seminars and launches.

Malaysian homes gaining popularity

With more direct and speedier means of traveling between Singapore and Malaysia, property investors from both countries could possibly have much to cheer about. And it’s starting early. Promises of a high-speed rail link to Kuala Lumpur which will get you there in slightly over an hour, changes everything for investors. If they previously had doubts about investing in properties which they may have trouble overseeing due to proximity, they may now be none.

Taken at the iProperty.com Expo: International Collection, Marina Bay Sands Expo Centre, Oct 2010

Properties at the Iskandar development region. Taken at the iProperty.com Expo: International Collection, Marina Bay Sands Expo Centre, Oct 2010

Banks here have reported an increase in enquiries about mortgages denominated in Malaysian ringgit, especially for property investments in Johor Bahru. The Iskandar project is also drawing marked interest from investers keen to get their hands on property across the causeway. OCBC, CIMB and Maybank have all reported a spike in interest on home loans and financing.

The favorable exchange rate could also be reason behind the increase in enquires. The ease of switching between the two currencies help as well. CIMB for example, allows clients to pay loan installments from Singapore, thus they do not have to open an Malaysian banking account.

Bungalow for sale in Leisure Farm, Johor Bahru.

Bungalow for sale in Leisure Farm, Johor Bahru.

CIMB and Maybank are both offering Loan-to-value ratio of up to 70 per cent whereas UOB and OCBC offer up to 80 per cent. However, one must keep in mind  that the Malaysian banks tend to charge a much higher interest rate of 4.3%.

Is Malaysia the next property hotspot for investors? What should you watch out for and are there more pros than cons or vice versa? Property seminars might be a good place to start looking if you have questions to ask or would like to speak to more experienced investors and pick their brain for valuable advice.