Buying a home across the causeway

Interest in homes away from this red dot, mostly just across the causeway in Malaysia, have been growing stronger. Not that Singapore has run out of homes to buy though. So what exactly is drawing attention there?

When Ms June Chan first went to Johor Baru to scout for potential properties in February, she spotted a villa going for a pretty price. Built on a sprawling 16,000 sq ft compound was a single-storey bungalow with three rooms and a swimming pool. It was in the Leisure Farm development, in Johor’s Iskandar region. The price: RM3.8 million ($1.52 million). Within two months, Ms Chan, 52, decided it was a good deal and plunged in. ‘It’s a second home for living in while my Singapore house is for rental,’ said Ms Chan, who is single and retired from a multinational corporation two years ago. She is now doing humanitarian work. With property prices rising in Singapore, more Singaporeans have begun looking to Malaysia for investment or to buy their second homes. The weakening Malaysian ringgit, the lure of owning landed property and familiarity with the country are reasons they cite for looking north. The Malaysian property market has been heating up in recent years, much like in the rest of Asia.

Silverscape condominium in Melaka, Malaysia.

Official figures from Malaysia Property Inc – an agency that promotes Malaysia’s real estate internationally – the total transaction value of real estate in Malaysia was RM137.8 billion last year, up 28 per cent from RM107.4 billion in 2010. About 2 per cent of that figure is foreign investment. Johor has seen the strongest surge in interest from foreign investors in the past year, according to the agency. In the first half of 2010, foreigners made up only 4 per cent of Johor property transactions, for properties priced above RM1 million. In the corresponding period last year, however, that figure shot up to 25 per cent. Much of the demand has been generated by the buzz over the Iskandar region, earmarked by the Malaysian government as a major growth area for the country. There are also now big Singapore companies investing in Iskandar.

Temasek Holdings has a joint-venture project with Malaysia’s sovereign wealth fund Khazanah Nasional to develop land in Iskandar. CapitaLand has been appointed project manager for a 2ha urban wellness project in Medini North, a region in Iskandar.  Property agents have also been pulling out the stops to get Singaporeans interested by advertising, conducting roadshows and taking busloads of potential investors on property tours. Ms Donna Lim, property agency HSR’s overseas department head, said the number attending its property exhibitions has risen sharply from last year.

SENI condominium in Kuala Lumpur.

Agents say the number of transactions by Singaporeans has also risen. While there is no official data, agents like Propnex say that Singaporeans bought 50 units in the second quarter of the year, compared to around 25 units in the first three months. It is marketing five projects there in total, located in Johor, Kuala Lumpur and Cyberjaya. Mr Peter Lim, head of Leisure Farm Singapore, which arranges free trips for buyers, said Singaporeans had bought 35 units in the development over the past two months, compared to about a dozen in the first two months of the year. Mr Edwin Tan, director of the Paragon Residences @ Straits View Malaysia project, also in Iskandar, said Singaporeans booked 116 units at a roadshow earlier this month, compared with 54 bookings from Malaysians.

Apart from Singaporeans, Malaysians living in Singapore have also been buying property there. Lecturer Jude Nesa Rajah, 51, bought his first JB property on impulse eight years ago after seeing the developer’s promotional booth at a shopping centre. He paid RM100,000 for the 1,016 sq ft unit in Bukit Indah. It is now worth RM220,000. A Singapore permanent resident and father of two, he said: ‘My investment is literally paying for itself… we’ve been renting out the place for seven years now, for RM1,000 a month.’ He said he is looking to invest in more properties when the market cools, adding that he hopes to retire there with his 48-year-old wife, a teacher. While Johor properties have always seen demand, now Singaporeans are also heading further north, scouting for potential investments in Kuala Lumpur, Penang and Malacca.Ms Lily Tan, senior marketing and sales manager at Hunza Properties, said Singaporeans were the top buyers of Hunza’s newest condominium Gurney Paragon in Penang, making up about 15 per cent of total unit sales.

Boulevard condominium in Penang.

But unlike those who buy property in Johor as their second or retirement homes, Singaporeans who buy in Kuala Lumpur and Penang tend to view purchases as investments, said PropNex chief executive Mohamed Ismail. Ms Goh Yu Ming, 32, bought a 4,000 sq ft condominium unit in Kuala Lumpur’s main shopping district, Jalan Bukit Bintang, last year for RM2 million. Ms Goh, who works in investor relations, believes she can get a rental yield of 6 to 8 per cent. Rental yields in commercial hubs like Kuala Lumpur and Penang range from 5 per cent to 6 per cent, while in Johor they are typically 4 per cent to 6 per cent. In contrast, Singapore residential properties generally yield 2 per cent to 3per cent, consultants said. The weakening of the ringgit against the Singapore dollar is expected to further stimulate demand. It has fallen by 2.7 per cent in the past year to reach a 14-year low against the Singapore dollar.

The Straits Times © Singapore Press Holdings Ltd. Reprinted with permission.

Editor’s Commentary:
Kuala Lumper, Penang, Malacca, Johor Bahru. These are the top spots for property buyers looking to secure a home outside of Singapore. Whether as a holiday home or for future investment, properties in these Malaysian states are certainly forces to be reckoned with.