Iskandar 'housing glut' may hit rents
A LOOMING housing glut in Iskandar Malaysia may weigh down rental yields in the economic zone, with homes being left empty.
The warning this time came from Malaysia's national organisation of developers, the Real Estate & Housing Developers Association (Rehda).
F.D. Iskandar, president of Rehda, noted that some 30,000 homes could be completed by 2016 or early 2017 in Iskandar.
If these are mainly sold to buyers outside Malaysia and Singapore, "then you will see that these units will be empty and once they are put up for rent and there are so many units available, that will put pressure on rental yields", he said.
Malaysia's federal government is "actually looking seriously" at this issue, Mr Iskandar added. But land administration in Malaysia lies within the state government's authority.
In the past 12 to 18 months, the deluge of homes launched or in the pipeline by Chinese developers, including Country Gardens and Guangzhou R&F Properties, has stoked concerns over a looming housing glut in the Iskandar region, which encompasses an area of more than 2,000 sq km in Johor.
"Obviously, we have seen developers from China launching a few thousand units at one go," Mr Iskandar said, adding that Malaysian or Singaporean developers would typically have 400 to 600 units in one project.
Most of the buyers of these Chinese projects come from mainland China, he observed. "Upon completion, they will not use this as their main home, there will be some concerns about these residential units being empty."
But Iskandar is bigger than Nusajaya or Danga Bay, he said, adding that demand for landed homes still "looks very strong".
Mr Iskandar noted that many Singaporean buyers prefer to buy from Singapore developers or reputable Malaysian developers.
There has also been much interest from Singaporean investors in industrial as well as commercial properties.
Meanwhile, other hot property spots in Malaysia such as Penang and Greater Kuala Lumpur are likely to be shielded from the supply glut in Iskandar as strong population growth in these areas is still supporting fundamental demand for housing, according to Mr Iskandar.
Kuala Lumpur's population is six million, and could grow to 10 million by 2020 through demographic growth, urbanisation and intra-state migration.
Mr Iskandar estimated that this would translate to some 170,000 homes being built each year, based on the assumption of four people per household.
Investment yields from residential properties in Penang and Kuala Lumpur are likely to hold up in the region of 5 to 8 per cent, while commercial properties could reap higher yields, he projected.
The retail segment has also emerged as a strong component, with Kuala Lumpur being ranked by global news network CNN as the fourth-best city in the world for shopping, after New York, London and Tokyo.
With the upcoming high-speed rail between Singapore and Malaysia expected to cut travelling time from 51/2 hours to just 90 minutes, both Kuala Lumpur and Singapore will benefit from greater inter-city travel and cross-border investments, Mr Iskandar said.
Still, he is not asking potential buyers to completely snub Iskandar, which he believes to be a "highly investible location".
But he has a piece of advice: "Please look at the quality of the developers. Be savvy investors. If it's for owner-occupation, there's no worry whatsoever, but if it is for investment, you need to do due diligence before buying."
THE BUSINESS TIMES