This USD100 billion city near Singapore “scares the hell out of everybody”
This USD100 billion city near Singapore “scares the hell out of everybody”
Chinese developers are swamping the market
Rather than join the fierce, oft-expensive competition for land in Singapore, Chinese property developers are on a building spree outside the city-state, close to the Malaysian border. Companies such as Country Garden, Greenland Group, and Guangzhou R&F Properties Co have set their sights on Iskandar in the hopes that the Malaysian economic growth corridor would be the next Shenzhen, an economic success story near Hong Kong.
Although the take-up has been decent for Iskandar developments — 8,000 apartments have been sold in Country Garden’s massive Forest City project in Johor state so far — the concerns of a glut are all too real to some experts.
“These Chinese players build by the thousands at one go, and they scare the hell out of everybody,” Siva Shanker, head of investments at Axis-REIT Managers, told Bloomberg. “God only knows who is going to buy all these units, and when it’s completed, the bigger question is, who is going to stay in them?”
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Investment growth in Malaysia stood at 2 percent year-on-year in the third quarter, compared with 6 percent in the previous quarter, Bloomberg reported. Residential sales values in the country dwindled by almost 11 percent last year, with the drop in the city of Johor Bahru alone recorded at 32 percent, government data showed.
“I am very concerned because the market is joined at the hip, if Johor goes down, the rest of Malaysia would follow,” said Shanker. “If the developers stop building today, I think it would take 10 years for the condos to fill up the current supply. But they won’t stop.”
There are now more than 350,000 private homes in the pipeline for Johor state, according to Bloomberg, citing data from the National Property Information Centre.
“Land is plentiful and cheap,” said Alan Cheong, senior director of research & consultancy at Savills Singapore. “But buyers don’t understand how real estate values play out when there is no shortage of land.”
Read next: 10 reasons why you should invest in Iskandar Malaysia
Source: Property Report