The property market in Johor, particularly Iskandar Malaysia, might be a case of too much too soon.
Red flags are showing in the state where launches of projects and high prices are common place but the pace of launches, which now includes “carpet building” by China developers, is flooding the market with more houses than what could be sustainable.
“We welcome foreign developers including those from China, but flooding the market with massive supply of properties could create property overhang,” says Johor Real Estate and Housing Developers Association (Rehda) chairman Koh Moo Hing.
Latest data by the National Property Information Centre (Napic) indicate the amount of new homes being built in the near future is equivalent to 42% of the stock of 702,101 houses in the state.
Almost 300,000 near homes are being built or in the planning stage at a time when the market in Johor has hit a soft patch.
Napic data shows that at the third quarter of last year, construction for 116,859 homes had already started while the building of 162,579 homes have yet to start.
Meanwhile, 16,168 homes had been approved for construction in Johor in that quarter alone.
Analysts say the new supply does not include new launches by Iskandar Waterfront Holdings Bhd, which is expected to increase three-fold to more than 4,000 units and is expected to remain elevated up to 2017.
The supply of new homes does not seem to be putting a lid on the escalation of home prices in the state. As the new launches are priced thereabouts or even higher than what is being sold in the more established Klang Valley, the new supply of homes and their higher prices have had a telling impact on prices in the state.
The average residential value for Johor property has risen some 45% over the past five years to RM197,147 in 2012 from RM136,034 in 2009. Comparatively, the country’s average residential value has only gone up by 30% in the same period to RM248,515.
Research house Hwang-DBS Vickers Research notes that recent launches in Nusajaya, Medini, Danga Bay and Johor Baru are in the range of RM600-RM1,000 per sq ft, with prime units hitting RM1,500 per sq ft.
Given there is going to be an oversupply of homes in Johor, a slew of launches by China-based developers recently has got some worried.
