Stirring up interest in Iskandar Malaysia

/ The Edge Property |

January 1, 2016 10:00 AM SGT

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New-home sales in Iskandar Malaysia have cooled over the past year, with Singaporean and mainland Chinese buyers retreating from the market. Even local Malaysian buyers have adopted a wait-and-see attitude amid a slowing economy. “People are just holding back in times like this,” says UEM Sunrise’s managing director and CEO Anwar Syahrin Abdul Ajib.

Whether people are waiting for a good deal or gauging market sentiment before taking the plunge, the Bursa Malaysia-listed property developer hopes to lure homebuyers back with incentives. UEM Sunrise launched its “Signature Selection” programme in September by offering inducements in various projects with unsold stock. These range from RM50,000 ($16,632) worth of kitchen fit-outs to cash rebates, travel vouchers and lucky draws with cars as top prizes.

At Regent’s Park in Nusajaya, where freehold five-bedroom villas are priced upwards of RM6 million, buyers stand a chance to win a Jaguar XF. At Noble Park, the latest phase at its East Ledang gated and guarded residential community, buyers of its grand pool villas can look forward to winning a Range Rover Evoque. Buyers of super linkhouses at Estuari Gardens @ Puteri Harbour can vie for the top prize of a Mercedes C-200. UEM Sunrise is also including some of its projects in Mont’Kiara, Kuala Lumpur in the “Signature Selection” programme.

Luxury villas in Regent's Park sit on land area of more than 10,000 sq ft and have built-up areas of 6,000 sq ft

“A lot depends on the type of product, and the profile of buyers,” says Anwar. “We have to think out of the box again next year, as we foresee that the market will be soft. Any hint of recovery is likely to be in [2H2016].”

Investors have always tended to compare what they can buy in Malaysia for the same amount in Singapore dollars, given the exchange rate. And that has always lured a percentage of Singa poreans and expatriates to make that switch from high-rise compact living in Singapore to freehold landed housing and a lower cost of living across the Causeway.

Sentosa Cove versus Estuari Gardens In Sentosa Cove, for example, where residential properties are sold with a 99-year lease, a three-storey waterfront terraced house at The Villas @ Sentosa Cove changed hands for $5.1 million ($2,047 psf) in September. The property sits on a land area of 2,497 sq ft and it has a built-up area of 5,000 sq ft. It comes with four bedrooms, a private pool and a private berth.

At UEM Sunrise’s Estuari Gardens @ Puteri Harbour in Iskandar Malaysia, which is the closest comparable to Sentosa Cove in Singapore, the freehold super link double-storey terraced houses each sits on a land area of some 3,500 sq ft, with a central courtyard, four bedrooms and a built-up area of about 5,000 sq ft. They are priced at RM1.8 million, or equivalent to $600,000 in Singapore today.

For $600,000, you can buy a 506 sq ft, one-bedroom apartment in a new 99-year leasehold development in Woodlands; a 463 sq ft, one-bedroom unit in a three-year-old leasehold condo in Jurong; or a 700 sq ft, leasehold executive condo in Yishun that will be completed three years from now.

Contrary to expectations, the plunge in the ringgit from RM2.52 to RM3.03 against the Singapore dollar over the past year has not translated into more Singaporeans snapping up properties in Iskandar Malaysia. “We are not seeing the impact of that yet,” says Anwar. “However, the current situation does present opportunities.”

A property consultant in Singapore says, “People are afraid that the ringgit may fall further next year. They are also concerned about the political situation and the 1MDB scandal.” However, there are some investors from Singa pore who see it as a window of opportunity to pick up retail, commercial or industrial properties, given the current exchange rate, says Peter Lim, a veteran in marketing property in Iskandar and the managing director of boutique realtor Pierre International. “They are not necessarily buying just yet, but just checking things out,” he says.

Caution sets in Companies have also become more cautious, as the Singapore economy is expected to grow a modest 2% to 2.5% in 2015 and 2016, because of a softening in the global economy. MNCs and local corporates in Singapore have been the biggest group of foreign investors in Iskandar Malaysia. Cumulative committed investments from 2006 to September 2015 amounted to RM185.34 billion, with foreign investment accounting for 41%, or RM75.56 billion. The top three foreign investors are from Singapore, China and the US. In 2013, Johor prided itself on being “the chocolate capital of Malaysia” when The Hershey Co, the biggest chocolate maker in the US, announced that it was investing RM816 million in a state-of-the-art confectionery plant in Senai Airport City. The factory is expected to open next year.

Two years ago, when a tour of factories in Iskandar Malaysia was organised, it attracted more than 200 people from Singapore. A tour in May this year drew only about 100. Still, investments in the manufacturing sector in Johor continued to soar from RM14.4 billion in 2013 to RM52.1 billion in 2015, according to data from Iskandar Regional Development Authority (IRDA).

Caution has also set in at the prospect of an oversupply in the Johor housing market. In 2014, committed investments in the residential segment accounted for RM38.58 billion, or 25% of the total invested in supporting sectors including real estate and infrastructure, according to IRDA. In 2015, the focus switched to retail, where investments almost doubled to RM45.19 billion from a year ago. Investments in the residential segment was RM40.06 billion this year, representing 22% of total investments in the sector compared with retail’s 24%. According to data from the National Property Information Centre’s (Napic) 1H2015 Property Market Report, Johor has a residential stock of 752,270 units, with an incoming supply of 166,139 units and planned supply of 179,975 units.

The latest property sales data by Napic points to both a cratering in transaction volume and sales value across all real estate sectors in Johor. Residential transaction volume in Johor contracted 33% y-o-y in 3Q2015. Transaction value fell a steeper 47.9% y-o-y. For the commercial sector in Johor, both transaction volume and value in 3Q2015 dived 44% y-o-y. Industrial transaction volume declined 34.2% y-o-y in 3Q2015, but sank 41.5% in terms of transaction value.

The pipeline supply in Johor may be the highest in Malaysia. However, only about 80,900 units are approved as high-rise residences in Iskandar Malaysia, points out Pierre International’s Lim. Only 8,000 units (or 10% of the high-rise units approved) of these are being constructed.

“Some of the massive project launches that made headlines are not located in Nusajaya but in other parts of Iskandar such as old Johor Baru city and the eastern board of Permas Jaya,” says Lim. “Not all of Iskandar Malaysia presents the same investment returns or potential.”

While high-rise residences may face an oversupply, especially in central Johor Baru, where many such properties are coming up, only a limited number of landed housing within gated communities is coming onstream, says UEM Sunrise’s Anwar. “Nusajaya is more balanced as far as supply is concerned. There’s still demand for landed housing among Malaysians as well as Singaporeans buying for their own use.”

Clusters of activities UEM Sunrise is master developer of a sprawling 24,000-acre site in Nusajaya, one of the five flagship developments in Iskandar Malaysia. Within Nusajaya’s education cluster, Educity, is Marlborough College, Newcastle University Medicine Malaysia and the recently opened University of Reading. Opening its new campus in 2016 is Raffles American School, with Management Development Institute of Singapore (MDIS) also scheduled to complete its new campus in Educity next year.

Within Nusajaya are also the gated residential communities of Horizon Hills, a joint development between Gamuda Land and UEM Sunrise; East Ledang by UEM Sunrise; and Leisure Farm by Mulpha International. Puteri Harbour, the waterfront resort precinct, comprises a mix of high-rise condos such as UEM Sunrise’s newly completed Imperia and Teega, where construction is at an advanced stage; Pacific Star and DB2’s joint-venture project Puteri Cove Residences; as well as Southern Marina, a joint venture between PPB Group, Kuok Brothers and Khazanah Nasional. Construction is also underway at BRDB’s Emerald Bay, whose marina- facing houses priced from RM6 million have been fully sold.

The high occupancy rates at Hotel Jen and Somerset Puteri Harbour serviced apartments can be attributed to Pinewood Studios in Iskandar Malaysia. Located in Medini, it opened last year and is reported to be the filming location for Hollywood movie Alien City.

“The growth of Educity and Pinewood Studios are very important,” says Anwar. “Putting in activities within Puteri Harbour and growing it into a waterfront resort island like Sentosa will create a lot of interest as well.” Negotiations are underway to have the management of ONE°15 Marina Club in Sentosa Cove operate the marina in Puteri Harbour.

At Gerbang Nusajaya, which covers 4,551 acres with a gross development value (GDV) of RM42 billion, Phase One of the ready-built factories at Nusajaya Tech Park is scheduled to be completed by year-end. Phase Two was launched in April. Nusajaya Tech Park is a 60:40 joint venture between Singapore’s Ascendas and UEM Sunrise. Japan’s Mitsui & Co has also taken a stake with Ascendas and UEM Sunrise to develop customised facilities for long-term lease. Another catalytic project in Gerbang is Motorsports City by Singapore billionaire Peter Lim.

At Medini, the Gleneagles Hospital has just opened; and Afiniti Residences, with 147 serviced apartments in a mixed-use development that includes the Avira wellness centre and wellness-themed retail offering, is also newly completed. Afiniti Residences was launched by a joint venture between Temasek Holdings and Khazanah International. In June 2013, all the units were sold via ballot system within five hours, and prices surpassed RM1,000 psf.

“As usual, developers were watching each other,” says Chris Boyd, executive chairman of Savills Malaysia at a recent talk at EcoWorld Gallery in Singapore last month. “When they saw the success of Afiniti, a lot of developers felt very gung-ho and piled into Iskandar at the same time, and that led to a potential oversupply. A lot of developers then pulled back because they saw what would happen with more than 30,000 high-rise units potentially entering the market at the same time.”

‘Game changer’ The biggest bugbear for commuters right now is traffic congestion during peak hours at both the Causeway and Second Link. Therefore, what many consider “a game changer” will be the completion of the MRT connection from Johor Baru to Singapore’s Woodlands. Another is the high-speed rail, which will link Kuala Lumpur and Singapore with Gerbang, expected to be one of the five stops along the route. “That will create an impetus for new economic activities in this place,” says Anwar.

A total of 98 submissions were received in response to the joint request for information exercise on the high-speed rail project at the end of last month. European companies represented 56% of the interested parties, and East Asian companies accounted for 14%. Malaysian entities made up 13%, and Singapore companies just 4%.

UEM Sunrise intends to embark on overseas road shows in 2016 to places such as Singapore, Indonesia, South Korea and Taiwan to promote Nusajaya as well as to launch Estuari Gardens @ Puteri Harbour. The first phase sits on a 47-acre site and will have 350 terraced houses. The overall Estuari development has about 10 phases and sits on a 159.6ha site with a GDV of RM7 billion. Subsequent phases will include semi-detached houses, bungalows and cluster housing.

UEM Sunrise has either developed, co-developed or sold a total of 14,000 acres within Nusajaya. There is still 10,000 acres available. “We’re relooking at the master plan to see which pockets we want to develop ourselves, and which ones we need to co-develop,” says Anwar.

Overseas ventures The next few years should also see more overseas project launches from UEM Sunrise. With the success of Aurora Melbourne Central and The Conservatory, its first two highrise residential projects in Melbourne, UEM Sunrise is ready to launch its third in the city. It is a redevelopment of the 21-storey Victoria Police complex, which was acquired by the developer for A$8 billion ($8.3 billion). The new project at St Kilda is expected to be a 23-storey apartment block and scheduled for launch in 2017.

On Dec 3, UEM Sunrise announced the sale of a block of 252 serviced apartments in Melbourne to Ascendas Hospitality Trust for A$120 million. The serviced apartments are part of the 92-storey Aurora mixed-use development, which has 941 apartments, and retail and office space.

Meanwhile, in Vancouver, it has sold its mixed-use development, Quintet, and plans to execute the second project on a 4.9-acre lot called Alderbridge. In South Africa, UEM Sunrise has a landbank of about 30 acres with a prime beach frontage in Durban. “We are working closely with the council, as South Africa is hosting the Commonwealth Games 2022,” says Anwar. Therefore, the developer is mapping out the master plan, where — as in Nusajaya — it will carve out pockets for its own developments, and other pockets will be co-developed with other investors.

In Singapore, UEM Sunrise is involved in the development of two mixed-use projects, Marina One and DUO, via M+S, a joint venture between its parent company Khazanah Nasional and Singapore’s Temasek Holdings. As at end-October, DUO Residences was 94% sold. Meanwhile, Marina One Residences has launched the first tower of 521 units. As at end-October, 360 units have been sold with the latest median price at $2,338 psf.

Singaporeans have been big buyers of UEM Sunrise’s projects. According to sources, chairman of Hersing Corp Harry Chua purchased up to 15 apartments at Aurora and four apartments at the penthouse level of the Conservatory worth A$7 million when the projects were launched. That makes him the biggest investor in UEM Sunrise’s projects in Melbourne.

This article appeared in the City & Country of Issue 706 (Dec 7, 2015) of The Edge Singapore.

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