JB property owners halt cash-out plans in anticipation of price rebound

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With the reopening of Singapore and Malaysia's land borders, many Malaysians who work in Singapore are now searching for rental homes in Johor Baru, with strong demand pushing rents up.

MANY property owners who were looking at letting go of their properties in Johor Baru have changed their minds after Singapore and Malaysia’s land borders reopened on April 1, in the anticipation of property prices rebounding in the near future.

After the Malaysian government imposed a lockdown in March 2020, followed by numerous extensions and stringent measures to curb the spread of Covid-19, many property owners – including Singaporeans – were eager to cash out in late 2020 and 2021.

Besides reducing their asking price by as much as 30 per cent, some owners even threw in furniture and sedan cars as part of the deal to attract buyers, but their efforts were in vain due to market uncertainty.

Usha Lachumanan, a real estate negotiator of Gather Properties in Johor Baru, said such deals can no longer be found in the current market. Many buyers have halted their plans, with some choosing to rent out their units instead.

Many Malaysians who previously worked and lived in Singapore are now looking at moving back to Johor Baru for cheaper rental and more space, she said. She now concludes 3 rental deals in a week, compared to 1 deal in 3 months during pandemic times.

“The rental demand is strong now and monthly rental is even higher than pre-pandemic levels, especially for properties located close to the Causeway and Second Link,” she told The Business Times.

For example, a 3-bedroom apartment with a built-up area of close to 1,000 square feet (sq ft) in Bukit Indah was rented out in May with a monthly rental of RM1,300 (S$409) on a one-year contract, an increase of 30 per cent compared to RM1,000 in 2019.

Another unfurnished 3-bedroom condominium in Horizon Residence with a built-up size of close to 1,100 sq ft was rented out for RM1,200 a month in May, with the current asking price for another similar unit ranging from RM1,600 to RM1,800. The rental for a similar unit was RM1,500 in 2019.

Other than rental demand, property agents in Johor Baru are also seeing increasing enquiries to purchase properties in Johor Baru, with a majority of these investors coming from the Asia-Pacific region.

Usha noted that since Malaysia’s border reopened, buyers from the Middle East and Hong Kong have shown strong interest in landed properties in Iskandar Malaysia.

Kate Tee, a real estate negotiator from Eu As Properties, has also received enquiries from Singaporeans and Singapore-based expatriates who are looking to buy properties in Johor Baru for their own stay.

“Some of my clients, who are Singaporeans that work from home, planned to move to Johor Baru for a spacious home and living environment with more lifestyle offerings. There are also some expatriates in Singapore, such as Koreans and Japanese, who decided to move to Iskandar Malaysia for their children’s education,” she added.

In the past 2 months, Tee has concluded RM13 million worth of deals for 4 bungalows and 2 shops, all located in Iskandar Malaysia. One of the bungalow buyers is a Japanese expatriate in Singapore who plans to move in with his family, she said.

Samuel Tan, executive director of KGV International Property Consultants (Johor), concurred that there is increasing interest for properties in Johor Baru since borders reopened on April 1.

“Unlike during pandemic times, buyers can’t find any deals which are under market value now, as many properties which were selling at a discount are now seeing the asking price adjusted to above market value,” he said.

​​For example, a 560 sq ft studio apartment at KSL D’Esplanade Residence was sold at RM340,000 in March this year, 5.5 per cent lower than the bank’s valuation price of RM360,000. But a similar unit changed hands at RM380,000 in June, 2 months after borders reopened.

During pandemic times, Tan noted that prices for some auction properties, which were located in less desired locations, were 40 to 50 per cent below market value. But as domestic economic activities gradually resumed in September last year, many good auction properties – especially landed ones – were being snapped up by investors.

For properties in less preferred locations, prices remain at a discounted level but have mostly risen to close to market value.

“As market activities began to stabilise, many property owners who were looking at selling their units are now holding back. For some Singaporean owners who were buying as vacation homes, (they) now have no reasons to let go as they are now allowed to travel,” he added.

Tan observed that rebounding commercial and industrial activities, as well as the on-going construction of the Johor Baru-Singapore Rapid Transit System (RTS) Link, are growth catalysts that will support job creation and in turn contribute to the growth of the state’s property market.

At an estimated cost of close to RM10 billion, the RTS project is expected to be completed in 2026 and start operations in 2027. It will connect Bukit Chagar in Johor Baru to Woodlands in Singapore, serving 10,000 passengers per hour each way.

Although Johor Baru has been long plagued by the issue of oversupply, Tan noted that the problem of a residential property glut will pass as the market eventually finds an equilibrium.

“The overhang numbers for JB have decreased in recent years,” he said, referring to residential units that have remained unsold for more than 9 months after their launch.

“(Johor Baru) being a growing city, it will become more expensive and crowded moving forth. Future new home buyers will have no choice but to live in high-rise apartments at least during their initial years, in view of the property prices exacerbated by the high inflation,” he added.

Johor recorded the second highest number of overhang residential properties in 2021, with a total of 6,089 units worth RM4.72 billion.

Across Malaysia, there are a total of 36,863 overhang properties worth RM22.79 billion, according to the data from National Property Information Centre.