There is strong potential for a property development boom in Pengerang, Johor in two years, if plans to turn the area into a major oil and gas hub progresses well, according to property consultants.
They say rental rates and real estate prices in Pengerang have increased substantially in the past 12 months, following announcements about infrastructure developments by Petroliam Nasional Bhd (Petronas) and oil and gas multi-discipline technical service provider Dialog Group Bhd.
PA International Property Consultants Sdn Bhd executive director V. Sivadas, who is based in Johor Baru, says: “The last year has seen heightened activities in terms of buying interest. There has been a substantial increase in the prices of smallholdings and other properties here.”
In Pengerang, Petronashas plans for a RM60bil integrated refinery and petrochemical complex, known as Rapid, which is expected to be commissioned by the end of 2016 while Dialog, together with Netherlands-based Royal Vopak group are developing a RM5bil independent deepwater petroleum terminal which is to be completed in the next six years.
Dialog executive chairman Ngau Boon Keat tells StarBizWeek that the natural deepwater and strategic location of Pengerang has attracted the attention of potential oil and gas investors from Taiwan and other countries.
“Pengerang has the potential to be bigger than what we anticipated. If done properly, the petrochemical industry in Pengerang and Singapore's Jurong Island (combined) can be bigger than Rotterdam in the Netherlands. In 20 years, Pengerang could surpass Rotterdam,” says Ngau.
CB Richard Ellis (Johor) Sdn Bhd director Wee Soon Chit also says real estate prices have gone up substantially since Petronas and Dialog announced their plans for Pengerang last year.
“There are some activities and speculation. For example, agricultural land in the area used to be priced at RM3 to RM4 per sq ft. The prices have almost doubled now,” he says.
Wee says the increase in prices of agricultural land around Pengerang is partially driven by the speculation of future land acquisition bydevelopers.
“This is compared with prices of agricultural land around Mersing or Johor Baru, which have gone up by 20% to 30% in the last three years, driven by increasing commodity prices.”
Meanwhile, Sivadas points out that there are proposals for Pekan Sungai Rengit, which is near to Pengerang, and its immediate hinterland of detached dwelling plots to be re-zoned for commercial purposes.
“Prices are sky-rocketing in anticipation of spillover from the massive developments in the area.”
However, Sivadas says while buying interest for real estate in Pengerang is substantial, there has not been a deluge in transactions.
“We understand that many owners are holding back. They would rather wait and see,” he says.
Sivadas points out that while Dialog's project has taken off, Petronas' Rapid is still in the pre-acquisition stage.
“Land has not been formally acquired. We understand studies are still being undertaken to determine the extent of the land to be acquired for the Rapid project.” A recent report by OSK Research notes that Dialog is making good work progress at the Pengerang terminal project, with more than 150 acres of land reclaimed to date.
“This is sufficient to build its Phase 1 centralised tankage facility, which would have a storage capacity of 1.3 million cu m,” said the research unit.
KGV International Property Consultants executive director Samuel Tan points out that in the next few years, accommodation will be needed for thousands of workers in Pengerang during the construction phase of the projects.
“The demand for accommodation is reflected in the increasing rental rates in the area, which is known as a sleepy fishing village,” he says.
Tan points out that in addition to construction workers who will stay in kongsi or long wooden houses near the construction site, there are engineers and construction professionals who will require more comfortable housing.
Sivadas says the sub-district of Pengerang which includes Pantai Timur and Tanjung Surat has a population of 48,603in 2010.
“There is expected to be much migration from other parts of Malaysia, as well as foreign workers coming into the region in view of the size of the proposed developments here. This will also fuel the property boom.”
Meanwhile, Sivadas notes that the scenario in Pengerang is different compared with the one faced by Gelang Patah and its hinterland in the early 90s when the Johor state government acquired close to 25,000 acres for the development of what is now Bandar Nusajaya, as well as to facilitate the development of the Second Link to Singapore and the Customs, Immigration and Quarantine Complex.
“A substantial amount of land was also acquired for the Port of Tanjung Pelepas. While Nusajaya has the benefit of the link to Singapore as its strongest selling point, the Pengerang region is to be led by the oil and gas industry,” he says.
According to Sivadas, a study of the landbank in Pengerang will show the predominantly smallholding nature of land there, with the exception of a major oil palm plantation (the 4,553-acre Pengerang Estate owned by Multi-Purpose Holdings Bhd to the west of Sungai Rengit, and east of Pularek, the Royal Malaysian Navy's recruit training centre).
“We believe this parcel (Pengerang Estate) will be developed in the near future, dependent on the speed and scale of the oil and gas developments in Pengerang. Further north of Pengerang Estate is Sebana Cove, which is a marina, golf course and residential development with landbank for development too.”
Sivadas says it is possible that the Johor state government may acquire land in the same manner that it did for Bandar Nusajaya and Port of Tanjung Pelepas at Gelang Patah in the 90s.
“Substantial smallholdings could be acquired, for Petronas's Rapid, as well as for re-parcelling of blocks of smallholdings for development,” says Sivadas.
Leisure and tourism
Last July, Johor Mentri Besar Datuk Abdul Ghani Othman said Desaru would focus on the leisure, tourism and hospitality sectors with Khazanah Nasional Bhd being the main driving force behind the development.
StarBiz quoted sources as saying that in the pipeline was the construction of four international-class hotels managed by luxury hotel groups and a new 27-hole world-class golf course with a combined investment of RM1.3bil.
Other components in Desaru's development include the two theme parks incorporating tropical, eco-adventure and water features and a convention centre to cater to the meeting, incentive, convention and exhibition segment.
Sivadas says the developments within Desaru will tie in with the oil and gas developments in Pengerang.
“With an expected huge increase of skilled and expatriates over the next few years, residential and resort developments will enjoy the spill-over effects.”
Sivadas points out that the Desaru development project by Khazanah covers an area of 4,113.29 acres along a 17km coastline fronting the South China Sea.
“Work is underway on the 27-hole golf course designed by Ernie Els, and another 18-hole course designed by Vijay Singh, as well as hotels and infrastructure works. At least three major international chains of hotels and resorts are committed thus far. A themepark is also earmarked,” he says.
Sivadas notes that existing hotels and resorts along the Desaru coast are in high demand especially during festive and school holidays.
“The completion of the Senai - Desaru highway (in mid-2011) and its bridge over Sungai Johor has made the big difference.”
However, Sivadas says there has not been many transactions of land within the Desaru belt.
“Many are either plantations held by government-linked companies or related parties, or alienated smallholdings held by individuals. With the strong prices for palm oil, we don't expect a rush by major land owners to develop their landbank. It may be prudent to submit preliminary applications for development while reaping the benefits of the strong oil palm prices.”
Concerning property developments within the Sungai Rengit and Pengerang area, Sivadas says there are hardly any organised large-scale projects.
“The closest big organised scheme here is Taman Sungai Ringgit which was first launched in the 80s, comprising 264 bungalow plots. Though some land was sold then, the plots remain undeveloped. With all the developments at Pengerang now, the owners here are expecting to finally see good returns on their investments.”
Sivadas says in a smaller scheme called Taman Rengit Jaya, double-storey terrace houses were sold at RM163,000 last year.
“Subsequently, a sub-sale of a unit was done at RM195,000 which translated into a price increase of 20% within a year.”
Tan also says the property market in Pengerang and nearby areas such as Pekan Sungai Rengit, Teluk Ramunia and Desaru is likely to heat up in one or two years.
“Property developers must mitigate their risks. Once the situation is seen to be more concrete in terms of infrastructure being set up, solid progression of projects and subsequently, adequate demand for housing and commercial areas, the property developers will make their moves,” Tan notes.
Tan points out that the travel time to Pengerang has also been shortened with the Senai-Pasir Gudang-Desaru highway.
“The travel time to Pengerang, from Johor Baru, is less than 45 minutes now compared with two hours before.”
However, Wee is cautious regarding the prospects of a property boom in Pengerang and nearby Pekan Sungai Rengit.
“Without a doubt, there will be a rise in property prices and increased property developments in the area once the Petronas and Dialog projects take off. But the question remains about whether the influx of high-income workers or professionals for the oil and gas, or petrochemical industry in the area can achieve the critical mass necessary for a major property boom.”
Wee says a good example is Kertih, Terengganu where Petronas has an integrated petrochemical complex.
“Perhaps Pengerang will become another Kertih in terms of size.”
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