Johor residential market to pick up pace

THE ongoing vaccine rollout, various government incentives and pent-up demand is set to spur the Johor residential property market in 2021.

With the rollout of the vaccine, KGV International Property Consultants (Johor) Sdn Bhd executive director Samuel Tan says the pandemic would then be brought under control, thus spurring confidence in the Johor property market.

“Once people start seeing effective control of the pandemic, their confidence level will return, albeit gradually, ” he tells StarBizWeek.

Tan adds that the Home Ownership Campaign (HOC) and other measures introduced by the government will serve as boosters to encourage buyers.

“In fact, many residential properties, especially high-rise ones, are worth considering as the prices of some have dropped quite substantially. We observed that genuine buyers are back to public auctions and some properties, including high-rise, are receiving higher bids.

“However, we believe that recovery is likely to be uneven, as uncertainties still linger due to doubts on the overall effectiveness of the vaccines or concerns of a potentially new wave.”

The HOC was kicked off in January 2019 to address the overhang problem in the country. The campaign, which was initially intended for six months, was extended for a full year.

The HOC proved successful, having generated sales totalling RM23.2bil in 2019, surpassing the government’s initial target of RM17bil.

The government reintroduced the HOC in June last year under the Short-Term Economic Recovery Plan (Penjana), to boost the property market after it was adversely affected by the Covid-19 pandemic.

Tan says the government can consider other possible measures to spur the Johor property market, such as doing away with the real property gains tax (RPGT) on those that own property for more than five years.

“The RPGT does not bring the government a lot of revenue and the notion of taxing genuine property buyers for owner occupation or long-term investment goes against the very principle of the RPGT to curb speculation.”

Tan is also proposing that the government consider allowing tax deductions against the interest of monthly instalments for a single residential property purchase.

“This helps genuine buyers for owner occupation by increasing their discretionary income. This can be further tweaked by targeting a specific group of buyers.”

Additionally, Tan is proposing that the government allow the conversion of land in Medini from leasehold to freehold.

“This is a win-win proposition for both Medini and end-purchasers.

“By converting the title to freehold, land at Medini will be attractive for investors and the difficulty of obtaining end-financing will be resolved.

“There are still a high number of unsold completed units and supply in the pipeline in Medini city.”

More choices available

Tan believes the Johor property market this year will also be spurred by pent-up demand, the low interest rate environment and exemption of stamp duty for first timers.

“Buyers who delayed buying last year are likely to re-enter the market and scout for good buys. There are more choices available.

“We expect the volume and value of transactions to grow 15% to 20% this year with the vaccine rollout and low base effect.”

Meanwhile, Rahim & Co in its Property Market Review 2020-2021 says Johor’s residential market is still much in favour of landed homes, as the demand is met by supply whilst the high-rise segment still has some way to go to match-up supply to demand.

“Prices of the affordable range, between RM200,000 and RM300,000, generally are still sought after and even more so with the pandemic having shaken one’s financial security.”

Generally, Rahim & Co says residential property prices remained relatively stable in 2020.

“Single-storey terraced houses in areas of Taman Bukit Indah, Taman Molek and Taman Pelangi were transacted between RM400,000 and RM490,000.

“Within the same schemes, two-storey terraced houses averaged at RM641,000. Condominium developments such as Kondominium Petrie, Aloha Tower and The Embassy Suite saw its prices at about RM424,000.”

Separately, Henry Butcher Malaysia in its Malaysia Property Outlook 2021 report says the recent revival of the Johor Baru-Singapore Rapid Transit System (RTS) has given the property industry a reason to cheer.

“It will add positively to the buying sentiment in Johor especially for properties located closer to the RTS station, even if a tangible impact on property prices will not be felt immediately.

“Market sentiment will also enjoy another boost when the borders are open completely to traffic from Singapore again, but the rising numbers of the infectious Covid-19 cases has posed a dilemma to immigration checkpoints as both sides of the divide seek to safeguard their respective territories.”

Given the latest imposition of the movement control order, Henry Butcher says a recovery of the residential market, which was originally predicted for the second half of 2021, may now be delayed to early or some time in 2022.

“Going forward, the residential sub-sector is expected to remain the key driver of Johor’s property market.

“Landed terraced houses can safely be singled out as the segment that will see the state through the pandemic era, seeing that it has performed well in the past few years.

“For the service apartments/small office home office category, it will take some time for the market to absorb the overhang stock to a reasonable level, more so when international travel is still a challenge.

“All things considered, the reintroduction of the HOC will offer the market some semblance of hope to stir interest again.”

Tan says the Johor residential market was negatively impacted by several factors last year.

“The biggest impact came from the pandemic. Additionally, the US-China Trade War and local political uncertainties also affected sentiment.

“As a result, both transaction volume and value in Johor Baru plunged last year. Based on the official figures as at the third quarter of 2020, the residential transaction volume and value stood at 7,840 units and RM3.34bil respectively.”

Tan notes that these statistics were only about half of 2019’s numbers.

“In view of the fact that the fourth quarter is typically a lull quarter, the overall figures in 2020 are likely to be at most about 70% that of 2019. In other words, we see a 30% drop year-on-year.”

Having said that, Tan says landed properties were less affected, compared with high-rise units.

“This can be seen from the overhang figures in Johor Baru. As a proportion, landed properties constitute about 16% of the total overhang units, while the balance 84% are high-rise.

“This is not surprising as landed properties are getting scarce and locals still prefer landed units. On the other hand, the oversupply of high-rise properties continues to irk potential buyers from committing.”

Tan says the future supply of high-rise properties stood at close to 100,000 units as at the third quarter of 2020.

“Nevertheless, the oversupply issue is less severe now compared with a year ago, as out of the approximately 100,000 units, only one-third have already started construction, while the remaining two-thirds only obtained approval but work has yet to begin.

“Many developers of the two-thirds of the future supply are likely to either defer or stop the development in view of the weak sentiment currently.

“Most developers focused on clearing existing stocks in the past one year.”

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