Iskandar developers seen taking a big hit
Heftier taxes, scrapping of easy financing will deter buyers, says RHB Research
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Heftier taxes, scrapping of easy financing will deter buyers, says RHB Research
Pauline Ng in Kuala Lumpur
28 November 2013
Developers with substantial exposure to the Iskandar Malaysia region are expected to be the “worst hit” by recent property measures, as heftier taxes would deter short-term foreign purchasers who also account for a significant portion of residential sales in some areas, a research house has said.
At the same time, overseas developers are expected to be more cautious about land transactions as more punitive taxes could lead to higher landholding costs, said RHB Research.
CBRE data indicates that foreign buyers account for 54 per cent of total high-rise residential sales (by developers) in Nusajaya, and 39 per cent in Johor Baru and major suburbs.
But the new 30 per cent RPGT (real property gains tax) on foreigners who gain on disposals within the first five years of acquisition is likely to “wipe out short-term foreign speculators to a certain extent”, RHB observed in a real estate report dated yesterday.
The higher floor price of RM1 million (S$388,000) from RM500,000 and the scrapping of easy financing schemes such as the developer interest bearing scheme, or Dibs, are additional deterrents to foreign buyers with speculation in mind.
In the past one to two years, the Johor economic zone has gained traction among foreigners, especially Singaporeans, for a number of reasons including the strong Sing dollar.
With robust demand, property prices soared, catching up with Kuala Lumpur city centre prices. A number of KL high-end, high-rise properties have been going at more than RM1,000 psf.
The steep price increase in such a short period may not be sustainable for a number of reasons, including the lack of commerce in Johor Baru. To date the bulk of Iskandar investments has been centred on real estate as developers from Kuala Lumpur as well as overseas made a beeline for the new hotspot.
Take Country Garden Holdings which acquired 22.25 hectares in Danga Bay for nearly RM1 billion. In August, it launched with much fanfare its integrated development which has an estimated gross development value of RM18 billion.
It put up a large portion of the development for sale - a method used by developers in mainland China - selling 6,000 units, or about two-thirds of the 9,000 apartments, within a month. Malaysian media reported that at least one in four buyers is from China.
With the pipeline of units coming from Country Garden and other developers in the next two to three years, people are beginning to see Iskandar as more of a “property play”.
RHB pinpointed Medini as likely to experience a slowdown in home sales in the near term as buyers react in knee-jerk fashion to the property cooling measures.
Still, the node may not be very badly affected given the many incentives and exemptions accorded to it by the federal government. Current exemptions include bumiputra quotas, and minimum price restriction for foreigners. Medini property buyers could also be excluded from paying RPGT if the Iskandar Regional Development Authority is successful in pushing for an exemption to ensure the special node continues to be favoured by investors.
There is no denying that the tighter guidelines in Budget 2014 have had a dampening effect as purchasers exercise more caution but RHB said the RPGT was “still bearable” for locals since the 30 per cent maximum rate only applies for disposals within the first three years. It noted, however, that some consolidation in property demand and prices can be expected. Based on past experience, the market could take a quarter or two to adjust to the regulatory changes.
The research house has singled out UEM Sunrise, Sunway and Mah Sing as property companies under its coverage with the biggest exposure to Iskandar in terms of gross domestic value and landbank area.