China still key to Iskandar success but where’s the growth?

Property prices are still down, with property analysts estimating prices for high-end condominiums having already dropped by between 5-10% in the past four years.

PETALING JAYA: The jury is still out as to the success or potential of Iskandar Malaysia in Johor, but one thing that is certain is the major sway property developers from China have in the region.

A report in the Straits Times today highlighted the disparity in the level of property investment inside the region by Chinese investors compared with those from Singapore.

According to statistics compiled by Real Capital Analytics, for the three-year period of 2014 to 2016, Chinese investors have put in more than US$2.1 billion (RM9 billion) while Singapore companies have invested US$985 million.

The statistics are based on completed transactions of US$10 million or higher.

However, several high-profile projects have been either slow to start or put on ice, according to the daily.

Highlighting the slow pace of development, the report said that since 2013, the bigger concern has been an oversupply of homes.

As a result, prices are still down, with property analysts estimating property prices for high-end condominiums having already dropped by between 5-10% in the past four years.

This does not seem to concern Iskandar Regional Development Authority (Irda) chief executive Ismail Ibrahim who was quoted as saying that for an estimated population of three million by 2025, Iskandar still needs about 500,000 homes.

“There are now about 700,000 homes, and Chinese developers are building another 20,000 to 25,000.

“If the population grows as projected, the number of homes being built is no cause for alarm,” he told ST.

Still, Chinese property buyers are coming in droves as the numbers for developer Country Garden have proven.

Sales numbers for high-rise apartments in its Forest City project hit 16,000 units last year alone.

The numbers may seem low, but for the more densely populated Singapore, next door, developers only sold 8,300 private residential units last year, in comparison, ST reported.

As far as the commercial aspects of the region, Ismail said Iskandar exceeded its targets last year.

“Iskandar received RM32.15 billion in investment commitment, surpassing its annual target of RM25 billion,” he was quoted as saying.

Still, despite the commitment from Singapore’s commercial sector, and the hopes that many more companies would ride the Iskandar wave, there are concerns about Iskandar’s economic model.

One Singapore real estate firm which has expanded into Johor to help Singapore and Johor manufacturing firms in opening factories in Iskandar, said the region was still way off the mark from its early promise.

Noting how Iskandar’s support to Singapore had been expected to emulate what Shenzen had been to Hong Kong, ZACD Group said the reality was still way below expectation and there were no signs it would get there.

ZACD Group head of research and consultancy Nicholas Mak said that there was interest from Singaporean companies, but in terms of manufacturing investments, Iskandar is a “very, very long way” from Shenzhen.

“Where Singapore-Iskandar differs from Hong Kong-Shenzhen is that when Hong Kong’s manufacturing sector hollowed out, it was natural for firms to move to the mainland, but Singapore manufacturers can make use of industrial land in the island’s west and north, or even opt to move to Batam.

“More so than Shenzhen, I wonder if Iskandar will go the way of Batam. It was once touted as the next big thing as land and labour costs were so low.

“But how often do you hear of manufacturers moving there now,” Mak was quoted as saying by the ST. -FMT