I recalled several of my predictions on real estate around the world and found most of them came true. Here is the list:
1. I predicted back in 2011 that 2013 will be the tipping point for Singapore residential properties and it will dip between 15-30% until 2016.
2. I predicted in mid 2012 that London will be poised to take off due to demand supply imbalances and low interest rates.
http://musingsonwallstreet.blogspot.sg/2013/03/an-anatomy-of-property-bubble-case_17.html
3. I predicted in March 2013 that there will be MASSIVE OVERSUPPLY of Iskandar properties, especially in the condominium sectors. I expect condo prices in Iskandar to plunge between 20-50% next 5 years. Those that foreigners bought will definitely bear the brunt of the fall, while those bought for around RM200-300k will not see much drops. Landed properties will hold the value better and fall between 10-30%. Commercial properties in the Nusajaya area where the population hasn't risen will fall as much. Occupancy rates in offices, retail and resi are around 60-70%.
4. I predicted in june 2012 that US has reached the bottom.
5. Now I will tell you that the following cities will see great opportunities:
Major US cities like New York, Houston, LA, Seattle, Austin, Florida will still see 30-50% upside in the next 5 years.
Australia is Mixed bag, but cities like Perth , Brisbane still generate positive spread over borrowing costs, while Sydney and Melbourne look expensive.
Tokyo is a good bet, but you cannot buy new. The difference between a 30-year property and new one is around 60%!! And the yield is only 4% for new but 8% for an old one in the city centre! also! you need to buy outside the city centre to achieve 8-10% yield for maximum capital appreciation.
London is now a HOLD. it has gone on a terminal velocity trajectory until 2018, when supply finally meets demand. Within this period, I expect around 25% capital appreciation! which isn't that much compared to other cities.
The last bastion for resi property investment is now in continental Europe. Prices are bottoming but you must pay in cash! No mortgage is available.
Red flags raised in Johor property market
Wait and see: Developers are bogged down with a decline in sentiment due to cooling measures and policy changes. - FILE PHOTO
[JOHOR BAHRU] The property market in Johor, particularly Iskandar Malaysia, might be a case of too much too soon. According to The Star newspaper, red flags are showing in the state where launches of projects and high prices are commonplace but the pace of launches, which now includes "carpet building" by China developers, is flooding the market with more houses than what could be sustainable.
"We welcome foreign developers including those from China, but flooding the market with massive supply of properties could create property overhang," Johor Real Estate and Housing Developers Association (Rehda) chairman Koh Moo Hing told the daily during the weekend.
Latest data by the National Property Information Centre (Napic) indicate that the amount of new homes being built in the near future is equivalent to 42 per cent of the stock of 702,101 houses in the state. Almost 300,000 homes are being built or in the planning stage at a time when the market in Johor has hit a soft patch. Napic data show that at the third quarter of last year, construction for 116,859 homes had already started while the building of 162,579 homes have yet to start.
Meanwhile, 16,168 homes had been approved for construction in Johor in that quarter alone. Analysts say that the new supply does not include new launches by Iskandar Waterfront Holdings Bhd, which is expected to increase three-fold to more than 4,000 units and is expected to remain elevated up to 2017.
The supply of new homes does not seem to be putting a lid on the escalation of home prices in the state. As the new launches are priced thereabouts or even higher than what is being sold in the more established Klang Valley, the new supply of homes and their higher prices have had a telling impact on prices in the state. The average residential value for Johor property has risen some 45 per cent over the past five years to RM197,147 (S$75,000) in 2012 from RM136,034 in 2009. Comparatively, the country's average residential value has gone up by only 30 per cent in the same period to RM248,515.
Research house Hwang-DBS Vickers Research notes that recent launches in Nusajaya, Medini, Danga Bay and Johor Bahru are in the range of RM600-1,000 per square foot, with prime units hitting RM1,500 psf. Given that there is going to be an oversupply of homes in Johor, a slew of launches by China-based developers recently has got some worried. The grand entrance of China-based Country Garden Holdings surprised many with the launch of 9,000 apartment units at one go, causing local players to keep a close watch on how they will impact the market there.
Mr Koh believes that the magnitude and scale of such launches could lead to a property bubble if foreign developers are given a free hand in their development projects. Rehda is hoping for the state government to possibly impose regulations that limit the number of units built within a year to match the market's demands, says Mr Koh.
Hwang-DBS Vickers Research says that Country Garden's 9,000-unit launch in Danga Bay alone could cause a glut, although delivery could be challenging given tight building materials and labour supply over the next three to four years. Analysts are concerned that these developers would replicate the ghost towns in China and if overbuilding does occur in Iskandar, that can be detrimental to the overall physical market in the mid-term. However, some property analysts say that the extra supply would not pose an issue if foreign developers were attracting foreign buyers, rather than targeting only domestic buyers.
Country Garden, which has impressively sold about 70 per cent of its Danga Bay maiden project in Malaysia, launched in August, said via e-mail that some 3,000 units were snapped up by Malaysians. Meanwhile, about 50 per cent of its foreign buyers are Singaporean and 45 per cent are Chinese. Most of its units were snapped up within a month.
Then, there is Hong Kong-listed Guangzhou R&F Properties, which recently bought 116 acres in Johor Bahru from the Sultan of Johor for RM4.5 billion. Market talk is that a 19-block development is in the blueprint. But according to its filing with the Hong Kong exchange, Guangzhou R&F plans to develop high-rise residential units, low-density housing, retail properties, offices, hotel and a shopping mall, all of which will be on a saleable floor area of about 3.5 million square metres. That's almost 10 times the floor space of the Petronas Twin Towers in Kuala Lumpur. Also, Hao Yuan Investment, which is believed to be a China-linked company registered in Singapore, is forming a joint venture with Iskandar Waterfront Holdings to develop 15 hectares in Danga Bay.
Not all are alarmed by the entry of China developers. "The sprouting of Chinese investors in Malaysia is in tandem with the government's initiative to make Malaysia an international real estate investment destination. Chinese developers have been investing in bluechip locations of New York, Los Angeles, London, Sydney, Singapore and their presence in Malaysia bodes well for the market," says Zerin Properties chief executive officer Previn Singhe.
He is unperturbed by the potential flooding of homes in the future as the supply coming in will be spread over a couple of years. "Once all the catalytic projects are in place, there would be requirements for new homes to accommodate migrations," he says.
Although rumour has it that Country Garden has been offering its Chinese buyers a deal that packages a unit in Iskandar together with a purchase of their property in China, it is insignificant to pushing up prices in the area, says V Sivadas, executive director of PA International Property Consultants Sdn Bhd.
As local and foreign developers grapple and challenge for customers when launching projects in Iskandar Malaysia, the surge in supply coming in has been startling. The slew of houses slated to be built together with a market that is taking a breather after seeing an up-rush in prices and cooling measures starting to bite has seen take-up rates of new developments almost grind to a halt. Post-Budget 2014, take-up rates have come in poorly with developers such as UEM Sunrise Bhd recording only 20 per cent in bookings for its latest project Almas Suites - a small office/home office development in Puteri Harbour. The project, which comprises 526 units, has reportedly completed a measly four sale and purchase agreements.
"In any case, competition in a growing market such as Iskandar Malaysia, is a good thing - it keeps all of us on our toes and ensures that property buyers have a wide variety of products to choose from. As we all strive to improve, greater value will be created for our customers, investors and end users," says Eco World Development Group Bhd CEO Chang Khim Wah.
However, this year could look bleak for developers as they are bogged down with a decline in sentiment brought about by the cooling measures such as the increase in real property gains tax, as well as the abolishment of the developers interest bearing scheme, introduced in the latest budget. Also, policies such as the change of the weekend differing from Kuala Lumpur and Singapore has caused a negative knee-jerk reaction with many developers and buyers adopting a wait-and-see attitude.
