Buying Iskandar? Points to note about Chinese (China) developers thus far

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Many Chinese developers are buying huge tracts of lands or are involved in land reclamation projects. On paper, all these developers are much larger than even Malaysia’s largest developers. For example, Country Garden Holdings co will be building 9,000 units of condominium on a 56 acre land. For a comparison, the total supply of units for the whole of Penang (island and mainland) would be around 10,000 units per year. Now do you see the size of these developments? Country Garden is also said to be involved in land reclamation project that goes into a ‘few thousand acres’ in Pendas, Johor.

Guangzhou R&F Properties bought six plots of land in Johor Baru for RM4.5 billion. The land was bought from the Johor Sultan. Total size is 47 acres. This purchase will be converted into a high-rise residential units, low-density housing, retail properties, offices, a hotel and a shopping mall. Since this is 20% smaller in land size compared to Country Garden, perhaps the total units to be built may be lower but would still be considered massive by Malaysia’s current standard. Typically, developments of over 1,000 units are unheard of, especially for condos.

iskandardevGreenland Group announced a US$3.3bil deal in two residential and hotel projects. They will be building a world-class waterfront properties in Danga Bay. This is a much bigger developer than Country Garden. In 2013, Greenland was ranked 359 in the Fortune Global 500 company. Their forte thus far is in mixed commercial development, including high-end hotels and residential towers.

Real estate Malaysia also beat Hong Kong, Australia and even Singapore in 2013 in terms of total investments from Chinese institutional and retail investors. This is as per reported by real estate consultancy Savills. Total for Malaysia was US$1.9 billion compared to US$1.8 Billion for Singapore, US$1 Billion for Australia and US$867 million for Hong Kong. It loses to only the UK and the USA. Quite an amazing feat because in terms of the actual property price, the real estate in Malaysia is by far cheaper than all the other places mentioned by Savills.

Okay, after so many positive developments, some questions remain. If all these new developments are going to complete at almost the same time, say within 2-3 years, what would happen to the demand-supply equation in Iskandar?  Do note that these are just the Chinese ones. There are many more Malaysian developers, Singaporean developers which are also buying lands and launching new projects. I think it is safe to say that if the market is relying on just the current growth pace, the new supply would overwhelm demand. All the planned catalysts that Iskandar is planning to put in place, for example, the education, the entertainment, the new High Speed Rail, the RTS has to fall into place and then the demand would grow faster than current pace.

written on 11 April 2014

Next suggested article:  Linking KL, Iskandar, Malaysia – Singapore by HSR and RTS

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