As reported in many medias, the prices of private condos in Singapore are falling in 2014. Read here: Singaporean economy, property prices down and Iskandar. It was reported now that residential prices in Johor has also fallen in Q2 2014. It has inched down by 1.6% on an overall basis. This is said to be the first decline in over 2 years showing that the days of never ending ever higher prices may be falling now. In fact, average prices of high-rise condos fell 13.5% in Q2 2014 compared to Q1 2014! This is as per a report from Maybank IB Research. The reason is similar to SIngapore; due to the cooling measures introduced by the Malaysian government beginning January 2014. Besides that, the huge upcming supply by end of 2015 meant that prices would remain weak or flat in the medium term. The numbers are pretty huge. According to Landserve study, 18,718 units of high-rise apartments are expected to enter the market by end 2015 and another 40,474 by end of 2017.
Actually, with SIngaporeans being the largest investors in Iskandar, any slowdown in their own country would meant that their appetite to invest overseas would also reduce. This I feel is a major cause and not just due to the cooling measures. Look closely and you would notice that the Johoreans more often than not would prefer landed while Singaporean investors would prefer high-rise. Thus the landed prices has not fallen as much compared to the high-rise ones. Their (Singaporean) reasoning is when its completed they can then rent the condo out for a good return on investment. Well, I think this thinking would be tough based on current sudden explosion of new units into the market by end of 2015. Nevertheless, this situation will change positive again when the Singaporean property market restart its climb. As for when, it may be later than sooner. Read here: Singapore property, prices continuously declining into 2015
What everyone must note is the major difference between a potential bubble bursting versus a potential oversupply. Potential bubble bursting is going to affect the whole market and prices would suddenly face a huge pressure. It should normally have a situation where the availability of affordable properties are close to none and everyone just could not afford anything anymore. A check online showed today is still not yet the situation. Potential oversupply however would depend on what the market situation is at that time. Just one university increasing its student population and number of lecturers would take up a huge chunk of the condo supply, not to mention the continuous expansion of the Singaporean businesses in Iskandar, especially during the property slowdown period. I am not sure if there are better chances compared to currently.
Moving forward I think the trend would continue to mirror that of Singapore, especially if the integration between Iskandar and Singapore continue to deepen. Not all the time because this would also depend on the confidence level for Iskandar amongst all investors and not just the Singaporeans.
written on 5 Nov 2014
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