Where are the facts on Iskandar Malaysia?
Everyone these days seems to be saying, “Let’s go to Iskandar for our sure-win property investments!”
Agents are sprouting anecdotes about prices jumping in highly sought after areas such as Medini and Danga Bay. The question is where are the hard verifiable figures?
In Malaysia, as a real estate practitioner, you can access data compiled by the Valuation and Property Services Department, a government agency, through its website – Jabatan Penilaian and Perkhidmatan Harta (JPPH) but presto, there is nothing much to be found about Iskandar property market statistics.
I have no idea if any property agents and consultants in Singapore actually keep track of sales volumes and price trends there. For me, I rely on my contacts in Malaysia to give me info on the ground. What to do, as there is no such Malaysian equivalent of our Urban Redevelopment Authority’s website to check on any amount of information, including the number of homes sold in a particular development last month and transacated prices among other information.
And the best part is, few developers publish official statistic information on their projects. Don’t you feel frustrated if you want to monitor property trend? The lack of good quality property information about Iskandar only facilitates people with vested interests to cherry-pick anecdotal data to talk up the market.
I’m not alone who take that stand. CBRE Malaysia’s associate director of estate management Kevin Goh said that unscrupulous agents and developers sometimes use the information gap to make false claims about their properties.
For example, marketers may claim that the project is 80 per cent sold and selling fast when the real number might be closer to 30 per cent.
Hopefully, when Iskandar matures and the sub-sale and resale markets are more established, good quality information will be more easily available. That will make it harder for touts to make inflated claims.
Without access to common property comparables like psf and rental yield, buying an investment property in Iskander is as good as buying a car without test driving it.
Our Best, Always.
With all the news on numerous Singaporeans buying homes in Iskandar, one would have thought that the past reputation of uncompleted homes, abandoned projects or delays in completion haunting Malaysia is gone.
But it appears not to be.
Just recently, a mixed development project consisting of hotel, shopping mall and residential units KSL D’Esplanade Residence, minutes away from the Causeway found itself in the limelight after irate buyers complained of delays to the press.
Buyers say that they were given conflicting information on the completion dates of the project.
Here’s what the developer said – “The 80 per cent completion rate cited in 2011 referred to the lower floors and that “every floor has a different completion date. But projects first get three years unless you apply for an extension, which we did not plan for. If we had applied for the extension to five years, this year would have been the fifth year, and we’d be in time to complete the project.”
The firm said the sales and purchase agreement begins only on the date of purchase, not the day which construction started, meaning every buyer’s three-year duration started at a different date.
That’s not all. According to the brochures, the hotel would have an 18-hole mini-golf course but buyers found out later it had been replaced by a water theme park. An exasperated Singaporean buyer commented, “I did not buy the unit to stay next to a wonderland.”
Ouch! So the completion date of the project is a moving target. And the sales brochure is a magician spell book. Just look at the brochure picture vs the project in progress. Do they look the same?
Don’t forget your due diligence.
Our Best, always
How does gross rental yields of up to 10 to 12% sound to you?
When I was in Manila last year on a due diligence trip, I saw sky scrapers rising, packed malls and lots of folks hanging around purposefully. Finally, helmed by a more honest and reform-minded President Benigno Aquino III, affectionately known as Noynoy, a cleaner and better government is attracting more foreign investments and creating the stable investment climate that is conducive to a surging property market. Unfortunately, according to current Philippines constitution, one can only serve as the president for 6 years. With 3 more years left in his tenure, one hopes his eventual successor can keep up the momentum in the long journey ahead.
So what’s driving demand?
1) IT-related support activities such as call centers and business process outsourcing (BPO) firms have boosted demand for rental housing. Some estimate that the Philippines will overtake India by 2015 as the hub for BPO. Already, some Singapore companies have located backroom functions to the Philippines.
2) Remittance from 10 million Overseas Filipinos. How much is the total remittance worth? About USD23 billion in 2012, according to World Bank estimates and 60% of these remittances go directly or indirectly to the real estate sector, especially into the low-end to mid-range residential housing projects in regions near Metro Manila. The strong local demand support and the fact that most of them take very little loans from the banks (high interest rate) means that there is no frothy bubble building up on the back of cheap loans (think Singapore!)
However, with vacancy rates as high as 12 to 15% in some parts of Metro Manila, one must still be very careful when choosing a property investment, whether it is commercial or residential.
Before we go Yayy, let’s do it, consider some of these must-know
To buy a Philippine property as a foreigner,
1) You can buy a condominium unit on your own, if not more than 40% of the building is foreign owned
2) You can buy the property through a Filipino spouse
3) You can buy through a company incorporated in the Philippines with at least 5 shareholders, out of which 60% must be locals
4) You have an investment/Special Retirement Visa for long term stay foreigners
Main Taxes you’ll be subjected to upon Purchase
2) Document tax (aka Stamp Duty) – 1.5%
3) Transfer tax – 0.5%
4) Registration fees – 0.25%
5) Rental income tax (where applicable) – 5.13%
Main Taxes you’ll be subjected to upon Disposal
1) 6% of Gross Selling Selling Price or Market Value
So, if you are intending to buy and rent out a Philippines condominium, what is your true rental yield?
Apparently, younger people now want homes near shops, and developers are responding.
Recent launches such as The Midtown and Midtown Residences in Hougang and NeWest on West Coast Drive, at the former Hong Leong Garden Shopping Centre site have been well received. Freehold mixed development Novena Regency (55 residential units and 45 commercial units), on the old Novena Ville site, is expected to launch before June to strong response too.
Another mixed-use site on Yishun Avenue 9 could be launched within the next few months. The hotly contested 99-year leasehold site was won by Chip Eng Seng’s CEL Property with a top bid of $212.1 million.
With high psf retail spaces cleverly marketed as unaffected by increased additional buyer stamp duties and onerous seller stamp duties, it is no wonder developers are jumping on the bandwagon. It makes sense to purchase a retail unit if you are experienced in running a retail business and the walk in traffic justify the high psf. But if you just hope to rent it out, be sure to do your sums and make a calculated decision.
The buying frenzy appears unabated as buyers snapped up newly launched homes and commercial units in a mixed development.
The Jewel @ Buangkok, a City Developments Limited (CDL) project moved pretty well. KAP Residences in King Albert Park and Liv on Sophia near Dhoby Ghaut also did well.
However, do note that only 208 out of 280 released units of Jewel @ Buangkok were snapped up. There are another 400 to go at the project priced at about $1,150 per sq ft (psf), higher than the average resale price ($1,070 psf) of The Quartz, which is next door.
Brisks sales at KAP Residences indicate that mixed-use (commercial/residential) developments are popular. The freehold development in District 21 is near household name schools like Methodist Girls’ School and National Junior College. According to Oxley, a mickey mouse unit developer, 93 of the 107 commercial units released were sold at an average price of $5,446 psf, while its flats went at an average price of $1,705 psf. This brought the total number of units sold at the project to 228.
Meanwhile Punggol continues to be flooded with condo launches. 512-unit Punggol executive condominium (EC) Ecopolitan by China-based property developer Qingjian Realty is expected to launch in late June while e-applications for a Sing Holdings EC near the Coral Edge LRT station (also in in Punggol), is expected at around the same time.
Not entirely unexpected, Johor state government said it would raise tax rates for foreigners owning properties there by end 2013. It is not likely to be substantial and definitely as chilling as Singapore’s property cooling measures.
Currently, property owners in Johor pay two tranches of property tax. The first is an assessment tax of up to 6 per cent per annum, based on the annual rental value of the property. This could raise to 10%. They also pay a second component known as a quit rent of one to two sen per square foot annually. In comparison, an annual property tax of 10 per cent of the estimated annual rental value applies in Singapore, with lower tiered rates of zero to 6 per cent for owner-occupied homes.
According to Johor state’s Chief Minister, the tax rates will go up on about 130,000 foreign property owners, of which 90 per cent are Singaporeans. Currently, foreigners can only buy properties above RM500,000 (S$202,400) in Johor.
I’ve been to the Iskandar region and I must say I’m pretty impressed by the roads and pace of development. Still, I maintain that there is no active resale market in that area and investors should be prepared to stay over in Iskandar should there be no ready tenants. Also, agents marketing properties across the causeway may not want to tell you that there is a Real Property Gain Tax (RGBT) of 15% on any property sold in the first two years, and 10% on the third to fifth year!
Be Savvy and do your due dilligence!