Overview of the Property Market in Johor
Source: Property Market Report 2004

The property market activity for the year was more active compared to last year. The market observed higher activities in property transactions for all sub-sectors. Shopping complex and purpose-built office registered marginal upward trends of average occupancy rates but lower take up space as more space came on stream. On the construction side, residential and industrial properties witnessed increasing numbers of construction starts, while shops recorded otherwise. Meanwhile, supply of property units moved upward as more completion units were recorded during the year, although residential registered a declining rate.

There were 37,813 transactions worth RM10.63 billion, a 27.2% increase in the number of transactions. Strong growth was recorded in all sub-sectors. The residential and agricultural property sub-sectors strengthened further to record 27.1% and 20.7% increases respectively in the number of transactions. Commercial, development land and industrial sub-sectors rebounded by 45.9%, 22.6% and 41.9% after experiencing respective downfalls of 2.3%, 5.1% and 17.3% last year. In the commercial property sub-sector, two bulk transfers were recorded involving 125 vacant shop lots in Johor Bahru District.

On the value side, the transaction value increased at an even higher rate of 58.9%. Growth was broad-based led by development land, industrial and agricultural property sub-sector at 132.9%, 123.3% and 86.1% respectively. The high growth in the agricultural property sub-sector was driven by three estate land sales in Segamat District, while the increase number of transactions of development land in Muar District supported growth in the sub-sector. Although the value of industrial property increased, its value was marginal i.e. RM890.13 milion or 8.4% of the total transaction value.

The residential sub-sector continued to lead the market in activity and value with its contributions of 66.1% and 42.1% respectively. Agricultural property followed with 19.7% of the market share. Development land, commercial and industrial property sub-sectors followed suit, each with 3.8%, 8.5% and 1.9% contribution respectively.

The number of residential and shop overhang units had increased exorbitantly over last year, although industrial overhang noted otherwise. The state held the second highest number of residential overhang and the highest shop and industrial overhang units in the country. The unsold units under construction had also risen for residential and shops. On a positive note, all three sub-sectors recorded declines in the not constructed unsold units.

The trend of completions, starts and new planned supply for the year varied from one sub-sector to another. Residential sub-sector noted a decline in completions, whilst shops and industrial units noted otherwise. Units which began construction increased for residential and industrial units but otherwise for shops. A higher number of building plan approvals was granted for residential units but lesser numbers for shops and industrial units. There were new completions and new planned supply for both commercial complex and purpose-built office. However, only shopping complex sub-sector saw the commencement of a building.

Prices of property units were generally mixed. In the residential sub-sector, increases were recorded in schemes located adjacent to the city centre and those that benefited from the completion of highways. In the commercial property sub-sector, prices of shops were largely stable with increases recorded in selected areas and decreases in less favourable areas. Similar trends were observed for industrial properties. Stable price trend was recorded for agricultural property with a few exceptions.

In the rental market, rentals of residential units were largely stable with downward trend particularly in Johor Bahru District. Shops on the other hand, registered generally stable rentals with some increases in selected areas, while less favourable areas recorded otherwise. Rentals of ground floor shops remained unchanged, whilst those affected by the on-going construction works of the 'Meldrum Walk' and 'Gerbang Perdana' moved further downwards. Rentals of retail space in shopping complexes were mixed whilst office space in purpose-built office buildings, particularly in Johor Bahru City Centre had yet to recover.

Leisure property performance looked positive with higher occupancy even when more rooms came on-stream in the review year. More than 3,000 rooms from nine hotels were at various stages of construction.

Residential Property

The residential sub-sector continued to propel the property industry in the state. There were 31,807 transactions worth RM4.48 billion for the year, an increase of 27.1% in activity and 30.3% in value respectively. The Stamp Duty waiver had benefited the sub-sector as more than 31.6% (10,060) of the total residential transactions fell under this category. There were three major transactions during the year. The first one involved 13 vacant terraced lots and 20 vacant semi-detached lots along with 17 vacant shop lots in Taman Nesa, for a consideration of RM2.00 million. The second and third transactions involved four blocks of five-storey flats, two blocks each in Perindustrian Senai III vicinity and Taman Air Biru, Plentong. The former was valued at RM2.60 million whilst the latter at RM3.41 milion.

The majority of the transactions were in the affordable price range of RM100,000 to RM200,000 accounting for 40.2%. Johor Bahru District dominated the market with 67.6% of the total transactions. Buyers’ preference remained inclined towards single-storey and double-storey terraced houses as recorded by the 29.7% and 47.3% increases in transactions compared to last year. In terms of dominance, double-storey terraced units accounted for 34.9% of the total transactions, followed by single-storey terraced and low-cost houses with 31.5% and 11.3% market share respectively.

In the primary market, 22,224 residential units were launched during the year, comprised 17,003 units of landed properties and 5,221 units of stratified types. The overall sales performance was moderate at 42.0%, higher than 34.2% recorded last year. Terraced units formed 62.9% of the total launches, receiving a 44.9% market response of the 13,974 units launched. The majority of the stratified units were made up of condominium and apartment units (70.6%), which recorded take up rates of 45.4% of the 3,684 units launched. Sales performances by property types were disheartening ranging from 24.4% to 51.5%. Most launches were focused in Johor Bahru District, accounting for 73.7% (16,389 units) of the total. The district captured a 44.2% take up rate, higher than the state’s performance. The sales performances of other districts in ascending order were Segamat (15.9%), Batu Pahat (31.8%), Muar (39.6%) and Kluang (43.3%).

The residential overhang increased by 55.4% to 3,785 units worth RM624.30 million. The state held the second highest number of overhang units in the country, accounting for 24.3% of the national total. The majority of overhang comprised two to three storey terraced (1,372 units) and condominium / apartment units (1,063 units). There were another 14,032 units under construction and 4,556 units not constructed remained unsold after nine months of launched. The former saw an increase of 14.0% while the latter recorded a 7.2% drop.

Generally, prices of residential units were mixed. In Johor Bahru District, single-storey terraced units in Taman Pelangi and Taman Sri Tebrau recorded 3.7% and 0.9% increases, as these schemes are located within three to five kilometers radius from Johor Bahru City Centre. Similar units adjacent to the Bandar Nusa Jaya and Second Link Corridor also recorded price improvements. Both Taman Bukit Indah and Taman Mutiara Rini recorded a 2.4% increase. Residential units in Skudai vicinity also recorded improvements due to ease of traffic flow in Jalan Skudai with the completion of Johor Bahru – Skudai Highway in 2002. Similar units in Taman Sri Skudai, Taman Skudai, Taman Skudai Baru and Taman Desa Skudai recorded increases of 4.1%, 2.6%, 0.9% and 6.5% respectively. Prices of similar units in most of the schemes in Kulai increased in the range of 1.9% to 11.3% most probably due to the recent closure of Senai Toll as well as the upgrading of infrastructure in the locality. In other districts, single storey terraced units and double-storey low-cost units in Taman Tangkak Jaya, Tangkak increased by 5.3% and 10.9% respectively. The presence of educational institutions such as Matriculation College and Community College in the locality could have driven up the prices.

Double-storey terraced houses in Taman Pelangi, Taman Melodies and Taman Sri Tebrau recorded increases in the range of 1.1% to 3.0%. Oversupply situation continued to manifest Bandar Indahpura, which recorded a 3.2% decline while prices of units in Bandar Putra remained stable.

For high-rise units, apartments in Taman Tampoi Utama recorded a 2.5% increase. This was due to the increase in commercial activities in the locality following the opening of another hypermarket, Kipmart, in addition to the existing Giant Hypermarket and Plaza Angsana.

The rental market was largely stable with downward trend particularly in Johor Bahru District. Single storey terraced houses in Century Garden, Melodies Garden and Taman Sentosa decreased by 11.4%, 5.9% and 12.4% respectively. The decline was due to many of the tenants, who were initially working in the neighbouring country, had shifted out. Similar units in Taman Universiti registered a 26.5% decrease as more hostel blocks in Universiti Teknologi Malaysia (UTM) campus were completed to accommodate students.

Double storey terraced houses in Taman Impian Emas, which rentals had been stable since year 2001, declined by 25.7% due to the oversupply in the locality and competitive rentals offered by adjacent schemes. Similar units in Taman Sentosa and Taman Universiti also recorded downfall in rentals by 6.5% and 11.3% respectively.

The on-going construction works of the Pandan Elevated Highway, which had caused traffic congestion, depreciated rentals of Sri Mutiara Condominium and Daya View Apartment units significantly by 32.9% and 22.5% respectively. On the other hand, the completion of Johor Bahru – Skudai Highway, particularly the Tun Aminah flyover, began to impact positively on the rentals of units in Selesa Putri Apartments, Bandar Selesa Jaya.

Shops

The market activity for shops was robust as indicated by higher transaction activities and completion units but lower rates of the construction starts and building plan approvals in the construction side. This was an important indication that developers remained cautious about the market.

There were 3,371 transactions worth RM1.10 billion as compared to 2,324 transactions worth RM739.89 million last year. The market activity for shops noted 45.0% increase, while value increased even higher at 49.1% against last year. Two bulk transfers contributed to the significant increases in activity and value. Both transactions were noted in the first half of the year, involving 17 shop lots in Taman Nesa and 108 vacant shop lots in Taman Perling.

By type, double storey shops were still preferred among the buyers, accounting for 64.5% of the total transactions. Three storey shops followed with 19.5% market share. Single-storey to four and a-half storey shops commanded better demand for the year, with the majority of the transactions focusing in Johor Bahru District.

The state held the largest number of shop overhang in the country with 1,800 units, translated into 42.3% of the national total. The overhang had more than double last year’s figure of 965 units, the majority of which comprised four storey shops. The unsold shops under construction were also on the rise from 1,862 units to 1,930 units. There were another 124 unsold shops (not constructed) remained unsold after nine months of launched.

The existing stock of shops stood at 56,558 units by the end of 2004. Completions grew extraordinary by 80.6% to 1,681 units. On the other hand, shops, which began construction during the year, dropped by 9.5% to 2,209 units. There were another 6,003 units in the incoming supply and 10,569 units in the planned supply. New planned supply fell slightly by 6.2% to 2,241 units. Double storey shops continued to dominate at all stages of development.

Prices and rentals of shops were largely stable with increases recorded in selected areas and decreases in less favourable areas. Double-storey shops in Taman Sentosa, located fronting Lien Hoe Plaza, which was regarded as a prime area recorded a 5.6% increase. Similar shops in Taman Pelangi Indah also recorded improvements of 6.3% as this newly established scheme is self-contained with quality construction and surrounding. Taman Universiti and Taman Rinting had succumbed to the competition from adjacent hypermarkets such as Giant, Makro, Carrefour and Kipmart, recording respective downfalls of 11.1% and 13.1% for similar units. Three storey shops in Taman Pelangi and Bandar Baru Permas Jaya recorded 8.3% and 17.3% increases respectively.

In rental market, rentals of ground floor shops along Jalan Wong Ah Fook fell further by 24.2% after experiencing a downfall of 12.0% last year. The chaotic traffic situation in the city centre, particularly along this road was mainly due to the on-going construction works of ‘The Meldrum Walk’, the closure of Tanjung Puteri Bridge to make way for ‘Gerbang Perdana’ construction and also the beautification and rehabilitation works of Sungai Segget. All these projects were expected to complete in 2005.

Industrial Property

The industrial property sub-sector recorded improvements in the market activities, although its contribution to the property market remained the least. The number of transactions grew by a high 41.9% to 915 while value grew at a higher rate of 123.3% to RM890.12 million compared to the previous year. The tremendous hike in total value was mainly contributed by transactions involving detached factory and industrial vacant land, which accounted for 39.4% and 31.5% of the total respectively. These two property types were largely priced above RM1.00million.

The increase in activity for all industrial property types was broad based driven by terraced industrial units with 36.9% of the market share. Semi-detached and detached followed with market shares of 20.2% and 16.8% respectively. Johor Bahru remained the hub of the industrial property market in the state and captured 66.0% and 79.4% of the transaction number and value in the sub-sector.

The industrial overhang was insignificant in numbers although the state held the most number of industrial overhang units in the country. There were 166 overhang units, a reduction of 7.8% over last year’s 180 units, worth RM112.42 million. There were another ten units under construction and 85 units not construction and 85 units not constructed remained unsold after nine months of launched.

The existing industrial property as at the end of the year totaled 13,000 units. The incoming supply increased marginally by 2.4% to 341 units. Completions increased by 46 units while starts correspondingly increased by 48 units. Planned supply also increased slightly by 1.7% to 1,832 units, inclusive of 120 units of new planned supply, a decline of 16.7% compared to last year.

Prices of industrial properties were largely mixed with more on downward trends. One and a half storey industrial units in Johor Bahru District were transacted between RM210,000 and RM480,000 depending on the land areas and built-up areas. Similar units in Taman Perindustrian Tiram fell by 8.9% in price, as the scheme was located quite a distance from main road. Vacant industrial plots in Johor Bahru District were transacted in the range of RM204 p.s.m. and 258 p.s.m.

Outlook For 2005

The growth prospect for Malaysia is expected to remain favorable in 2005 albeit a slight moderation early in the year, as the expansion of the global economy is expected to sustain at a steady pace. The economic impact of the Tsunami tragedy on Malaysia was insignificant and temporary, MIER reported that the Business Conditions Index (BCI), that tracks confidence in the business sector, decreased by 12.9 points to 97.3 points in the fourth quarter of 2004 due to the expected slowdown in the global and domestic economies, and higher energy costs and highway toll rates. The Consumer Sentiment Index (CSI), the consumption Indicator, was at 109.3 points. The CSI remained above the critical 100-point mark indicating that consumer confidence remained positive.

Bank Negara Malaysia had assured that the monetary policy stance would continue to be supportive of economic expansion by ensuring that interest rates remained consistent with domestic economic activities.

The residential property market looks promising, being backed by accommodative financial policy such as low interest rate regimes and easy end financing. Developers are encouraged to utilize Measure 116 of Budget 2005 that promotes the implementation of Industrial Building System (IBS), in developing affordable homes. The measure allows full exemption on levy imposed by CIDB on housing developers who use more than 50.0% IBS components. As the system reduces the dependency on foreign workers, the developers will unlikely be affected by labour shortage like the one caused by the recent illegal works (PATI) programme. Notwithstanding this, developers have to be cautious before embarking on new projects. Demand in the primary market is expected to slow down as indicated by the lower sales performance rates and higher overhang and unsold units. Building cost may increase due to the higher oil prices especially when government reduced subsidies on diesel prices. The build and sell concept, if materialized will bring about a change on the property construction sector in the coming year.

Notwithstanding this, there will be a moderate improvement in the office sub-sector with increased take up space and occupancy rates, amidst stable to lower rental levels. On the construction side however, developers must exercise due care before embarking on new projects particularly in Johor and Pulau Pinang. This is because the two states have substantial space in the incoming and planned supplies.

In tandem with the improved consumer demand and business confidence expansion, coupled with the increase in tourist arrivals, performance of the shopping complexes will remain favourable in the coming year. The occupancy of shopping complex is expected to improve. However on the construction side, developers in Kuala Lumpur, Johor, Pulau Pinang and Melaka have to be cautious, before undertaking any new projects in the respective states. Besides recording ample vacant space, these states (except Melaka) have significant space in the coming and planned supplies.

The industrial property sub-sector is expected to moderate as the performance of the manufacturing sector had eased towards the end of 2004, amidst higher oil and commodity prices as well as the softening of the global economy.

The agricultural property sub-sector is likely to improve in accordance with budget 2005 that focused on revamping the agricultural sector as the third engine growth in the economy, after the manufacturing and services sectors. The RM1.50 billion allocation for smallholder projects will probably increase the volume of transactions involving smallholdings in the coming year.

The prospect for the tourism sector remains promising in line with the various government promotions. Budgets 2005 introduced further measures to promote education tourism including the exemption of stamp duty and real property gains tax to private institutions of higher learning (IPTS) that merge. The health tourism packages under Budget 2005 are expected to increase tourist arrivals and occupancy levels of the hotel sub-sector through the coordination efforts between hospitals and hotels as well as establishing an internal referral network. In addition, more foreign tourists are likely to come if they could be diverted from harder hit areas of the Tsunami tragedy. Overall the better-performed tourism sector is expected to push further increases in the occupancy rates of hotel as well as shopping complexes in 2005.