KUALA LUMPUR, Aug 12 — Roaring development in Iskandar Malaysia is creating a flood of Singapore buyers who are driving up Iskandar home prices there by as much as RM500,000 over bank valuations.
In recent months, the Johor development corridor has seen the announcement of several high-profile projects including CapitaLand and Temasek Holdings’ planned RM8.3 billion Danga Bay, Singapore billionaire Peter Lim’s Motorsports City and the Medini integrated development project.
This is in addition to the planned intercity rail link between Iskandar and Singapore as well as a Kuala Lumpur-Singapore high-speed rail that will also stop at the Johor economic hub.
“Owners in Iskandar are seeing how their property values have risen over the last few years, and many hope to cash in on it,” property consultancy Chris International director Chris Koh was quoted by The Straits Times in a recent report.
According to Koh, asking prices for home property in the Iskandar area are soaring wildly beyond official valuations, with some owners demanding a premium of RM500,000 above what banks price the properties at.
The variance has also caused some sellers to throw the valuation book out the window.
“Home owners are left to resorting to street talk to gauge the price of their home, based on what they hear a nearby home has been sold for,” Koh said in the report.
Another real estate agent, Germaine Ng, said the move by home owners to place a hefty premium on their properties adds another obstacle to potential buyers. Banks will not finance a property purchase for more than its appraised price, so buyers must pay for the difference in cash.
Both Koh and Ng agreed that Singapore buyers began having second thoughts once Iskandar property owners started asking for RM200,000 over bank estimates but, ultimately, have not stopped buying.
In one example, Ng said a Singapore prospect pulled the plug on the purchase of a RM2.65 million mansion in Perling as it was RM250,000 above the assessed price; four months later, the home sold for RM3 million.
For locals, however, the phenomenon may signal the influx of foreign buyers that could further squeeze out Malaysians already reeling from home prices in the country.
In 2008, a two-storey link house in Taman Bukit Indah sold for RM400,000. Today, the same home is just a smidgen under RM1 million.
The same occurrence is taking place in London, with foreign buyers snapping up over half of new homes in the British capital and leaving nearly two in three prospective home buyers complaining of the inability to afford their own homes.
Iskandar Malaysia, previously dubbed the Iskandar Regional Development, was launched in 2006 by then Prime Minister Tun Abdullah Ahmad Badawi as a way to drive progress in the southern region and tap into expansion demand from firms in neighbouring Singapore.
Although Singapore initially eyed the project as a rival, it has since warmed up to the corridor. Khazanah Nasional, the main shareholders of Iskandar, is also in a joint venture with Singapore counterpart Temasek Holdings to develop a “Wellness Township” in Medini, within Iskandar.
It has so far attracted over RM6 billion from Singapore firms, with Iskandar Regional Development Authority (IRDA) estimating that RM5 billion came from the republic’s SMEs.