Friday 11 April 2014

Why has another Iskandar launch faltered?

Since the latter part of last year, we have written extensively on the anticipated slowdown of the property market in Malaysia.

We paid particular attention to Iskandar, Johor. From literally plantation estates and nothing more, it became the “Promised land” to many developers, investors and property owners.

Over the last few months, there has been a series of mega land deals, some involving land reclamation. This has shocked the market and changed sentiment.

A photo of Puteri Harbour Masterplan obtained from UEM Sunrise Sales Gallery

The latest launch last weekend is by Singapore-based Pacific Star Development Pte Ltd in Puteri Harbour, Iskandar. The Puteri Cove project comprises three 33-storey residential towers with almost 1,000 units on 7.8 acres of land.

Tower 1, with 329 units, was launched several months ago and currently has a roughly 70% booking rate.

Tower 2, also with 329 units and 33 storeys, was launched last weekend. It attracted a booking rate of only about 25%.

The poor response to Puteri Cove is in sharp contrast to the launch of the nearby Teega project by UEM Sunrise Bhd in late 2012, which was 98% sold within a month of its launch.

Apart from the now weaker overall market sentiment, there may also be some other reasons for the poor take up at Puteri Cove.

One major reason could be pricing. The “sea view” units are priced at between RM1,300 to RM1,450 psf. The “marina view” units are priced at between RM1,500 to RM1,600 psf.

These prices are higher than the top end of the market in terms of new launches in the area, in a now weaker environment.

Meanwhile, there is also the issue of design. A property investor commented that the design layout of the building looks like flats, with long corridors and up to 14 units per floor served by four central passenger lifts and a service lift.

It remains to be seen whether Puteri Cove’s poor launch take-up rate is due more to the weaker property market or its pricing or other issues.

Whatever the case, it highlights two important lessons.

One, Iskandar is like the goose that lays the golden egg. Don’t kill it by over-expanding development and supply.

Two, a more challenging market means developers must offer their customers a better all-round value proposition.

Read more on this in The Edge this week. 


  1. Wow....RM1450 psf....a completed KLCC condo project price.

  2. I think Dato Tong, you have forgotten to highlight the plus points of this project i.e. the high end finishing (much better than Teega), direct waterfront (inc yacht marina) views (which most Teega units do not have), potential leasing out of Tower 3 to 5 star serviced apartment operator and the fact that this is built by a Singapore developer. The projects around the private marina like Pinetree, Puteri Cove, UEM's future project and Kerry's future project are all being built on much higher specs than that of the previous Puteri Harbour projects. And it helps expand the next phase of Puteri Harbour development as Imperia, Encorp Marina and Teega all complete in 2016-2017 while these projects complete in 2017-2018. Puteri Harbour actually has very limited land compared to other parts of Iskandar or even KLCC

  3. I believe iskandar could shape up to be the biggest property bubble of our time .. The reason is there are so many property which will complete at the same time in 2017-2018 and buyers will need to hold for a long time as I don't think anybody will move there upon completion as most are investors rather than owner occupied. We may end up with a large ghost town .. If earlier the bubble in iskandar was boosted by cheap credit / financing from bank , this may end soon as some bank getting cautious of iskandar in particular the subsale market which is non existent .. I would be very cautious in particular buying from little known developers who may have cashflow problem if the economy turns for worse and as a results the property will gets abandoned .. At $1600 Psf in some swamp named marina / harbour - it has gotta be the biggest bubble ! :)

  4. And also as u mention large tract of land will be throw out and release to the many developers creating a huge huge oversupply .. Once the credit tightens and all these come crumbling down , beneath the rubble is all that's left of the so call promise land .. teega & ujana was a good buy as back then it's cheap.. Subsequently the price of the development there has gotten illogical .. There is also one launch by tiong nam at $1200-1300 Psf .. Now new development is $1600psf . Greed has overpower fear thus far .. With all the hot money flowing into iskandar one can smell and feel the weight of the bubble .. U dont even need a needle to burst that gigantic bubble :)

  5. My impression of Iskandar from a Klang Valley view:

    1. Most people I have spoken to (because they live in KV) treats Iskandar as an Investment hub. Not many really talk about staying there.

    2. Iskandar is a NEW CITY, it needs new permanent owners and long term tenants. In order to fill up this BIG NEW CITY, it may take a lot longer than we thought. I doubt foreigners will occupy most of it.

    3. Pricing, based on the launches, much higher than KL City, hard to compete as far as investment return is concern. I think a Singaporean rather stays at outskirt of the city than in mafia land and jammed at the toll (eventually when more stays at Iskandar)

    4. Yes, hot money indirectly as usual, causes OVERBUILDING. Very common phenomena as well as easy funding over last few years. Just like KL, home loans ballooned.

    5. Most "mafia" likes to resides in Johor, not sure why. Until crime rates reduces, Klang Valley still better than Iskandar.

    6. Unlike KL is a financial hub, Iskandar is a "education hub?" "medical hub" or "entertainment hub". 20 yrs down the road, with speed train, I am doubtful that its urbanisation is as good as KV.

  6. I think security & public safety is always an issue whether its in kl or jb.. Muggings , breakins , robbery, car jacking, scamming, looting, murders, snatch thief, etc are some of the daily occurance in a society which is a by product of the many failed system/policies. Many developers has been aggressive in jb lately but those who join the party late will have problem to sell unless they price it logically ..not all area command top pricing .. puteri harbour is the most expensive area follow by Medini & the jb city area ..However the prices there wasn't supported by the local population . It's blown up by some block purchase from buyers overseas .. most of the locals dont earn enough to afford a rm 4 to 5 k a month mortgage payments .. So the danger is that when there is a severe economic downturn , there could be a very cheap fire sale as many owners I dont think can rent out their unit unless they rent it out really cheap .. Bear in mind - supply are plenty and large block of land could still be release out to the hungry developers for a cheap price .. One can compare cyberjaya and iskandar .. It took more than 10 years for cyberjaya to takeoff .. Similarly buyers of iskandar may need to hold the property for 5-10 years and hope that within this period there is no severe economic crisis that will results in a property market crash like what we experience during the Asian financial crisis

  7. I wonder how many people who commented here actually stay or even visited Iskandar....especially Nusajaya. Or how many know the different between Iskandar, Nusajaya and Medini.