Oversupply of high-rise units in Johor unlikely

There will not be an oversupply of high-rise residential units in Johor despite the approval of over 80,000 such units as they will not be built simultaneously.

It was recently reported that the authorities in Johor had approved 80,900 units of high-rise developments, of which 8,000 were being constructed now.

KGV International Property Consultants executive director Samuel Tan said only 10% of the approved developments were currently being constructed, adding that it was only a “perception” that there would be an oversupply situation.

“The general feeling is that there will be too many. But not all are being built simultaneously,” he said.

Tan said potential buyers and investors should also not be “put off” by the slew of developments within the state by China-based developers.

High-rise residential units have been the staple of developers in Johor since 2013, with China’s Country Garden Holdings Co Ltd launching 9,000 units in one go that year in Danga Bay.

“These Chinese developers know what they are doing. They are businessmen and know when to launch,” said Tan.

In light of the incoming supply of high-rise properties, the Johor government has issued a freeze on new applications to build serviced apartments.

One industry observer noted that the freeze should only be for selected locations and “not apply across the board.”

“There is still demand for high-rise developments, especially affordable ones.”

Tan echoed this sentiment, saying in certain established areas within Johor, such as Tebrau and Bukit Indah, there was still demand for affordable properties priced between RM300,000 and RM400,000.

“Those that can’t afford landed residential properties will look to affordable high-rise units. So the freeze by the state government should be selective, otherwise it would create pent-up demand.”

Tan said for this year’s outlook, the perception of an oversupply of high-rise properties in the state could result in transactions slowing down.

“Last year, transactions within this sub-segment did not slow down,” he said.

According to CH Williams Talhar & Wong’s (WTW) in its 2015 Property Market report, the existing supply of high-rise residences in 2014 increased 2.15% to 31,322 units compared with 2013.

Citing the National Property Information Centre, WTW said there were currently 37,632 units under construction, which were projected to come on stream within the next three years.

“The average transaction values of condominiums in the sub-sale market increased from RM400 per sq ft in 2013 to RM450 per sq ft in 2014, up 12.5%,” it said. - By The Star