Strong increase in prices over the next two years

Strong increase in prices over the next two years

MOST brokerages believe there would be strong land price appreciation in the Iskandar Development Region (IDR) over the next two to three years.

A local broker said Johor land prices were coming off from a lower base, compared with properties in Penang and Kuala Lumpur.

“Land appreciation in Johor has under-performed, compared with land in Kuala Lumpur and Penang. This is largely due to high oversupply,” he said.

“The entry of international property developers, operators and investors will change the IDR’s property landscape significantly. Real estate of international standards will see the creation of new demand and give property values a boost in Johor, especially in the IDR.”

An analyst with TA Securities concurs. He said real estate in the IDR was expected to appreciate sharply by 300% to RM30psf from RM7.50psf in the next two to three years.

“Given the IDR’s huge potential to attract international investors, we believe land value there should at least match that of Bayan Lepas in Penang. Even at RM30psf, land prices in the IDR would still be well below that of Singapore,” he said.

The analyst expects to see exponential growth in land prices in the IDR – compounded annual growth rate of about 51% for the next four years – with the entry of international developers.

He said early investors including local property developers were advised to seize the opportunity to buy sizable land or increase their land bank in the IDR. These land parcels would be most attractive to international developers, operators and foreign investors.

The analyst said since the IDR master plan was revealed in November last year, the asking price for raw land has been on an up-trend.

“New price benchmarks were recently set for industrial land (RM21psf) and commercial land (RM65psf) in Nusajaya, way above the RM7.50psf transacted for mixed-development land in the last two years,” he said.

A Singapore property analyst said while the Government's move to create an economic hub in south Johor was commendable, it would take time before land valuations in the IDR came close to that of Singapore's.

“Undeniably, there will be some Singaporeans and foreigners who will be interested in investing or living in the IDR but by and large, most would have a wait-and-see attitude,” he said.

He said while lower land prices was a consideration, many investors also wanted to make sure (before investing) that the IDR truly developed into a pro-business region with good infrastructure and delivery systems that businessmen could count on. “It also has to be a place that's fun and enjoyable for people to stay or visit and this has to be seen first,” he said.

The foreign analyst said the level of success of the IDR would depend on many factors, and would require the full support of local developers, the public and retail players in the property market as well as foreign participation – in terms of injection of investment as well as expertise.

Government incentives to attract FDIs into IDR:

# Exemption from corporate income tax for 10 years
# Exemptions from withholding tax on royalty and technical fee payments to non-residents for ten years
# Exemption from FIC rules
# Unrestricted employment of foreign employees
# Freedom to source capital globally

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