How the Singapore-KL HSR could affect property prices

/ The Edge Property |

July 29, 2016 10:00 AM SGT

Two years ago, Singaporean David Neubronner moved into his new home at Straits View Residences, a gated landed housing community located in the Permas Jaya housing estate of Johor Baru. He bought the four-bedroom, semi-detached house from Malaysian property group BRDB Developments when the project was launched in Singapore in 2010. The double-storey house has a built-up area of 3,000 sq ft and sits on a freehold land area of 6,000 sq ft.

Neubronner purchased the property six years ago with a view of retiring at 55. In 2014, when he received the keys to his new home, he also took up the position of director of business development at property agency SLP International. He continues to work in Singapore on weekdays while his son just started secondary school this year.

They look forward to Friday afternoons when he drives across the Causeway to their home. “Security in JB may still be an issue, but I like the privacy and open space,” says Neubronner. “Singapore is getting very expensive and congested. It’s just a matter of time before more Singaporeans will consider living in Iskandar Malaysia.”

That could happen within the next decade, with greater rail connectivity between the two countries. On July 19, a memorandum of understanding (MOU) was signed, which marks a significant step towards more detailed planning and the eventual construction of the 350km high-speed rail (HSR) link connecting Singapore and Kuala Lumpur. HSR is said to cut travelling time between the two cities to 90 minutes — as the trains will run at a top speed of more than 300kmh — and is targeted to be operational in 2026.

Between the two terminal stations at Bandar Malaysia in KL and Jurong East in Singapore, there are six intermediate stations in Malaysia that will be connected via a domestic service: in Putrajaya, Seremban, Ayer Keroh, Muar, Batu Pahat and Iskandar Puteri (formerly known as Nusajaya). Besides the non-stop HSR service between Singapore and KL, and the domestic service, there will be a shuttle service between Iskandar Puteri in Johor and Singapore.

Passengers will be able to clear customs, immigration and quarantine for both countries at their point of departure, with both governments co-locating these CIQ (customs, immigration and quarantine) facilities at three locations — Singapore, Iskandar Puteri and Kuala Lumpur. With HSR and the station at Iskandar Puteri offering a shuttle service to Singapore, will more Singaporeans be encouraged to revisit the Iskandar housing market?

Capitalising on proximity to HSR station

Some Malaysian developers with projects located near the site of the prospective station at Iskandar Puteri have already capitalised on their proximity to launch their projects. An example is UEM Sunrise, the masterplanner of Iskandar Puteri. UEM Sunrise launched its first residential development in Gerbang Nusajaya, where the HSR station will be located.

Called Melia Residences, the strata landed housing community on a 73.64-acre freehold site will contain five phases with a total of 625 units. Launched in early May, the first two phases of 206 units were snapped up within a fortnight, registering total sales of RM206 million ($68.5 million), according to UEM Sunrise in a release on May 19.

UEM Sunrise launched the first two phases of Melia Residences near Gerbang Jaya in Iskandar Malaysia in May

Source: UEM Sunrise

Leisure Farm, a 714ha gated resort residential community — about six times the size of Sentosa Cove — is located just a two-minute drive from the upcoming station at Gerbang Nusajaya, says Wayne Wong, Mulpha International’s gene ral manager of sales and marketing.

The HSR service will cut travelling time from Iskandar to Singapore to just 15 minutes from station to station. “There is already an international community with many Singaporeans and expatriate residents in Leisure Farm who work in Singapore and commute daily to work,” says Wong. “This MOU announcement will excite the market and create renewed interest among Singaporean investors.”

Mulpha therefore plans to soft-launch its latest project, Residensi Bayou, a strata landed housing development with 82 terraced houses and 10 semi-detached houses. The three-storey terraced houses with three-bed- rooms-plus-study will have built-up areas of 3,344 sq ft and be priced from RM2.08 million ($693,503).

Leisure Farm will release Residensi Bayou, a strata landed housing development with 82 terraced houses and 10 semi-detached houses.

The terraced houses will be priced from RM2.08 million ($693,503).

Another five luxury villas (house and land) at Leisure Farm has just been released. They are individually designed houses with land sizes ranging from 17,724 to 23,957 sq ft, with built-up areas from 7,578 to 9,662 sq ft. Buyers may choose between a fully-furnished villa priced from RM8.82 million and a partially furnished one priced from RM7.63 million ($2.54 million).

“HSR will enhance value and demand for residential properties in the neighbourhood of Iskandar Puteri — but not necessarily the whole of Iskandar,” says Neubronner. “However, that depends on when it is up and running.”

There are lingering concerns about oversupply in the housing market in Iskandar Malaysia. Last May, Lawrence Wong, Singapore’s Minister for National Development, warned about the impact of oversupply on housing prices, with 336,000 new private residential units in the pipeline in Iskandar Malaysia. This is equivalent to 46% of the existing housing stock in the whole of Johor in 2015 (see table).

Table

Which housing market will be an immediate beneficiary?

Chris Boyd, executive chairman of Savills Malaysia, says: “Research has shown that, initially, the greatest impact of HSR on residential property values is seen around the stations at each end of the line. HSR tends to ‘level’ values, and KL will be the biggest beneficiary.”

A lot will depend on the cost of the fare and frequency of the HSR train service as well, says Boyd. “There should be plenty of morning and evening services with Japanese-style punctuality,” he says. Those stations in between towns such as Ayer Keroh, Batu Pahat and Muar may benefit the least. “Seremban and Southern Johor may become so-called dormitory suburbs,” he adds. “However, that will only happen if the fare is inexpensive.”

Likewise for Singaporeans, the ticket price of a train ride on HSR will also be important, according to Ivan Hoh, managing director of PropNex International.

Jurong — immediate beneficiary

Desmond Sim, head of CBRE Research for Singapore and Southeast Asia, is putting his bet on Jurong’s housing market being the most immediate beneficiary of HSR. “The international high-speed-rail terminus was the concluding piece for the Jurong Lake District, and so it will certainly benefit the property market there,” he reckons.

Jurong East had already been earmarked as Singapore’s second CBD in the 2008 Master Plan. The two precincts announced then were the commercial hub of Jurong Gateway clustered around the Jurong East interchange station as well as the leisure and residential Lakeside precinct.

On July 11, URA announced that it was looking for multidisciplinary teams to develop masterplan proposals for Jurong Lake District. A key focus of the masterplanning exercise includes developing proposals for Lakeside Gateway, a new mixed-use precinct and home to the future terminus of the KL-Singapore HSR. A large part of the 112ha Lakeside Gateway precinct is occupied by the Jurong Country Club, which has been acquired by the government.

MCL Land was the first to capitalise on the recent announcements in Jurong Lake District with the launch of its Lake Grande private condominium project. The 710-unit, 99-year leasehold condo is located just across the road from Lakeside MRT station. Balloting of units started on the weekend of July 23 and 24, and 90%, or 449, of 500 units released that weekend were snapped up at an average price of $1,360 psf.

Besides the merits of the property, the pricing of units and its location, the recent announcements on HSR and URA’s affirmation of Jurong as Singapore’s second CBD also played a role in creating interest, says Koh Teck Chuan, CEO of MCL Land.

Lim Ming Yan, president and group CEO of CapitaLand, is optimistic about the HSR. “With around 100,000 additional commuters estimated to use the service daily, HSR is set to stimulate both business and leisure travel between the two countries,” says Lim. This increase in traffic is expected to boost values of CapitaLand’s properties, as it has three malls near the upcoming HSR terminal in Jurong East — Westgate, JCube and IMM.

The sales gallery of MCL Land’s Lake Grande private condo at Jurong Lakeside

Improved sentiment in Singapore

In May last year, when it was announced that the terminus in Singapore would be located on the site occupied by Jurong Country Club, property prices in Jurong shot up. “Property prices in Singapore are still relatively expensive,” says CBRE’s Sim. “That’s why the government is not thinking of removing the cooling measures anytime soon.”

The Monetary Authority of Singapore announced on July 25 that it was still too early for the property measures to be eased, as housing prices had adjusted downwards by a cumulative 9.4%, versus the 60% increase recorded from the trough in 2Q2009 to the peak in 3Q2013. “The risk of a renewed surge in property prices is not trivial, given that interest rates are likely to remain low and global investors continue to search for yield,” says Ravi Menon, managing director of MAS.

With improved sentiment in the Singapore housing market, total transaction volume surged 65% to 4,550 units in 2Q2016, the highest level since 2Q2013, when the total debt servicing ratio (TDSR) framework was introduced, says Christine Li, director of research at Cushman & Wakefield. The increase in the transaction volume was across all market segments, with the rebound in the prime resale market being particularly strong at 84% q-o-q and 34% y-o-y.

The softening in property prices in Singapore has opened up investment opportunities. “Instead of looking out to Malaysia and other overseas markets, more Singaporeans have started looking for bargains in the domestic market,” says Neubronner. When prices in the city state start to increase again, however, Singaporeans will once again cast their eyes across the Causeway to the more affordable homes in Malaysia, he adds.

KL — longer-term beneficiary

KL’s housing prices will benefit only over the long term, as development has yet to take place in Bandar Malaysia. “The 200ha site of the former air force base at Sungei Besi has still not been redeveloped,” says Prop- Nex’s Hoh.

There are concerns about the ramifications of the 1MDB scandal on Malaysia’s economy and currency. And while KL may only be 90 minutes away when HSR is completed and KL’s property prices are cheaper relative to Singapore’s, foreign investors are unable to buy cheap property because of the floor price of RM1 million, says CBRE’s Sim.

Besides currency, there are also other risks associated with owning a property in Malaysia, such as the condo management, maintenance of facilities as well as security. “The foreign exchange is a worry, though. That’s why investment demand has fallen off quite a bit,” says Sim.

Retirement haven?

Still, buying property in Malaysia makes sense if one is looking to retire. “When you retire, if you’re not earning the same kind of income that you once did, it makes sense to move to a place where you can stretch your dollar, and that’s what makes Iskandar a viable place,” says Neubronner. “One will have greater spending power in Johor, with the exchange rate at RM3 against the Singapore dollar compared with six years ago when it was RM2.30.”

He advises buyers to look at landed properties in gated communities by established developers with a good track record. For instance, he bought his semi-detached house at Straits View Residences for RM1.15 million six years ago. This year, developer BRDB sold a similar-sized house for RM2.25 million. Even after taking into consideration the currency erosion of 30% in the intervening period, Neubronner says he is still sitting on a capital gain. “Landed homes in gated communities have proven to be more resilient in the current challenging climate,” he says. “That may not be the case for high-rise projects.”

Besides HSR, a study is underway to explore the possibility of the northward extension of the Thomson- East Coast MRT Line (TEL) to Johor Baru.

“Without a shadow of a doubt, the MRT will have the most impact,” says Savills’ Boyd. “The term ‘game changer’ is overused, but the completion of the MRT linking Singapore with JB is going to change the landscape forever, and both will benefit enormously. The beneficial impact of the MRT on JB property has been underrated so far.”

In the meantime, most buyers will prefer to wait and see on the progress and outcome of the HSR. “There have been successful launches in both KL and Iskandar this year, but sentiment is currently muted; so, it might be best to wait for a while,” says Boyd.

This article appeared in the The Edge Property pullout of Issue 739 (August 1, 2016) of The Edge Singapore.

Tags: