FEVERISH buying interest in the booming Iskandar growth region across the border has prompted many sellers there to dramatically jack up asking prices for resale landed properties.
One factor driving up sellers' expectations is the plan unveiled earlier this year by the governments of Singapore and Malaysia to build a high-speed Singapore- Kuala Lumpur rail link by 2020, which will include stops in Iskandar.
Property agents who spoke to The Straits Times said sellers of landed properties are now asking for prices up to RM500,000 (S$194,000) above bank valuations, and deterring many Singaporean buyers from taking the dive into Iskandar.
"Owners in Iskandar are seeing how their property values have risen over the last few years, and many hope to cash in on it," said property consultancy Chris International director Chris Koh.
Iskandar's profile has also been given a significant boost by announcements that CapitaLand and Temasek Holdings are involved in developing a $3.2 billion township at Danga Bay, one of Iskandar's flagship zones.
Another project, Singapore billionaire Peter Lim's proposed Motorsports City, has also helped to convince sellers that the higher asking prices are justified.
Mr Koh said another factor leading to some very high asking prices is the lack of transparency or a data collection centre to consolidate transacted prices in Johor. He has been selling properties in Iskandar for two years.
"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," he said.
The demand for landed homes in gated communities has also outpaced supply, leading owners to call for higher asking prices.
Property agent Germaine Ng said banks have been unable to match valuations with asking prices of resale landed properties.
The Straits Times understands from banks with operations in Malaysia that asking prices have surged as high as 50 per cent above valuation. The difference works out to a cash premium buyers have to fork out, much like the cash-over-valuation system used for Housing Board flats here.
As a result, buyers are starting to think twice before sinking their cash into a property in Iskandar, said both Mr Koh and Ms Ng.
Property agents are also finding it harder to clinch deals because of higher cash premiums.
Seven months ago, Ms Ng said an expatriate living in Singapore aborted the purchase of a RM2.65 million resale bungalow in the Perling area because of the RM250,000 cash premium he had to fork out. Four months later, a similar property in the vicinity was sold for RM3 million, in a show of the volatility of prices.
Mr Koh said buyers are starting to think twice about buying when cash premiums enter the region of RM200,000.
Mr Ryan Khoo, a consultant at Alpha Marketing, a research firm specialising in Malaysian properties, agreed that property prices have generally risen in Iskandar, and that it is harder for investors to find attractive buys now.
For example, in Taman Bukit Indah - where Singaporeans make up an estimated 25 per cent of residents - a two-storey semi-detached house cost RM400,000 in 2008. Today, such a home has more than doubled in value to RM950,000.
At Horizon Hills, another development popular with investors, a similar property that cost RM400,000 in 2009 is now selling for RM1 million.
Said Mr Khoo: "Moving forward, I think people will no longer buy as easily as before. Firstly, pricing has gone up quite significantly, and secondly, people are more discerning about the product they are buying."
But with the Malaysian ringgit slumping last week to a 15-year low of RM2.55 against the Singdollar, Mr Koh believes that there will still be demand from Singaporean buyers for resale properties.
"There have been far too many stories of Malaysian projects that never get completed," said Mr Koh. "It is safer to buy something that you can see."
This story was first published in The Straits Times on Aug 10, 2013
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