Iskandar - golden goose kena slayed
Valdez, is this written by you? Interesting read, and I think many will have similar thoughts. However, I like to offer my differing view.
It wasn't long ago, around Nov 12 and especially after the May GE, when many were extremely bullish about the prospect on IM. Euphoria was at an all time high when most, if not all units were snapped up on the first day or two of launch.
Yet during the past 2 months, many people - investors, those on the sideline, naysayers, etc, have been turning bearish on IM. Recently at the PropertyGuru MPS, I also heard quite a bit of such talk at the coffee area and some booths.
Has the IM golden goose been really slayed?
To me, this is classical recency effect affecting the sentiments and mood of the general public.
When SGD/MYR breached 2.61 in late Sep, many were "predicting" the pair would hit 2.7 by year's end. When the cross slipped back to 2.54 a few weeks ago, a lot of people thought that MYR had strengthened and would continue to do so. With the slew of increased property curbs recently, many will naturally feel that IM, and even Malaysia, has or will lose its shine.
This feeling is entirely understandable. In the trading domain, this is fear at play. This fear of tumbling (conversely, the greed of wanting more) has a proven record of weeding out the uninitiated. If you can tide out the short-term adjustments, you'll likely reap greater rewards in the longer term. Yes, I believe that a short-term correction is in play, but I also believe strongly that it will be short.
Traditionally, property curbs have a reeling effect on speculators and the general public, but after a short while, the effects wear off. Just look at Singapore's first 6 rounds of property cooling measures which only dented the buyers' appetite mildly for a month or too. The only "curb" (which I don't technically term as one) that seemed to have caused substantial damage is the 7th round involving TDSR.
Understandably, with Malaysia's and Johor's recent bout of announcements, and all within a space of 4-6 weeks, many of us will be taken aback. However, let me put forth my reasoning that in a matter of months, investors will likely flock back to IM.
1.
Fundamentals haven't changed. IRDA has been doing a good job with attracting investors, both local and foreign, and will continue to do so. In around 8 years, IM has taken delivery of many new mega infrastructure projects like highways, townships and rejuvenation projects, and many others are on the cards. Those committed are starting or are on track to deliver their projects. Of note are those institutions in Educity, healthcare projects in Medini and JB, new theme parks in and around Medini and Desaru, and mega commercial / retail projects like Southkey, City Square extension and Medini Mall expansion. Don't forget the newly completed Pinewoods Studio. And of course, inter-state RTS is fast becoming a reality and HSR, contrary to my understanding, hasn't been shelved. All these will continue to support population influx, especially for interstate migration, and strong job growth, especially for a skilled and higher-paid workforce.
2.
Regional and world economics are getting better. We are expecting better economical conditions in 2014 for US, Europe and China. Abenomics has not only dug Japan out of the sinkhole, but placed Toyko back in the investment map. Nearer to home, regional countries will likely all post growth in 2013 and are forecast to improve going forward in 2014. Certainly in Singapore, our sentiments are at a 5-year high. Malaysia is not faring any worse, despite likely to miss their forecast performance by up to 1%.
3.
Malaysian property prices are still reasonable. Yes, prices in IM, KL and Penang have spiraled out of most locals' reach, but in reality, the Malaysian salary index had grown faster than the property price index. More importantly, with Singapore's strong currency, we should find properties there being still reasonably priced. After my recent trip to Penang, I was presently surprised that well-situated properties there have mostly remained under RM1k psf. That's less than S$400 psf for literally a beachfront condo at Gurney Drive, Tg Bungah and Gelugor. In IM, prices at Puteri Harbour has reeled back to RM800+ psf and Horizon Hills will still see new terraces being launched at RM400+ psf. Yes, they are expensive by past Malaysian standards, but in my opinion, Malaysian property had been severely undervalued in the past. Also, driven out from our local markets, Singaporeans and many foreigners like the Chinese, Koreans and Japanese alike will still find Malaysian property affordable.
4.
Increasing buyer pool. Actually, I personally don't really believe in this, but Ryan Khoo from Alpha Marketing have reasoned that there will in fact be an under-supply of investment-grade property in IM from now to 2025. I can't reproduce his works here, but do refer to his new book titled "What's the Big Deal with IM".
So, while the writer of the previous article spelled doom, I see opportunity. In fact, with prices reeling in a little (to maybe early 2013 prices), DIBS removed (so prices should fall a bit more) and GST setting in soon and the labour crunch (so material and labour costs will rise in), I really think this is actually a better time for serious investors with holding power to enter the market.
Don't let a few minor speed-humps like an additional RM10k state consent or a RPGT of 30% for 5 years (which is really 1 or 2 years for new projects discounting the construction period) set you back from potentially gleaning a very handsome reward in the medium term. Property prices will not recover to pre-2008 due to ever-increasing land costs (barring another global downturn or event), and Malaysia is really one of the last affordable region to invest in, so don't let this short-term correction affect or deter you.
Lastly, in the words of Warren Buffett, buy when everyone is fearful. I wish all of us great times ahead! :p
