Actually it's not flipping. Flipping is to let go of the property quickly to make money. On the contrary, this is to cut loss. Either feel the pain now, or bleed intensely with much more pain years down the road. But I'm looking at it solely from an investor's point of view, not buying for own stay. It's a very expensive lesson.
There is a very huge oversupply right now. It's not hard to imagine even in the next 5 years, it is quite impossible to find buyers for all the current crop of unsold properties, let alone trying to sell a unit that has already been bought now. The last I heard, Country Garden has 9000+ units, of which only about a third was sold. And that's only one out of many units in the Danga Bay Area. What about the many other projects in Medini and the rest of Iskandar.
If it's just the Singapore media painting a bleak future of Iskandar, we can perhaps say it's only "noise". But it's the Malaysian side themselves who are revealing the same truth, including the JB MPs and UMNO. If all these people are not to be trusted, then surely the astute banks have to be believed. Even they are very cautious about loaning money now for Iskandar properties.
http://www.themalaymailonline.com/m...ee-foreign-optimism-meeting-poor-local-demand
According to the stats, there are more than 330,000 units in Iskandar, which took Singapore about 50 years to build the same number of private residential properties!
http://www.freemalaysiatoday.com/ca...building-boom-causes-bust-in-property-prices/
And Singapore is 3x smaller than Iskandar with more than 5 million population. Iskandar has much less. Moreover, with Forest City coming in, that's another 300,000 more properties to be added to Iskandar! Where will the buyers be coming from to buy the older, resale properties?
Some argue the 330,000 figure is exaggerated by the Singapore authorities. But it doesn't really matter. Based on the poor sales, reduced land sales and building by developers, the general negative sentiments, we already know the oversupply is not a small problem at all. It will take many decades for the properties to show some signs of moving.
The initial optimism of Iskandar was due to the (wrong) belief that businesses will be attracted to move to Iskandar due to the lower cost of setup. But many from Singapore have done so in the last few years and they relocated back to Singapore. I was told the admin inconveniences, lack of skilled staff and salary issues were some of the main reasons. A Malaysian would not be attracted to work in Iskandar when he or she could get much higher pay just across the causeway in Singapore with a stronger currency. This problem of not being able to attract businesses over is not easy to solve even in the mid-term.
Even if one thinks perhaps waiting 10 years later, the situation might improve. So suppose I have paid $x for my present Iskandar property. It is still unlikely that I will be able to sell it at $x or more given it will probably still be a buyer's market due to the humongous oversupply. Prices will likely be the same or maybe even lower than what I bought in 2013.
But once my bank loan starts, I will have to start paying principal + interest progressively while not earning any rental. (The next 2 years or so will see absolutely no money coming in as the property is still under construction.) Based on my calculation, the amount I will have spent at the 3rd year paying off the bank mortgage will already equal the amount I will lose if I give up the property now. After that, it's just continual losing of money.
Optimistically, even if I can find a tenant, the rental amount will very unlikely cover the monthly mortgage. I estimated I have to top up a few hundred S$ every month. It could be worse once the Malaysian banks increase their interest rate further, maybe to 5-6% in the next few years?
Add to that, if you look at the SGD vs RM currency exchange, the RM has continually been weakening. I'm not referring to only 2 or 3 years data but over the last 10 years! For those of us who bought our Iskandar properties in 2013, we would have already lost about 14% due to the currency exchange.
Someone told me, that's good news. It means you can buy Iskandar property cheaper! (That person obviously has vested interest in Iskandar. He sells Iskandar properties.) But the full picture is not painted. Look from another perspective, you are holding on to a liability that is losing value with time.
Even if you let go your property now, and later regret and say, I shouldn't have given up, I want to retire in Iskandar, it's not difficult to see that 5-10 years down the road, you will be able to buy back in at the same price or even lower than what you have bought now. The advantage is, by then, there is a good chance RM will have depreciated further and you are not losing money paying the bank mortgage if are still holding on the property now.
Why I will not buy an Iskandar property for own stay:
I am still relatively far from retirement. My work, family and friends are all deeply rooted here. I don't find it attractive at all to be spending 1-2 hours traveling each way from Iskandar back to Singapore. I admit I was fooled by the "15 mins" travel from Tuas/Woodlands CIQ to Iskandar as the developers often like to advertise. What they didn't tell us is that the jam we will experience there could hold us back for more than an hour. I've tried going via Woodlands on a weekday, either by car or bus, at about 12pm, and I was stuck for about an hour at the CIQ alone. Totally unexpected.
Why I don't treat it as holiday home:
To pay say S$300,000 for a modest size Iskandar property and use it as a "holiday home" is certainly very expensive! Even if you splurge S$250
every week to stay in a 3 star hotel in Singapore, you can enjoy 25 long years of relaxing "staycation" to equal the cost of buying an Iskandar property!
Some other notes about Iskandar Singaporean investors might have overlooked:
1. Don't assume the property market in Iskandar is like Singapore where there are ready tenants and buyers and you can make positive cash flow from your rental.
2. There is a possibility you may never be able to sell your property next time for decades. Some are not bothered by this as they say they are buying it for "own stay". But unless you are financially very stable and rich, I feel whether as an investor or buying for own use, it's more reassuring to know you can let go of your property. You never know when you need the money urgently or to put it to better use.
3. "But my friend told me he could rent out his apartment in JB and he even sold it for profit. So why should I be worried about my Iskandar property?" I've heard this being reasoned out several times. Check when that friend bought his or her JB property. It's very likely before 2012 when the Iskandar craze started to happen. Many of them bought their properties at very cheap prices back then, naturally they will be able to make profits. Iskandar is still largely being developed and the prices of properties sold are already at inflated prices now. Will locals buy it next time? Moreover, many of the properties are targeted at foreigners. Your pool of future buyers are a lot more limited, if they are even interested next time when there are so much supply to choose from.
4. HSR may be coming but that is not catered for daily travel to and fro from Singapore and Iskandar. The ticket is too expensive for the daily commuter. The project is also expected to delay indefinitely. What is more attractive is the RTS. That was
supposed to be ready by 2018. But from the look of it, and the way the Malaysian side is handling the matter, it is almost as good as scrapped. Even with the RTS, it is to just ease the jam at the 2 CIQs. It's definitely better than the current situation, but traveling wise, I think the inconvenience of using it daily still remains to some extent.
All the above may not apply so much for those looking to retire in Iskandar soon, or if you have so much cash on hand (like many of those Chinese from China) you can't think of any better way to dispose of it.
I'm just sharing my thoughts aloud honestly. If you have opinions on Iskandar that are similar or different, please feel free to add on or share so that those who have bought (or thinking of buying?!!) Iskandar properties may learn.
