Property Prices in Johore Bahru

Recently some of my friends were interested in looking at properties for sale in Johor Bahru.  One of my friend was looking at buying a condominium as an investment; and my other friend felt that a landed property in Johor Bahru would be a good place for retirement. After all, the prices of condominiums and landed properties have sky rocketed in Singapore. So looking at Johor Bahru property prices, it seems to be so much cheaper. The Malaysian government has promised its strong commitment for the billion dollar projects in Iskandar region. Lots of properties will be make available as the land area is much bigger than Singapore. So is the properties in Johor Bahru worth looking at for retirement and investment? Well I give my personal assessment on this topic.

Firstly let me state clearly that I am not an expert on properties – anyway the so called property experts nowadays, you can get them for a dime in a dozen. Experts will tell you that properties market in Johor Bahru are hot and the prices are rising, which is quite true and a fair statement to make. But what they did not reveal to you is why are the prices of properties rising so high, so quickly? Is it because there are real value or is it just hot air? I feel that many people are simply following the herd mentality when buying properties, especially when they are hot in demand. It comes from the “not wanting to lose out” mentality or locally in Singapore and Malaysia it is term as Kiasu, Kiasi and Kiabor.

.

Properties Prices in Johor Bahru

.

Whenever I am in Johor Bahru, it is relatively easy to see booths being set up by developers in the shopping malls to market their properties, especially to Singaporeans and foreigners. Take an example of a brochure that I have picked up on a condominium project and landed property in Johor Bahru. I was quoted RM420,ooo for a condominium unit of 1410 sq. ft on the 10th floor located in Larkin Johor Bahru. The development is called SuriaMas suites by IJM Land. If I want to rent it out to pay for my mortgage loan, then how much rental per month could I fetch for this condominium unit? My friend told me that perhaps I could get a 5% return – which is approximately RM21000/per year or RM1750 per month in rental. This would help me to offset against my monthly loan installment. But seriously, if you look at other completed condominium projects in Johor Bahru, I would be happy if I could get RM1500 rental per month.

.

Properties Prices in Johor Bahru

.

For the landed property on the second brochure, the location is at Nusa Duta, a 2 storey semi-detached landed property selling for nearly RM900,000. It features guarded entrance, CCTV around the development. 24 hours security surveillance, card access security and perimeter fencing. My friend should be happy with this strong security features in this development – almost liked living in a fortress. If you take again the 5% return on investment – I should expect a annual rental of RM45,000 or RM3750 per month. But I seriously doubt I could get this amount if you look at the rental market for landed properties around this area.

To the Malaysians staying and working in Johor Bahru, both of these properties are overvalued. If you look at the average monthly household income of the local staying here – it is in the region of RM3000 to RM5000. Take the average household income of RM4000 per month and above, the affordable properties should be priced at about RM192,000 to RM240,000 which is 4 times the annual income for a typical family staying in Johor Bahru. So the question is whether the current high prices of properties in Johor Bahru are sustainable in the long term. If you depend solely on the investors to sustain the prices of properties, then there will be high risks that these properties prices will fall drastically during an economic downturn and prolong recession. That is because very few locals can afford to buy such high priced properties and rental income will fall during recession period; but you still need to service the monthly mortgage loan. Other expenses to take note is the monthly maintenance fees, taxes, repairs, etc.

But to my friend who can well afford to pay the RM900,000 semi-detached bungalow, so that he can play with his kids in their own garden; then the benefits or pleasure in having your own landed property will outweigh the cost. So my assessment is that buy the property if you can well afford it – whether it is for retirement or investment purposes. It is impossible to predict any market or the economy of a country going forward, but if you having the holding power or is able to purchase the properties without any loans, then your investment is safe.

 

 

.