Tag Archives: foreign property

Experts warn against flipping Iskandar homes

Singaporeans should purchase homes in Johor’s Iskandar region only if they intend to occupy them since gains from real estate flipping will be hard to achieve, revealed property consultants quoted in the media.

The Iskandar housing market has been dominated by speculators in the last few years, but the surge in supply has resulted in a slowdown since mid-2014.

“In 2012 and 2013, it was a free-for-all and speculation was rife. Even Singaporeans were coming in, buying blindly, and that encouraged developers to launch bigger numbers of units,” said PA International Property Consultants executive director V. Sivadas.

But transactions have moderated since the Malaysian government rolled out property cooling measures and stricter bank lending rules.

The fierce competition among property firms has also raised the risk of first-time developers abandoning their projects, Sivadas noted.

The high-rise residential market is particularly risky as oversupply looms largest in that segment.

On Monday, Monetary Authority of Singapore (MAS) board member Lawrence Wong expressed concern over the 335,838 private homes in the pipeline in Iskandar, which is more than the overall number of private units in Singapore.

Tan Ka Leong, director of property consultant WTW Johor Baru, said oversupply may be a real threat in the state of Johor over the next two to three years.

As such, consultants are advising investors to only shop for property in Iskandar if their pockets are deep enough to withstand a down market.

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Govt: Beware oversupply in Iskandar

Real estate investments in other countries could suffer losses and it would be hard to find tenants if there is a flood of properties, according to Minister for Culture, Community and Youth Lawrence Wong, who was speaking on behalf of Deputy Prime Minister and MAS Chairman Tharman Shanmugaratnam during a parliamentary session on Monday.

He was responding to reports about the aggressive construction activity in Johor and Iskandar, and also fielded questions from MP Lee Bee Wah on how many Singaporeans have purchased properties in Iskandar and how are local banks protected if many of these individuals default on their mortgages.

“There is indeed a real concern about future oversupply in the property market there and hence the potential decline in value of homes.

“Based on data from Malaysia’s National Property Information Centre (NAPIC), there are around 336,000 new private residential units in the pipeline — more than the total number of private homes in Singapore,” he said.

This number excludes the planned properties for the 1,400ha reclaimed land near Tuas Second Link that are expected to enter the market by 2020, Wong noted.

Given the situation, buyers have become more cautious and the number of Malaysian properties purchased through local property agencies has plummeted to 838 in 2014 from 2,609 in the previous year.

However, not all Singaporeans are aware of this, so the central bank and the Council for Estate Agencies (CEA) will continue to warn them about the risks involved in foreign property purchases.

Mr Wong also said the exposure of Singapore banks to overseas real estate is very small as they are strict on granting mortgages for such properties. In fact, such loans account for only two percent of the mortgage portfolios of major financial institutions in Singapore.

“In addition, the Total Debt Servicing Ratio (TDSR) framework introduced by MAS in June 2013 requires lenders to assess the debt servicing ability of their customers for all new property loans, regardless of whether the property is in Singapore or overseas,” he added.