Are There Still Affordable Homes for Johoreans?

Are There Still Affordable Homes for Johoreans?

Take a drive from Nusajaya all the way to Tanjung Puteri and you cannot help but notice the many housing projects marketed as ‘luxurious’ by developers in Iskandar Malaysia. With an average pricing of RM1,000 psf for condominiums in Nusajaya and around RM900 psf for condominiums in Johor Bahru, a studio unit would range in price from RM450,000 to RM500,000. Is this something that locals can afford?

Let us do the math.

Assuming the purchaser takes a loan of 80% with a current interest rate of 4.45% (Base Lending Rate of 6.85% minus 2.4%) for a RM450,000-priced property, the monthly mortgage would work out to approximately RM1,813. With an average income of RM3,000 per month, these homes are by no means affordable for Johoreans and are more geared towards Singaporeans and other foreign buyers.

Additionally, let us look at statistics which will help give us an idea of what affordability means to Malaysians.

According to Malaysia’s Asia Property Market Sentiment Survey for the second half of 2014, 49% of Malaysians have an annual income of between RM30,001 and RM90,000 which translates into a monthly income range of RM2,500 to RM7,500.

Of the survey’s 5,295 respondents, 5% are from Johor while 48% are from Selangor and 31% are from Kuala Lumpur. 53% of the respondents have a budget of less than RM500,000 for their homes. If we take a median income of RM5,000 for an individual servicing a mortgage for a RM450,000-priced home, this will leave them with around RM3,200 for other expenses.

However, we have to reduce to RM3,000 as this is the average income for most graduates in Johor. This will leave them with roughly RM1,200 which is perhaps just enough to get by. As such, affordability will be a major issue for fresh graduates and first-time homeowners. That is not to say that there are no more affordable homes for Johoreans

Driving the Market

With a general slowdown in property transactions in Iskandar Malaysia from Singaporeans and overseas buyers, developers are already bracing for a tough time ahead. Data from the National Property and Information Centre (NAPIC) showed that property transactions in Johor saw a steep decline of 33% quarter-on-quarter in the fourth quarter of 2014.

While this will mean a challenging time for the medium- to high-end market segments, this is good news for local buyers as affordable homes will be the focus for this year. Additionally, the state government has already put on hold approvals for serviced apartments in Iskandar Malaysia while developers shift their focus to the local market.

New Hotspots

For those of you wondering where the affordable homes are and which areas you should target as you missed out on Nusajaya’s and Johor Bahru’s opportunities, there are other areas where the federal government is focusing on for the next phase of Iskandar Malaysia’s economic development such as the corridors of Pasir Gudang and Pengerang.

In fact, Pasir Gudang and Masai are poised to be the new hotspots as they will enjoy the economic spillover from Malaysia’s largest oil and gas hub in Pengerang. First announced in March 2012, this RM70-billion project spanning 2,000 hectares has already created more than 40,000 jobs, fueling demand for homes in and around the area.

To gear up for the economic spillover from this Economic Transformation Programme (ETP), a new mixed-use development called Taman Seri Albion that is expected to create some 12,100 jobs will be coming up in Pasir Gudang with 865 units of affordable housing to be built by 2018.

Developed by UMLand Berhad, the project will comprise an industrial park targeting Malaysian and Singaporean small manufacturing enterprises (SMEs) involved in food and beverage production, garment manufacturing, printing and packaging industries, electronics, storage and warehousing, services, information technology, machinery spare parts, carpentry, furniture production and automotive workshops.

This will not only create businesses and jobs for locals but also enhance the desirability of homes in Iskandar Malaysia’s next growth corridor. Furthermore, this project is expected to add 37,000 affordable housing units which will be coming on-stream by 2018. The highest quantum price here will be capped at RM150,000 and the homes will be equipped with high-speed internet connectivity.

PR1MA Homes

Additionally, there are four PR1MA projects for Bumiputeras to choose from. The two in Tebrau and Pasir Gudang have respective starting prices of RM180,000 and RM185,000 while there is no indicative pricing yet for the projects in Masai and Pulai.

Transportation Hubs

The Bus Rapid Transit (BRT) lines are expected to commence services this year, thus increasing the desirability of properties located along them. As a guide, BRT Line 1 spans from Bukit Chagar to Tebrau, BRT Line 2 runs from Bukit Chagar to Senai and BRT Line 3 connects Bukit Chagar to Nusajaya.