KUALA LUMPUR: The frequency of land transactions in Johor has been rapid and robust, especially over the last two years, according to market observers.
These transactions span various categories, encompassing both development lands and those designated for agricultural and industrial purposes, they said.
"The pace increased in the last year. Why are developers and investors swarming to Johor Bahru for land purchases? Surely there are reasons for this upsurge in interest," said KGV International Property Consultants executive director Samuel Tan.
Tan suggests that the pent-up demand, resulting from years of the Covid-19 pandemic, has led to increased interest in significant investments such as residential houses.
"People are now able to visit showhouses and experience them physically. This serves as a great motivation for them to buy, thereby encouraging property developers to launch and build more," explained Tan.
Highlighting inflation as a long-standing issue, Tan pointed out that property investment has consistently served as a reliable hedge.
"Building, land, labour, and compliance costs have risen and are expected to trend upward. To navigate this, the purchase of properties will counteract the inflationary effects since prices will be cost-driven and not demand-driven," he told NST Property.
Tan also emphasised that recent catalytic projects, such as the rapid transit system (RTS), the near completion of the Gemas-Johor Bharu electrified double-track project, and the proposed Special Economic Zone (SEZ), further stimulate interest among developers.
"Further details on the SEZ will be announced on January 11, 2024, and excitement is already in the air. Whatever the case may be, it is positive news that will spur the demand and growth of Johor Bahru. What people need to know are the scope and incentives to be offered. Will there be a specific location or multiple locations?"
According to Tan, the stable political situation in Malaysia, especially in Johor, bodes well for the property development market. Policy certainties instill confidence in investors.
"The perceived elevation of the Sultan of Johor to be the next Agong in 2024 is taken as another positive development. People expect more focus on the state. Be that as it may, Johor, especially Johor Bahru, has already been on the growth runway since 2022.
"Property transaction volume and value have increased. Foreign direct investments and domestic direct investments are on the rise. The sense of confidence is in the air," Tan said.
Tan believes that the industrial sector will likely be the main beneficiary, as local and foreign investors are attracted to Johor Bahru due to the ecosystem for specific industries such as logistics, data centers, petrol and oil palm manufacturing, and food processing. In the services sector, healthcare, tourism, and education will be the forerunners.
While acknowledging this trend, Tan emphasised the need for more engagement with stakeholders, including MSMEs, developers, consumer bodies, professional organisations, and chambers of commerce, to understand the real needs.
He suggested calling town hall sessions to receive feedback, ensuring that plans align with the genuine needs of the people.
Ideal time for developers to profit handsomely from land sales
Property developers like Crescendo Corporation Bhd and UEM Sunrise Bhd have recently divested significant land holdings in Johor Bahru.
UEM Sunrise's subsidiaries engaged in five sale and purchase agreements (SPAs) with Paragon Globe Bhd's (PGB) unit, PGB Landmark Sdn Bhd, to collectively dispose of 46.9 hectares (ha) of land for RM146.1 million.
UEM Sunrise's CEO, Sufian Abdullah, stated in a stock exchange filing, " This disposal will allow us to monetise some of our land bank in Johor while still leveraging on the economic activities that will be created from the proposed industrial development by PGB Landmark to boost the demand for our planned residential developments within the vicinity of the lands."
PGB's Executive Chairman, Datuk Seri Edwin Tan Pei Seng, expressed that the land acquisitions will offer opportunities to create greater economic value for Johor Bahru and increase earnings potential over the medium to long term.
Meanwhile, Crescendo announced the sale of 2.63 million sq ft of vacant freehold land in Pulai, Johor, for RM315.17 million in cash to Microsoft Payments (Malaysia) Sdn Bhd.
These lands, situated within a prime and mature industrial estate in Pulai and surrounded by a mix of residential, commercial, and industrial developments, were deemed to have an estimated market value of RM315 million as of October 10, 2023. The audited net book value as of January 31, 2023, stood at RM40.56 million, determined by recent land transactions and asking prices of similar nearby properties.
Crescendo's subsidiary, Panoramic Industrial Development Sdn Bhd (PID), initially invested RM26.19 million in the properties on December 14, 2009, which increased to RM40.56 million with subsequent transactions and development costs.
Prior to this sale, PID had sold 8.25 hectares in Johor Bahru to Yu Ao Sdn Bhd for RM111 million.
Senior real estate consultant SM Goh commented that the transaction timing is ideal and the sale consideration, calculated at the rate of RM125 per square foot (psf), is a "good bargain."
According to Crescendo, the purchase price might increase to RM59.71 million for Parcel A and RM53 million for Parcel B (both at the rate of RM127 psf), if the TNB power main switching station (SSU) waiver for Parcel A is obtained.
"This is a very good price for Crescendo, and they can make use of the money gains to expand their property development activities. I understand they are diversifying into serviced apartments and mixed housing," remarked Goh.
The land is part of the master development known as "Nusa Cemerlang Industrial Park" (NCIP), a light and medium industrial park currently developed by PID.
Crescendo is expected to record a consolidated gain after taxation of about RM68.33 million from the land sale.
According to Goh, Yu Ao is anticipated to gain as well, since the Johor Bharu industrial sector stands to gain the most from market developments.
He said the projected Special Economic Zone (SEZ) will accelerate this sector's expansion.