Opportunity for Malaysia Developer in Singapore Crisis

One person’s loss is another person’s gain. That is the lesson for Malaysian property developers who may see increased investor interest on the back of the latest cooling measures in Singapore. The additional taxes on property purchases for both locals and foreigners in the Lion City are expected to have investors looking for opportunities elsewhere, especially in Malaysia’s special economic development zone, Johor, where property will appear to be cheaper as a result.

“Many other countries including Australia and Britain will benefit as their investment climate is improving due to the lower interest rates and poor market conditions which will make their properties attractive to buyers,” said CB Richard Ellis Malaysia executive director Paul Khong.

The additional buyers’ stamp duty of between three and ten per cent is expected to have a substantial impact on the Singaporean market. Observers find it unlikely that the Malaysian government will impose such taxes to ease alleged property bubbles in some key areas.

According to Maybank Investment Research, prices of private residential properties have continues to rise, albeit more slowly in the last two quarters. The bank said prices are now 13 per cent above the peak in the second quarter of 1996, and 16 per cent above the second peak in second quarter of 2008.

However, for Malaysian developer with projects in Singapore the picture may not look as bright.

“This new ruling will not bode well for Malaysian developers which have projects in Singapore. Unlike Malaysia, a buy and hold strategy is less applicable in Singapore due to relatively higher land costs of 40 to 60 per cent of gross development value (GDV) compared with 15 to 20 per cent in Malaysia,” the bank said, adding that the impact would be limited as developers’ exposure to the Singaporean market is relatively small.

Two of Malaysia’s biggest developers, Sunway Bhd and SP Setia Bhd both have projects in Singapore.

Source: Property Report