What guarantee that the China investors would not resort to price dumping if their properties are not selling well? No guarantee, if China buyers not willing to spend a million for a unit, they can dump to locals at 100,000.

Does China investors flush with oil money like middle east investors? No, they are here due to collapsing property market in China. Will China buyers flocking to Iskandar to snap up over price properties in Iskandar? When cooler weather countries like Australia, New Zealand offering a much better package? Will parents send their children to study in Iskandar and buy properties in advanced? Or they will do so in Australia, US and Canada? Any competitive reason to buy property in Iskandar now? Or should you wait for few more months or years and you will get same properties at half the price?

Will the China investors run away just like middle east inventors back in 2006? The answer is yes.

We may certainly be at that crucial point, and now might be a good time to take another look at your finances and consider selling before a major crash. The richest man in Asia certainly thinks so

BACK in 2006, the Iskandar Development Region in Johor was launched with pomp and fanfare as the state positioned itself as well as Malaysia to be a regional hub for property, theme parks, leisure, tourism, education and finance, among others.

Iskandar then attracted investors from the region as well as the oil-rich Arab states to spend on the best business deals in the region.

The Arab investors, however, despite inking several memoranda of understanding, have become noticeably absent.

It was reported that investments from the Middle East did not trickle in and some of the projects did not take off, and about 80 per cent of that land has since been sold to other foreign investors, including those from East Asia.


Read more: Chinese investors filling Arab void in Iskandar - Nation - New Straits Times http://www.nst.com.my/business/nation/chinese-investors-filling-arab-void-in-iskandar-1.504866#ixzz2zMRzhXL9

On March 21, protesters lined up in front of Phoenix Lake Gardens, a middle-class complex of 20-story apartment towers in northern Changzhou. They put up banners, trashed architectural models in the showroom and demanded refunds from the developer, Wharf (Holdings) Ltd. 0004.HK +0.99% Wharf had cut prices by as much as 20% after these protesters bought their apartments, making their purchases suddenly worth less.

David Wan, 25, said he had put $40,000 down on a two-bedroom apartment just a week before Wharf cut the price. "The salesperson told me that prices wouldn't fall," he said.

Another buyer said she and her husband sold their hometown residence 100 miles away and borrowed from relatives for a 40% down payment here, only to see the price for similar apartments later slashed.

The buyer, who would give only her surname, Xu, was especially angry that the developer brought in guards to block the protesters from the showroom. "We are their earliest home buyers, and this is how they treat us?" she said.

Wharf defends using the guards, who a spokesman said "wouldn't touch the customers unless they behaved unreasonably." The company said it cut prices to clear inventory, which it called "normal market behavior."

A few blocks away at another Wharf project, a police officer tried to explain to a demonstrator the new reality of housing in China.

"You bought a private home," the policeman told the irate protester. "Prices will go up or down. It's just like investing in the stock market

China is at the point where problems are feeding on themselves. Pessimism about property, which accounts for about 15% of China’s gross domestic product, is beginning to affect the broader economy. Declining property values look scary, despite cheery statements from government officials who assure us the property bubble is “not big” or analysts who say that the problems are not “systemic.” But the Chinese don’t look like they are buying either of those views. “If this continues, it will have immense impact on the whole Chinese economy,” says an unidentified Hangzhou real estate salesman on Economic 30 Minutes. “Without question, everyone thinks there is a bubble

Maybank IB Research had recently expressed concern about Iskandar Malaysia’s medium-term prospects, saying the massive incoming supply of residential and retail properties in hotspots like Danga Bay and Nusajaya could be harmful to asset values.

“Judging from the planned launches (serviced apartments, hotels, office and retail spaces) by Country Garden, Hao Yuan, Guangzhou R&F Properties Co Ltd, CapitaLand and Greenland Group, the hotspot areas, ie, Danga Bay and Tanjung Puteri, could be flooded with an enormous supply of high-rise mixed development projects, inducing price volatility,” it said in a client note last week.

“For instance, Guangzhou R&F plans to launch 15 blocks of 35-storey apartment buildings under phase 1 in the second half of this year, which implies an enormous 3,150 units of apartments, assuming six units per floor.

“That said, investor interest could return to developers with projects in Iskandar Malaysia on the finalisation of the Johor Baru-Singapore rapid transit system. Also, the listing of IWH in the second half could re-rate existing players in Iskandar Malaysia.”

PA International Property Consultants Sdn Bhd executive director V Sivadas told StarBiz that buyers were in “transition mode” due to changes in state policy and foreign ownership.

“People still have money, but they are being more careful about how they use it,” he said

If back in 2008, middle east developers for Iskandar Malaysia have gone kaput, don't you think china developers having property bubble back home will not?

With prices in China falling and the yuan depreciating, would buyers from China be attracted to properties worth RM1mil and above in Johor Baru?

Wouldn’t the buyers be able to find bargains in China itself, given that the prices there are already falling in the less-preferred cities?

Finally, funding for developers from China for their overseas projects is also taking a beating.

Because it is difficult to take money out of China, developers use offshore companies to raise debt that are backed by the financial resources of the onshore company.

The arrangement is called the “keepwell” agreement, where the onshore company backs up the debt with a promise to inject liquidity or buy up the bad assets. The lenders to the offshore companies are foreign investors.

But increasingly, the foreigners are not lending to offshore companies or seeking higher rates for loans because of the fear of defaults.

History has shown that foreign developers tend to flock back to their homeground when there is a slowdown.

The Middle East developers came in a big way when Iskandar Malaysia was being promoted prior to 2008. They prided on having an abundance of oil money and being able to splash it around in Islandar Malaysia, come what may.

However, when the property bubble in the Middle East burst, they dropped everything in Iskandar Malaysia to consolidate their positions in their home country.

So, why wouldn’t the developers from China do the same?

EVEN before the physical presence of the property developers from China can be seen in Johor Baru, the psychological impact the builders have on the industry as a whole in Malaysia is already being felt.

The fear of developers from China flooding the market with their large-scale development is real among property developers, not only in Johor Baru but also the country at large.

This is because all the big boys of the property sector have a presence in Johor Baru, or Bandar Iskandar. Without a project in the southern tip of the peninsula, a property developer is not considered to have “arrived”.

That is the clout that Johor Baru commands, thanks to the initiative of the federal government to make Iskandar Malaysia the thrust of its development of the southern economic corridor.





The might of the China developers was well displayed when Country Garden Holdings Ltd launched 9,000 apartment units in August, of which 6,000 were taken up within two months.

The Malaysian market is not used to developments of such a scale, for sure.

What now that the property market is already softening in Iskandar Malaysia?

The latest launch in Puteri Harbour by a Singapore-based developer saw a booking rate of only 25%, according to a report by a business weekly.

Puteri Harbour is about the most strategic of locations in Bandar Nusajaya, which is the hub of Iskandar Malaysia. It faces the Straits of Johor and is near the second link connecting Malaysia and Singapore.

Some 18 months ago, sales were brisk in Puteri Harbour, with prices transacting at around RM700 per square foot (psf).

The latest project launched by Pacific Star Development Pte Ltd is being marketed at between RM1,300 and RM1,600 psf. Property agents feel that the pricing is the reason for the poor take-up rate.

The view of most developers is that as long as the developing company has the ability to hold on to the property, it will be sold eventually. The critical factor is that the developer has to have deep pockets to weather periods of slowdown.

In this respect, there is a view that developers from China indeed have deep pockets and would be able to hold on to their projects and continue to develop them even if demand is poor.

Lastly, the developers from China are not dependent on buyers from Malaysia but from their country itself, where there is supposedly still strong demand from a select group of investors.

Put in a nutshell, the presence of developers from China is projected as not having any adverse impact on the local property market.

Is this really going to be the case?

Closer scrutiny, however, suggests that it may not really be the case after all for several reasons.

Firstly, there is a property slowdown in China impacting all developers there.

It is already being reflected in the share prices of the likes of Country Garden and Greenland Hong Kong Holdings Ltd, which have lost more than 40% of their market capitalisation in the last six months.

Property prices are stable in the tier-one cities and showing little weakness in tier-two cities. But in tier-three and tier-four cities, there is a massive oversupply of properties and prices are coming down.

Funding for developers with projects in the least-preferred cities has practically stopped, and authorities are looking at ways to ensure that new supply slows down and existing projects are completed.

The slowdown in the property sector in China has a spiralling effect on the economy as a whole.

In the past decade, the property sector has grown 10-fold in China and played a big role in keeping its economic growth vibrant. According to Moody’s Analytics, the construction of apartments accounts for some 23% of China’s economic growth.

Apart from keeping the industries growing, the proceeds from the sale of land is one of the major income earners for local authorities.

Now, new land sales are being transacted at lower prices compared to previous years.

This has allowed new developers to price their products cheaper, putting investors of older developments in a spot. House buyers are already complaining of new projects coming in at cheaper prices, causing an erosion in value of existing projects.

The developers from China are coming to this part of the world because of weak demand in their own country and to position themselves as being able to offer their customers properties overseas.

But Malaysia has imposed restrictions on foreigners buying properties that are only above RM1mil, meaning US$300,000 and above for buyers from China.

With prices in China falling and the yuan depreciating, would buyers from China be attracted to properties worth RM1mil and above in Johor Baru?

Wouldn’t the buyers be able to find bargains in China itself, given that the prices there are already falling in the less-preferred cities?

Finally, funding for developers from China for their overseas projects is also taking a beating.

Because it is difficult to take money out of China, develop