On the first day of 2021, our Prime Minister broke the bad news that the Kuala Lumpur-Singapore High Speed Rail (HSR) project had been terminated. Several Malaysian news reports quoted unnamed sources that the Malaysian Cabinet would go ahead with the project without Singapore and end the railway in Johor.
Early this week (Mar 29), Singapore and Malaysia announced that they have finally reached the settlement for the aborted HSR project. Malaysia has paid a compensation of S$102.8 million or RM320 million.
Singapore had reportedly spent about $270 million on the project, including consultancy services, infrastructure design and manpower, but excluding land acquisition costs. From the figures provided, the latter would amount to $167.2 million.
What about Singaporeans who bought Johor and Kuala Lumpur properties on the expectation that property prices in these two places will be spiked up by the HSR, who were carried away by the promise that HSR will provide seamline travel between Kuala Lumpur and Singapore, or the fastest and shortest link between Johor and Singapore?
Below are four good lessons we learned from buying homes in Johor. They are also applicable to buying overseas homes in foreign countries.
Lesson #1: Only enter an overseas market at the right time
As I mentioned in my new book Behind The Scenes of The Property Market, many homebuyers make the mistake of “buying into the future too early”. They go after newly launched projects that are under the limelight and in everyone’s radar.
They are excited by any new development plan announced by the government and are the first to snap up new private residential projects launched in related areas. They can easily justify paying for the project’s higher prices to anticipate future price appreciation of properties in the area.
However, there is a long lead time from announcement to construction and longer lead time from construction to completion – not to mention the delay from completion to operation if it involves public transportation such as new railway lines or stations.
Anything can happen between the announcement and completion due to unforeseen circumstances. Plans can be modified or downsized, projects can be delayed or aborted, and the economy can go up or down.
Unfortunately, eager buyers have already gone ahead and purchased at premium prices. Whatever happens, they can only accept what the future throws at them.
All new infrastructure or development plans take a few years or even decades to be built. In between, there may be a political unrest, a change of the ruling party, a prolonged pandemic, a financial crisis, or more than one economic cycle. As they say, change is the only constant in life.
If homebuyers intend to leverage these future plans, it is critical to time their purchase strategically and pick the optimal time to enter. Make sure that there is holding power and a long-term investment horizon to weather any market condition that may happen in the unforeseen future.
Lesson #2: Only buy in the right overseas market
In 2019, there was a guest post in this blog from Ku Swee Yong, CEO of International Property Advisor Pte Ltd. In “Case Study: A curious case of ‘no money down’ property schemes”, Mr. Ku shared the sad story of a Singaporean couple who regretted buying a 3-bedroom freehold condominium unit in Johor.
The truth is: There seems to be no end to the disappointments and hiccups of Singaporeans who purchased Johor homes. After these properties were bought in 2014, we witnessed oversupply from new projects, descending property prices, low rental demand, high vacancy rate, depreciation of Malaysian ringgit, lowered foreign ownership threshold at RM600,000, delay and cancellation of HSR, border restrictions under Covid-19 …
I have written a blog post back in 2014 on “Tough times ahead for Iskandar and Malaysia properties”. The points highlighted in the post are still valid today. Till now, Johor remained the Malaysian state with the highest number of unsold properties at 33,000 units.
In the article “Johor property remains subdued without foreign buyers” (The Malaysian Reserve, Feb 15), a spokesperson from Knight Frank Malaysia commented that “the downbeat demand is expected to prolong throughout 2021 under the MCO (Movement Control Order).”
Another property consultant highlighted the current real estate dilemma in Johor:
“The majority of the overhang property in Johor is located in the Iskandar region, which includes Johor Bahru, and the fundamental issue or root cause of it is that the units were originally built with foreign buyers as the target market.
The pandemic outbreak is one of the elements that made matters worse. The demand for unsold properties that were originally built for foreigners has become almost non-existence.”
Daily Covid-19 new cases have fallen in Malaysia from the peak of 5,700 end-January to 1,302 on March 28 and a total of 341,944 cases in the country. Last week, there were talks on progressively restoring cross-border travel between Singapore and Malaysia but with no proposed timelines.
Lesson #3: Look beyond the marketing messages
Real estate marketers are opportunists who know how to seize every market opportunity to sell to the right target. Just look at how Johor developers have made good use of the occasions to target foreign buyers:
1) Sell “affordability” to the Singaporeans in 2013 and 2014 after Singapore imposed Additional Buyer’s Stamp Duty and Total Debt Servicing Ratio on private residential property purchase
2) Sell “MM2H” (Malaysia My Second Home) to the Mainland Chinese in 2016 and 2017 when capital outflow was hot among the well-to-do and foreign citizenship was the aspiration of the middle class
3) Sell “back-up plan” to Hong Kong people in 2019 and 2020 after a protest in August 2019 and the subsequent passing of the National Security Law by the government in June 2020
Make hay while the sun shines.
Nonetheless, despite their timely marketing efforts, not all Johor developers had the same luck in closing deals from foreign buyers.
In The Malaysian Reserve article, Knight Frank Malaysia revealed that not all Malaysia developers promoting their Johor property projects at the Hong Kong roadshows were successful. Apart from properties in the affordable range of RM500,000 to RM700,000, luxury units with higher price tags failed to attract prospective buyers from Hong Kong.
This is not surprising because those who can afford overseas properties tend to look for real estate in the UK instead of Malaysia, especially after the British government offers the pathway to British citizenship for Hong Kong people holding British National (Overseas) passport.
Last month, Johor’s ruler Sultan Ibrahim Iskandar told the press that completion of the Johor Bahru-Singapore RTS (Rapid Transit System) Link by end-2026 will boost Johor’s economy in the hotel, hospitality and tourism sectors. Johor has the potential to be a technological and medical hub.
The Sultan might be too optimistic. When Shenzhen Metro began operation in 2004 connecting directly to the Hong Kong Lo Wu station, when there were direct transportation links connecting Hong Kong and different Chinese cities in the Pearl River Delta, we used to share the same optimism.
Over the last two decades, there were many Hong Kong retirees from the lower-income group living in Shenzhen to take advantage of the lower living standard. As the Chinese currency appreciated over the years, many have returned to Hong Kong.
Below are what’s likely to happen when the RTS Link is finally in operation:
1) More Malaysians will travel from Johor to find work in Singapore because of better job prospects and higher pay provided by the latter.
2) More Singaporeans who find it expensive to retire in Singapore will move to Johor for a more modest retirement life.
How can these two outcomes benefit the Johor high-end condominium market built to target affluent foreign buyers?
Lesson #4: Don’t assume buying overseas is similar to buying at home
Surprises await buyers who assume that buying a home in Johor is comparable to buying a home in Singapore, but cheaper and more affordable.
In Singapore, we have the Housing Developers Control and Licensing Act to govern developers. We have the Building and Construction Authority to regulate the building and quality standards of new homes. When we are used to a regulated and trust environment, we take things for granted and assume relevant parties in other countries will also play it by the book.
But once homebuyers venture out of Singapore, they are on their own. There is no guarantee whether the overseas property projects will be completed, or completed on time with acceptable quality.
There are many experiences in life that, if you can afford to pay the price, you can expect good service in return. Think good food in nice restaurants or enjoyable stays in 5-star hotels.
But unfortunately, this philosophy does not apply to properties. Many owners and landlords have had unpleasant experiences dealing with agents, contractors, and repairmen. You give them the business, you pay the price, but you can get shit in return.
Some Japanese tenants complained to me that they were frustrated with repairmen, handymen and deliverymen in Singapore: They never show up on time. They don’t stick to the published or agreed charges. There is no guarantee of the quality of work. They are unprofessional. They don’t seem to take pride in their work.
If you think Singapore contractors and repairmen are difficult to manage, think again. Recently, I read an article in a new Chinese book where the author shared his interesting experiences of being an owner of an Iskandar property.
1) Unpredictable travel time
Driving from his Singapore home to the new Iskandar home takes one hour if the traffic is mooth. During weekends, it is one and a half hours. Once he spent five and a half hours for the journey because there was only one counter opened at the Malaysia customs.
2) Unreliable workmanship
There were many problems dealing with the developer on defects and the contractor on renovation. For instance, to fix a repeated short circuit problem, the repairman simply cut the electricity. The job to touch up the ceiling paint could leave paint stains all over the new vertical blinds that need to be replaced with a new set. A worker took three trips to fix a ceiling fan: The 1st trip didn’t manage to fix it and had to return the fan to the factory. The 2nd trip the worker forgot to bring the nails for the fan. Changing the kitchen top could result in damaged cabinet doors. They were supposed to fix six pieces but three pieces were left behind at the Singapore factory.
3) Poor customer service
The owner purchased furniture for the whole house from the same furniture shop. Five days before the delivery date, they called to inform him that they could only deliver nine days later. But they could deliver part of the order on time if the owner top up RM1,300 for delivery. The shop told him later that they actually couldn’t fulfill the order even after nine days.
Food for thought
Sometimes there is no right or wrong because different countries have different work culture and business practices. When we buy something overseas, we can’t expect the same level of quality and efficiency that we enjoy at home. And it is not a secret that foreigners in another country can’t avoid being treated differently, both in terms of pricing and service.
Next time when somebody tell you that you can buy a nice home in some countries at a fraction of what you pay for in Singapore, remember, you get what you pay for.
If you need advice on property matters or residential properties in Singapore, you can check out my personal consultation service.
My new book Behind The Scenes of The Property Market is now available for preview and order online. You can also check out my online courses.
That is a very interesting idea that you have brought up.
Many PRs may wish to purchase land, but since they made their initial investment in their home country, they are now facing difficulties.
Hopefully, HDB would be able to amend the rule and enable PR to purchase HDB (old units) land.
For PRs and foreigners who want to buy landed properties in Singapore, they can apply to the authority. It will be approved on a case-by-case basis.
Some Japanese complain of shoddy workmanship and no pride in the jobs? True. Almost all our maintainance and repairmen are foreigners( Japan excluded) esp those just across the Causeway. Only thing is we have strong regulatory controls and good legal infrastructures to redress unsatisfactory and shoddy workmanship.
Since 2014, Johor properties esp condo are in over-supply. Today, Johor has the most unsold units in the whole of Malaysia. Johoreans do not live high-rise but landed. Those investing Sporeans must learn from you on tips of buying foreign properties for investments. No emotional factors like the surreal dream of landed property…so cheap! True, after the abortion of HSR, never buy into the future dreams, it may never come esp when the National political leadership is so unpredictable. Buy only completed project, not those off-plans! Li Ka Shing once said; look at the world map, buy only when you can’t see the country but only the names.
The biggest mistake of homebuyers is that they believe in the marketing messages and what the development will look like in the future, With no idea of what they are buying into, after they buy they are at the mercy of the developer, the economy, the government policies and the local housing market.