The Malaysian Reserve, 18 July 2014 - Chinese firm score prime KL land
The Malaysian Reserve, 18 July 2014
ISKANDAR Malaysia may have opened the gates to China-based developers looking to flex their muscles beyond their borders, but mounting evidence suggests that their Malaysian ambitions may not be limited to the southern economic growth region alone.
Attention is now gravitating towards the more proven fertile property landscape of the Klang Valley. The most recent transaction to illustrate this is the sale of prime land in the capital's Golden Triangle district to Hong Kong-listed developer Agile Property Holdings Ltd (APHL).
The 3.14-acre site, made up of eight contiguous parcels within the vibrant Bukit Bintang district in Kuala Lumpur, was sold to the company for RM448.4 million (or RM3,280psf) by landowner Tropicana Corp Bhd.
The site has been earmarked for a mixed commercial development that will be built over the next three to five years.
Despite news reports firm scores land billing the project as a joint-venture between the two companies, it is clear that APHL will enjoy the lion's share of the deal with a 70% stake in the JV company, Offshore Triangle Sdn Bhd.
Under the agreement, Tropicana Corp will sell the land to Offshore Triangle and retain a 30% share of the proceeds.
This transaction comes hot off the heels of an announcement by Guangdong-based developer Country Heights Holdings that it will soon embark on its second residential project in the Klang Valley, which will take shape in the booming township of Bukit Bintang and close to the upcoming Tun Razak Exchange Rawang, Selangor.
The first was a 257-acre residential township called Diamond City located in Semenyih, Selangor, which was launched last month.
The project will host 1,050 units of luxurv landed homes, and to date, it has already managed to sell more than 70% of the units from the first phase.
Country Heights made inroads into the local market via the highly publicised Danga Bay waterfront development in Johor, which made headlines with its rapid sales despite breaking property price records in the state.
A handful of other China-based developers are said to be in advanced stages of JV talks with local entities, while even more are expected to make their way to our shores as the country's fertile development landscape is currently being talked up by several news dailies and business publications in China.
While the initial attraction mav have been Is-kandar Malaysia and its proximity to Singapore, equal attention is now being paid to more traditional property hotspots such as the Klang Valley and Pen-ang.
Reuters recently reported that Malaysia is "turning into the darling of Chinese developers" as mainland investors are turning their backs on market restrictions in Hong Kong and Singapore to "bet billions on cheaper housing and higher returns in the Southeast Asian country".
The report pointed out that in 2013, Chinese institutional and retail investors invested a total of US$1.9 billion into real estate in Malaysia, exceeding the US$867 million invested in Hong Kong and USS1.8 billion invested in Singapore. The figure also topped the US$1 billion invested in Australia, but fell behind Chinese investments into the United Kingdom and the United States.
In addition, the last 10 years have seen Chinese citizens make 2,733 MM2H applications, making it the country with the highest number, followed by Bangladesh, the UK and Japan.
Despite the obvious economic benefits that the Chinese could bring to the local landscape, some market players are concerned that overzealous attention from the country's big-gun developers could negatively affect local businesses.
Already many local developers have cried foul over the sale of some of the most prime parcels in Is-kandar Malaysia to foreign developers and the fact that much of the incoming housing units are being aggressively marketed to Chinese nationals when there is still unaddressed demand among local home seekers.
Despite this, Iskandar Malaysia remains a fresh frontier and there is ample room to compete on an even plain. Currently, Chinese developers seem content to focus on high density projects, while local developers are focusing their attention on projects that offer landed units.
However, the fresh attention being paid to the Klang Valley is giving rise to a new set of concerns. Unlike Johor, the Klang Valley is already a highly competitive and saturated development arena. The arrival of big Chinese developers could spell a very uneasy future for many small and emerging local development companies..