Lofty land prices

THE EDGE WEEKLY ISSUE#995

THE WEEK OF DECEMBER 30, 2013 – JANUARY 5, 2014

FRANKLY SPEAKING – Page 7

The lofty land prices that entities linked to businessmen from mainland China are paying for seafront land in Johor Baru seem to suggest that there is more to the deals than meets the eye.

A year ago, the market was flabbergasted when Country Garden Holdings Ltd, a Hong Kong-listed property developer, paid RM900 million or RM376 psf for 55 acres in Danga Bay.

In early December, the Sultan of Johor was the talk of the town when he entered into an agreement with Hong Kong-listed Guangzhou R&F Resources Ltd to sell 116 acres, also along the seafront, for RM4.5 billion or RM890 psf.

Last week, Iskandar Waterfront Holdings Sdn Bhd, the master developer of Danga Bay that sold the parcel to Country Garden in December last year, entered into a deal to sell 36.8 acres to Singapore-based Hao Yuan Investment Ptd Ltd for RM1.6 billion.  It translates into RM998 psf.

Apart from the fact that all these parcels face the sea and are near the existing Causeway, the buyers are companies in which the major shareholders are Chinese from mainland China.  Country Garden and Guangzhou R&F are listed in Hong Kong and have extensive property development projects in China.

Hao Yuan is based in Singapore but its shareholders are from mainland China as well.

Why are entities and individuals from mainland China willing to pay so generously for land parcels in Danga Bay?

Do they really believe that Danga Bay will become what Shenzen is to Hong Kong?

In Johor Baru and Iskandar Malaysia, the property market is already softening, with recent launches seeing poor response.

Country Garden launched more than 9,000 units this year, which are supposed to be completed by 2018.  property agents are already forecasting an over-supply residential units.

Are these mainland China companies not afraid that they could be caught if that happens?