Kulai property market shows good potential despite pandemic

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Kulai used to be an important stopover point for motorists.

Kulai is a town and the capital of Kulai District located within Iskandar Malaysia. It is 29km from Johor Baru and 8km from Skudai and situated along the old trunk road (now known as Road One) that links Kuala Lumpur and Johor Baru.

Before the North-South Expressway opened in 1994, it was an important stopover point for motorists.

As the town is surrounded by rubber and oil palm estates, there are many housing estates within it. Most of the residents are involved in the agriculture sector, particularly the oil palm and rubber estates.

The setting up of factories in Kulai has strengthened and diversified the town’s economy, and among the public-listed companies with offices and factories in Kulai include Yi-Lai Industry Bhd, SCGM Bhd and JCY International Bhd.

A Property Advisor analysis reveals that transaction volumes have been on a downward trend in Kulai, but median prices have been going upwards. This pattern can be seen both for landed and high-rise residential properties.

The transaction volume for landed properties had dropped 8% from the first half of 2018 (1H2018) to 1H2019 and, predictably, plummeted by 77% in 1H2020 due to the pandemic. High-rise property transactions dropped 20% year on year in 1H2019, then 71% in 1H2020.

The median price for landed properties has been increasing steadily since 2018, rising close to 4% from 1H2018 to 1H2019, then another 9% in 1H2020. The median price for high-rise properties spiked nearly 17% in 1H2019, followed by a smaller but still significant increase of 12% in 1H2020.

Similar to the trends for the breakdown by property type, Property Advisor’s analysis shows that prices continue to be on the rise despite a downward trend in transactions.

The median price for first-home buyers (FHB) spiked by nearly 17% in 1H2020, after remaining unchanged in 1H2019. This is in contrast to transactions dipping by almost 9% in 1H2019 and a further 79% in 1H2020, showing that FHB were paying more for their houses than in previous years.

As for investors, the median price first increased in 1H2019 by 17%, followed by a tamer 6% increase in 1H2020. Investor transactions had dropped 17% year on year in 1H2019, with a sharp drop of 71% after Covid-19 hit the economy.

What does the expert say?

Landserve (Johor) Sdn Bhd executive director Wee Soon Chit told Property Advisor that Kulai has vast potential to grow during the next decade due to the spillover effect from Greater Johor Baru.

“Kulai has a cheaper land bank, good connectivity from north to south and the Second Link Highway, which runs from Senai-Kulai near the international airport to the Malaysia–Singapore Second Link at Tanjung Kupang, Johor Baru, as well as the Senai Desaru Expressway, which connects Senai in western Johor to Desaru in the east.

The Malaysia-Singapore Second Link at Tanjung Kupang, Johor Bahru. (Wikipedia pic)

“I think Kulai will grow into a prominent industrial area, primarily due to its strategic location. At present we have a few well-known industrial schemes like [email protected], [email protected] Airport City, Indahpura Industrial Park and numerous individually owned industrial premises.”

On top of these well-known industrial schemes, Wee also added that there are a few active developments in the Bandar Indahpura area which is famous for its Johor Premium Outlets and Aeon Kulai.

Although Kulai has yet to be fully developed compared with the more mature areas closer to Johor Baru city centre, Wee noted that the setting up of a Microsoft Data Centre in the Sedenak area, which is currently 40% completed, will spur growth in the Kulai area.

Challenges in the Kulai property market

i-Park industrial parks offer secure and conducive workplaces. (i-Park pic)

However, due to the Covid-19 pandemic, which has dampened demand for properties and put pressure on selling prices, Wee said it would be a big challenge for developers to offer more sophisticated products.

“Developers cannot afford to offer more attractive homes as it will somehow add to the development cost and eventually the selling prices. However, in terms of industrial development, i-Park industrial parks ([email protected] and [email protected]) are a unique brand offering sustainable industrial development that offers secure and conducive workplaces.”

He added that the take-up rate for all properties had declined due to uncertainty and a wait-and-see approach. “Selling prices for single- and double-storey terraced houses remain strong, but the take-up rate has slowed down. This is mainly due to stricter financing requirements and price adjustments, with the discounting of properties, especially commercial and industrial, and high-end residential such as semi-detached and detached houses.”

In terms of facilities, Wee said Kulai needs more private hospitals, institutions of higher learning and most importantly government hospitals as the current ones are too small and old.

He said the properties most in demand in Kulai are single- and double-storey terraced houses with selling prices from below RM300,000 to RM400,000. In the most strategic areas, such as Bandar Putra IOI, single-storey terraced houses are selling at RM380,000 (RM345 per sq ft) and double-storey at RM580,000 (RM280 psf).

This article was written by Sharina Ahmad of PropertyAdvisor.my, Malaysia’s most comprehensive source of property data, property analytics and insights.