TO ADDRESS Johor's property glut, a property consultant has suggested that developers bite the bullet and allow prices - inflated to begin with during a period of easy credit - to slide to more down-to-earth levels.
Take the bull by the horns and drop prices to more realistic levels, Jones Lang Wootton executive director Malathi Thevendran proposed when asked what developers could do to move housing stock.
Speaking at a property forum in Kuala Lumpur on Wednesday, she said Jones Lang Wootton had warned of an oversupply as early as 2013 because of the numerous property launches by developers capitalising on the Iskandar Malaysia hype.
Not only did the market have to contend with local developers focused mainly in the Nusajaya, Medini and Danga Bay areas, Chinese developers also jumped in after their home market began to cool. Country Garden, for one, astounded watchers with its Danga Bay project of 9,000 apartment units - unheard of in Malaysia's populous Klang Valley, never mind much-smaller Johor Baru.
Despite the supply numbers, prices rocketed from RM450 per square foot to RM1,500 at their peak - a level akin to Kuala Lumpur city prices.
If KL-ites were astonished at the swift ascent, Singaporeans were just as perplexed.
Ms Thevendran recalled attending a road show in Singapore and being asked if such prices were rational considering a HDB flat in an up-and-coming township in Jurong East costing S$500 psf could realistically appreciate to S$650-700 psf over a reasonable period of time in the land-scarce island state.
In contrast, not only does Johor have a large landbank, they are reclaiming even more land, she said.
At present, the biggest reclamation project is Country Garden's Forest City to the south-west of the state where four man-made islands covering some 1,817 hectares - about three times the size of Ang Mo Kio - are coming up.
But what about the domino effect of letting prices fall? Real Estate & Housing Developers Association (Rehda) president Soam Heng Choon asked in reference to how past purchasers and banks would react to a drop in property values.
Ms Thevendran observed that prices were inflated to begin with - over the boom period of 2009-2013 - artificially fuelled by property investor clubs and speculators, among others.
Low interest rates, easy bank lending and developer interest-bearing schemes (Dibs) also played a major role in the rush to buy. Dibs in fact accelerated prices because developers would offset the initial interest-free period they provided buyers.
To cool the market and check ballooning household debt, the central bank later implemented prudent-lending guidelines and banned Dibs.
Ms Thevendran said market sentiment is now providing a reality check.
As for existing buyers, she said they didn't kick up a fuss when prices shot up during the property boom, so they should not complain if prices head in the opposite direction now.
Johor is a good place to be in and its potential is fantastic. But pushing prices to current levels was unnecessary and unrealistic.
A Rehda survey of members indicated that the bulk of unsold units in the RM500,000 (about S$160,000) to RM1 million range in Johor are in Kulai while those in the RM1 million to RM2.5 million bracket are in Johor Baru, Skudai and Pulai.
Mr Soam, who is also chief executive and managing director of IJM Corporation, indicated developers would be content to move stock so long as it was not at a loss. If they can break even, developers just want to get stock off their hands.
He maintained that most builders make only 10-15 per cent in profits, which over a three-year construction period, is not a lot.
In addition to land and construction costs, Malaysian developers also have to cross-subsidise affordable housing and bumiputra units.
Developers say compliance costs have also been going up - it varies from state to state - and in Penang, for instance, it is almost RM400 psf.
Home prices are high because the cost burdens are ultimately passed on to buyers.
While there is pent-up demand for housing, there is a big pricing mismatch because salaries have grown very slowly over the years compared to inflation. This has been made worse by the diminishing purchasing power of buyers owing to the feeble ringgit.
At the same time, many developers prefer to build high-end apartments or houses as margins are fatter although some are now building more affordable homes because of the weak demand for luxury units.