Somerset Puteri Harbour investors frustrated with returns

/ EdgeProp Singapore
November 17, 2018 2:00 PM SGT

With the two-year guaranteed rental returns having expired in February 2017, investors in the Iskandar Malaysia project say their returns are now close to zero. Their plight highlights some of the real risks of investing overseas, even if it is just across the Causeway.

Singaporean Victor Ng remembers the first time he cast his eyes on a potential investment in Iskandar Malaysia: It was Somerset Puteri Harbour in Iskandar Puteri (formerly known as Nusajaya) at a weekend preview in early February 2012. It was not an impulse purchase, he says. Before the purchase, he had visited the site and other projects launched in the area. “I felt that Puteri Harbour was an up-and-coming area,” Ng tells EdgeProp Singapore in a recent interview.
Ng: I felt that Puteri Harbour was an up-and-coming area (Photo Credit: Albert Chua/EdgeProp Singapore)
About 120 out of 132 units offered for sale under a sale-and-leaseback scheme were snapped up at roadshows in Singapore and Kuala Lumpur over a fortnight, according to a report by The Edge Financial Daily in Feb 24, 2012. The rest were purchased after that. A majority of the buyers (about 80%) were said to be Singaporeans.
Somerset Puteri Harbour is a 204-unit serviced apartment project located on the waterfront at Puteri Harbour in Iskandar Malaysia. Units ranged from studios, and one- to three-bedroom apartments measuring 762 to 1,496 sq ft, to penthouses from 3,650 sq ft. Prices of units sold ranged from RM720,000 to RM4.5 million, or an average of RM900 psf. Upon completion, these apartments would be managed by The Ascott — the serviced residence arm of Singapore-listed CapitaLand — for the first 10 years. Under the leaseback agreement, investors were offered a guaranteed rental return (GRR) of 5% for the first two years after completion.
Ng paid RM982,669 for a 1,178 sq ft, two-bedroom serviced apartment at Somerset Puteri Harbour, which he purchased off-plan. Another investor who purchased a unit at launch was Singaporean Peter Lim. “I was attracted by the Somerset brand and the reputation of the developer, UMLand [United Malayan Land], he adds. “I also liked the harbourfront locale, which is very niche, and very scarce.”
Somerset is one of the brands under...