In recent years, the real estate market has been slowing down for a long time. However, the price of durian land, which is farmland where durians are grown, has grown at an amazing rate.
Since 2013, the prices of these lands in places like Pahang and Negeri Sembilan, where a lot of durian is grown, have skyrocketed. This is because of the rise in demand for the King of Fruits.
Gary Wong, director of the real estate firm VPC Alliance (East Coast) Sdn Bhd, says that the durian frenzy has made the durian land market so hot that transaction prices have reached new highs. At least some of this could be due to speculation driven by the durian craze, he says.
Based on information collected by a company in Mentakab, Pahang, the average price of durian lands in Raub went from RM2.80 psf in 2013 to RM9.83 psf in 2017. This is a 251% increase.
Due to changes in durian prices, the average sold price dropped from its highest point in 2017 to RM5.16 psf in 2018. This was an increase of 84.29% from 2013.
Wong tells EdgeProp.my, “Durian prices have definitely affected durian land prices.”
The average retail price of Musang King, the most popular durian clone on the market right now, jumped by 93.15% from RM36.50 per kg in 2013 to RM70.50 per kg in 2017. The average retail price then dropped by 35.53% from a year ago to RM45.45 per kg in 2018.
As the price of durian has gone up, the value of durian lands has steadily gone up as well.
Wong says that the price of land in Raub was only about RM120,000 to RM150,000 per acre, or about RM2.56 to RM3.44 psf, before it went up to RM300,000 to RM400,000 per acre, or about RM6.89 to RM9.18 psf, in 2016.
Over the past two years, the price of these kinds of lands in the district has been around RM400,000 to RM500,000 per acre, or about RM9.18 to RM11.48 per square foot, which he says is likely due to market speculation.
“A sale and purchase agreement (SPA) was signed in Raub for RM600,000 per acre, which is a record high. I know that the durian farm is run very well, but the price is just too high. I think RM300,000 to RM350,000 per acre, up to RM450,000, is a fair and reasonable price for these lands right now.
Negeri Sembilan also showed the same thing. Siew Weng Hong, who is the director of Henry Butcher Malaysia (Negeri Sembilan) Sdn Bhd, said that the price of durian land in the Jelebu district hit a new high of RM350,000 per acre last year.
The price of land in the district went up from about RM200,000 (RM4.60 psf) per acre in 2015 and 2016 to between RM300,000 (RM6.89 psf) and RM350,000 (RM8.04 psf) in 2018. This is an increase of 50% to 75%.
“RM350,000 is the highest price ever paid for land here. The durian craze is the main reason why durian land prices in Jelebu have gone up. The district is thought to be one of the best places in the state to grow durians because of its sloped terrain, which is very good for durian growing, he says.
Correlation between durian prices and land prices
There seems to be a strong link between how much durian costs and how much durian land costs.
For example, the prices of Musang King and durian lands in Raub have gone up steadily since 2013. They reached their highest point in 2017, then went down in 2018. (see Chart 1).
Flohrence Yong, a senior negotiator at Maxland Real Estate Agency who specialises in agricultural lands in Pahang and Negeri Sembilan, says that the increase in demand for durian lands began about six years ago.
“Back then, a lot of Chinese tourists came to
Malaysia and fell in love with the fruit there. But there wasn’t enough food in the area to meet their needs.
“After that, many people saw the King of Fruits’ potential, which led them to buy land to grow durian,” she says.
Henry Butcher Malaysia’s Wong says that locals and Singaporeans have always wanted the King of Fruits. As a result, durian prices went up even more, especially for popular clones like Musang King and D24, which were bought by people in China.
Because of this, he says, more people started getting into the business, drawn by the high profits from the crop, especially those who sell them in China, Hong Kong, and Taiwan.
“Last year, a customer from Hong Kong told me that the Musang King can be sold there for up to HK$500 (RM263) per kg, which is crazy! So, he bought a durian orchard on Jalan Manchis in Karak, Pahang, and started sending the Musang King to Hong Kong last year.
In the meantime, rubber and oil palm estates are being converted into durian farms due to the weak prices of the two commodities.
“Compared to oil palm and rubber, whose prices are low, durian is like the golden crop. So, the current trend is to buy rubber or oil palm plantations and turn them into durian lands.
“This is a very profitable business right now. We noticed that professionals like doctors and engineers are starting small businesses in this field,” he says.
But Siew of Henry Butcher Malaysia (Negeri Sembilan) thinks that the rise in durian land prices shouldn’t be completely blamed on the durian craze. Since 2016, Siew says, agricultural land prices have been going up because there is less land and more people are moving into cities.
“But the durian craze has caused the price of durian land to rise more than other types of farmland, like rubber and oil palm,” Siew says.
According to the Malaysian Palm Oil Board, the average price of crude palm oil on the Peninsula in the first half of this year (1H2019) was RM1,998.50 per tonne, which is 15.91% less than it was in 2013.
Based on data from the Malaysian Rubber Board, the price of Standard Malaysian Rubber 20 has dropped by 23.31%, from about RM7.75 per kg in 2013 to RM5.94 per kg in the first half of 2019.
Frenzy continues
The durian craze doesn’t look like it will end any time soon, and investors are still buying up durian lands to get in on the trend.
Wong has heard that companies have bought more than 10,000 acres of land in Pahang, especially in Raub, Sang Lee, and Kemasul, to grow durians for profit.
Also, the demand for durians is likely to go up even more now that China has given Malaysia permission to start sending whole durian fruits to China in August of this year. Before this, you could only send frozen durian pulp to the Middle Kingdom.
“China’s approval was the push everyone needed to get into the durian plantation business. Some people who grow durians but only have 20 or 30 acres of land started to buy more land. “I saw wholesalers going into durian plantations,” says Yong of Maxland.
So, she thinks that land prices will continue to go up because the demand for durian looks good and there isn’t enough land.
“Durian farmers don’t want to sell their land right now because the future looks good for durians and demand is high for this kind of land,” she says.
Since a year ago, there haven’t been many new homes on the market. But there are still opportunities in places like Temerloh and Kuala Lipis that are “deeper” in Pahang.
“There are also opportunities in other states, like Titi and Mantin in Negeri Sembilan. “These places have cheaper land prices than Raub and Bentong, which are popular places to grow durians,” she says.
Wong from the VPC also says that old durian farmers in the Sungai Ruan and Klau areas, which are close to Raub, may give up their durian orchards. “There are old farmers in the Sungai Ruan and Klau areas who may be retiring because their children don’t want to work on the farm. So, they might be willing to sell their farm and take care of it for the new owner for a year or two before retiring.
“These old hands are usually very good because they have worked on farms for many years. It would be a good idea to keep them on the farm for a year or two so you can learn from them,” he says.
Will prices continue to rise?
Siew thinks that durian land prices will go up even more because the market is so hot and there is so much demand for durians.
But he warns buyers to be careful because it’s not clear how much fruit China will want in the future, and the demand could be lower than expected.
“It’s hard to say if the high land prices we have now will last. If the real need from
If China doesn’t turn out to be what people expect, interest may fade. “So, it’s best to be careful,” he says.
Siew adds that the rush to plant popular durian clones like Musang King now means that the supply of some types of durian is likely to grow a lot in the next five years.
So, he says, if the durian price goes down because there are too many of them, it might not be a good idea to invest RM400,000 to RM500,000 in a small durian holding right now because the returns might not be good.
Wong from VPC doesn’t think that durian land prices will go up any more because commercial planting on a large scale is happening in Pahang, which will make more durians available.
“The expected rise in the number of durians on the market is not good news for durian prices, which is not good news for durian land prices.
“From 2013 to now, the price of durian land has gone up from RM150,000 to as high as RM600,000, so I think we’re getting close to the top,” he says.
He also says that durian farms are not a simple business that can make money quickly. It will also cost a lot of money.
“Durian plantations require professional care. If you plant trees on empty land, it will be about six years before they start to bear fruit. “The cost of maintaining the plantation in the first six years can range from RM60,000 to RM100,000 per acre. This includes the irrigation system, fertiliser, pest control, and labour,” he says.
A source from EdgeProp