Will Iskandar flourish in the next 10 years or will it flounder in a sea of oversupply? Scepticism still abounds as exemplified by a very critical opinion piece entitled “Avoid Malaysian property, especially Iskandar” penned by respected analyst in Singapore, Ku Swee Yong. Asian Property Review finds out if his opinion is justified.
Text by Jan Yong
iskandar4Many consider Iskandar Malaysia, a 10-yearold special economic zone as a ‘work-inprogress’, and rightly so as large swaths of the region are still underdeveloped. Often jokingly referred to as another district in Singapore or the ‘hinterland’ of Singapore, and regularly compared to the synergistic relationship decades ago between Shenzhen and Hong Kong, it has yet to stand on its own feet as an independently-driven region.
The fact that big Chinese developers advertise their massive developments there by referring to the distance of their projects to Singapore speaks volumes of how Iskandar is being positioned – and how it is being perceived. One would be forgiven for thinking that without the ‘Singapore’ brand attached to it, Iskandar would be a godforsaken place.
The perception of Johor has been carefully cultivated over the last decade – and with many big developers, both foreign and local, putting their bets in the area three times the size of Singapore, Iskandar has seen solid take-up rates amid a frenzy of overdevelopment in the more popular spots and the accompanying speculative buying. Busloads of foreign purchasers are known to descend upon Iskandar, some with cash for the full purchase price.
‘To buy or not to buy?’ is a question that has taken on more urgency in recent months due to the economic slowdown in both Singapore and Malaysia. And when the Memorandum of Understanding to build the High Speed Rail (HSR) linking Singapore and Kuala Lumpur was finally signed on July 19 by both countries’ governments, the hype broke out once again with forums and seminars enthusiastically examining the impact of the HSR on property investment. The date of completion? In 10 years’ time.
Ku’s article was timely – although he did use the word ‘avoid’, the full phrase was ‘avoid for now’, like what a market analyst would normally say. This gives room for a change in direction or even a U-turn in the future if certain conditions are met, for example, the relaxation of the cooling measures (implemented to clamp down on speculation) or less volatility in the ringgit. A few salient points from Ku’s article published in will provide food for thought and explain why he came to his ‘avoid for now’ conclusion.
“In a drive around Nusajaya [in July], we observed that the pace of construction seemed slow, with several projects that were fully sold years ago still under construction. One large billboard proclaimed “Akan Datang” and “Coming Soon” above a construction site hoarding for a luxury condominium project that failed to launch after the 2013 peak of the Iskandar hype. Needless to say, construction has not started.
[ihc-hide-content ihc_mb_type=”show” ihc_mb_who=”1,2,3,4,5,6″ ihc_mb_template=”1″ ]
“As for the completed condominiums, banners displaying “For Sale” and “For Rent” are commonplace. A casual count estimates 10% of the apartments are furnished with curtains. A medical centre that was launched with much fanfare was opened for business in late 2015. As of July, no more than a quarter of the clinics in the medical centre have been taken up by specialist doctors.
“Some developers in Iskandar have dropped prices to move leftover apartments, adding downward pressure on valuations. Buyers who took deferred payment plans and paid down less than 10% of purchase prices are walking away from their investments. Some investors have gone further, requesting developers to refund their downpayments by citing the inability to secure mortgages as the banks have tightened up on loans to foreigners.
“The situation with commercial and industrial properties is similar. While millions of square feet of commercial and industrial space are completed and waiting for tenants, several high-profile projects have never broken ground.”
Ku, who is a licensed real estate agent and the CEO of Century 21 Singapore, also questioned the oft-cited value of investments into Iskandar, querying on the items that make up the amount of RM202 bil between 2006 (year of inception) and March 2016.
He asked, “How much went into businesses and factories that will create jobs? How much was for the reclamation of land and for the purchase of land by developers? How much was due to the sales of strata-titled apartments, SOHOs, offices and industrial space by the same developers? What about the value of investments that have been withdrawn?”
Against this background, Ku wrote his bleak conclusion: “I am eager to be the first to upgrade my call on Malaysian properties to a “Buy”. However, against an uncertain political climate and economic outlook in the country, which could depress real estate valuations or further weaken the ringgit versus the Singapore dollar, my call on Malaysian real estate is an ‘Avoid for now’.”
That was in August. Have things improved since then? Is Iskandar’s destiny inextricably tied to Singapore’s fortune? Asian Property Review asked several experts for their opinion.

dan-tohDAN TOH

Founder and CEO of Running Stream International Pte Ltd
“We do concur with the essence of the article. At this point, we too are of the opinion that Malaysia property prices have left reality for far too long and the current drought is likely to last for quite a number of years as we await fundamentals such as population growth, employment growth and wages to catch up. Having said that, we have always believed that you can always find silver linings in any dark clouds when it comes to property markets. There will still be gems around that have strong micro factors such as location, price point, local growth, infrastructural developments, etc. But the overall trend for Malaysia property is, in our opinion, strongly negative.
That said, every market opinion is certainly subject to the factor of time. There is no denying that Johor has come a long way from where it was a decade ago. We have seen tremendous improvements to the state whether it be highways, shopping malls or housing projects.
However, we do know that the market has gone in the way of irrational exuberance and as a result, it will take quite some years for the population to catch up with the market in terms of demand and prices.
Is Johor better than ever before? Definitely. Will Johor be better than now 5 years down the road? Yes. Will we invest in Johor? No. At least not now when rental is absolutely abysmal. The same can be pretty much said for KL too, we reckon.”

samueal-tanSAMUEL TAN

Executive Director at KGV International Property Consultants
“To generalise avoiding Iskandar Malaysia (IM) is certainly doing genuine and long term investors a disservice. We have to understand the IM is a 20-year plan and we are only mid-way through. Even then, the targeted investment is consistently achieved over the last 10 years. The catalysts are in place.
What we are facing now is also encountered by other countries. There is a slowdown in the economy which inadvertently affects the property market.
The property market is cyclical in nature. After the slowdown which will bring prices to a more realistic level, motion will be in place to push prices northwards again.
The concern is really on the supply of high-rise apartments. It will take awhile to fill them. However, one has to take cognisance of the fact that the Johor State Government has ceased giving approval for the development of new apartments since last year.
While I think it is good to be cautious, it is quite another thing to advocate a ‘miss’ to a fast developing economic corridor.”

khalil-adisKHALIL ADIS

Founder, Khalil Adis Consultancy Pte Ltd
“There are some truths there with regards to the slowdown in the market, pace of construction and overdevelopment as well as lack of population. However, Iskandar also proved Singaporeans wrong when it became so successful from 2012 onwards.
What we are seeing is a period of correction, like all property cycles. Singapore’s property market is having the same situation with many unsold and unrented HDB and private homes.”

noel-neoNOEL NEO

SVP, Research & Investor Interface, Asia Pacific Real Estate Association Limited
“Real estate markets are highly cyclical and some may argue that the low cost of capital (driven by the central banks’ response to the 2008/09 global financial crisis) has caused a mismatch between supply and demand in some locations and asset types.
In this environment, a bifurcation of the market is likely. Good quality and well-leased projects will be highly sought after, while poorly located and vacant properties will have difficulty attracting buyers. If you own good quality assets with high occupancy, like many of the Malaysian REITs, there will be no difficulty attracting buyers both local and global.”

shan-safeedSHAN SAEED

Chief economist/Investment strategist at IQI Group
“Iskandar Malaysia is set to become Malaysia’s most developed region where living, entertainment, environment and business seamlessly converge within a bustling metropolis. The government has gone the extra mile to make IM as attractive as possible for investors. Doing business there is easy as the region has a range of business and migrant-friendly policies.
Since its launch in 2006, the region has progressed rapidly drawing in large numbers of investments from both domestic and international investors. Among the benefits are a 10-year corporate tax exemption and 100% foreign business ownership.
IM’s strategic location will attract more corporate investments, especially in the nine promoted sectors. It is the perfect location for Singapore’s future expansion for its manufacturing and productive sectors as it offers low cost industrial space, low labour cost, ease of access and business-friendly environment.”

glen-chanGLEN CHAN

President & CEO of Pacific Star Development
“Over the next 10 years, we are cautiously optimistic as we expect that – based on its proven track record of the previous decade – Iskandar Regional Development Authority (IRDA) will meet its targets in terms of domestic and foreign investments. In addition, the coordination and implementation by IRDA, the state government of Johor and all other stakeholders in the Iskandar region, including the private sector, will have had the experience of the past decade to better steer the next together.
New catalytic developments focused predominantly on transport infrastructure are also coming on-stream. A boost will come from world class and multimodal infrastructure in the form of:

  • Rail – one of the main catalysts is the HSR linking Singapore and KL;
  • Ferry – Daily and direct ferry services which will operate from Singapore’s Harbour Front Ferry Terminal to Puteri Harbour International Ferry Terminal are expected to start in 2017;
  • MRT – The Tuas West Extension of Singapore’s MRT on the East-West line is under construction. When completed, the Gul Circle Station will be the closest to Raffles Marina and would provide an added option for connecting to and from Iskandar; and
  • Airport – Senai Airport is operating with daily direct routes from Guangdong and eventually Shenzhen via AirAsia with more routes expected.”


    Your Cart
    Your cart is emptyReturn to Shop