Since taking power in May 2018, the newly formed government has announced a slew of policy changes that will impact developments in Iskandar Malaysia. We analyse the impact of its policy changes in Iskandar Malaysia and how they may affect you as a consumer.
By Khalil Adis
Take a drive around Iskandar Puteri, Danga Bay and Johor Bahru and one cannot help but notice the rapidly changing skyline at this Malaysian state bordering Singapore.
Once seen as a buyers’ beware market, Johor has since 2008 rebranded itself as an up and coming economic zone called Iskandar Malaysia which is meant to complement the Lion City.
For a while, Singaporeans were afraid of buying Johor properties due to the many horror stories reported in the local press.
However, interest surged in 2010 after Singapore and Malaysia agreed to a land swap deal which led to Temasek Holdings and CapitaLand investing in Danga Bay and Medini respectively.
The warming bilateral relations, coupled with HDB flats hitting the million dollar mark, saw properties in Iskandar Malaysia being snapped up like hotcakes.
However, in the subsequent years, the entry of Chinese property developers like Country Garden, R&F and Greenland raised alarms of a potential oversupply as they appear to be building townships by the thousands.
Perhaps, more pronounced, is the development of the controversial Forest City project.
The project sparked concerns of environmental damage and land encroachment leading to an official protest from Singapore.
As a result, interests in Iskandar Malaysia started to wane as Singaporeans steered clear from the property market.
Here are the five impacts post GE-14:
Impact 1: No more foreigner only enclave
Forest City is currently one of the mega projects under review by the Pakatan Harapan government.
Although Forest City is a relatively new entry to the property market, it was granted a special economic zone status much like Medini.
This confused the public while many local developers were reportedly not very happy about it.
For example, it was not subjected to build a specified number of low-cost homes or to allocate a certain percentage of its development for bumiputras.
In addition, there are no caps on foreign ownership but with a minimum price threshold at RM500,000 per strata unit for foreigners.
It was also granted a duty-free zone where buyers will automatically be eligible for the Malaysian My Second Home (MM2H) programme.
This programme enables foreigners to enjoy a long-stay visa of up to 10 years.
However, as of September 2018, MM2H will no longer be granted automatically.
In addition, the federal government has said a foreigner-only township is no longer allowed.
As it stands, the current entry price for a condominium here averages RM1,400 per sq ft which is way beyond what the locals can afford.
For now, the developer is required to build affordable homes for locals.
Meanwhile, the minimum purchase price for a foreigner has been reverted to RM 1 million per strata unit.
The only thing that remains is its duty-free zone status.
Impact 2: Longer development period for Gerbang Nusajaya and Iskandar Puteri
This follows the review of another major project which is the High Speed Rail project linking Singapore to Kuala Lumpur.
The project was initially cancelled and then postponed.
Full service for the line will commence before 1 January 2031.
The Iskandar Puteri station will be located close to Motorsports City near East Ledang in Gerbang Nusajaya.
In April 2015, Nusajaya’s master developer UEM Sunrise Berhad revealed its comprehensive development plans for Gerbang Nusajaya which will have its own CBD similar to Jurong Lake District.
Spread across 4,551 acres of land, this second phase of Nusajaya’s development will be designed with catalytic industries similar to the various economic drivers in Nusajaya and Medini.
In anticipation for the High Speed Rail terminus in Gerbang Nusajaya, a number of catalytic developments have been planned.
They include Nusajaya Tech Park, a 519-acre integrated eco-friendly tech park and FASTrack Iskandar which is a 300-acre ‘motorsports city’.
Gerbang Nusajaya will have a gross development value of RM42 billion and with an estimated 220,000 population upon its completion
However, now that the project has been suspended, it will take a longer period for Gerbang Nusajaya, Iskandar Puteri and Medini to experience the expected spillover impact from the High Speed Rail project.
Impact 3: Opportunity costs to be passed on to consumers
With the delay of the High Speed Rail project, it may even result on the opportunity cost from developers to be passed on to consumers.
As such, new launches will likely be priced higher.
Developers who are banking on the project will be affected.
Impact 4: Correction of prices in the property market
The postponement of the projects plus investors sentiments on the perceived oversupply situation have impacted the market.
In fact, there is currently a glut in the housing sector in Johor.
According to data from the National Housing and Information Centre (NAPIC), Johor has the second highest number of supply of homes in the first quarter of 2018 - 795,363 units.
In comparison, Kuala Lumpur trails third with 471,475 units.
With the High Speed Rail project as the only property booster at the moment, the property market in Iskandar Malaysia is expected to be muted, moving forward.
This will likely impact the prices for current homes
For example, the median condominium prices in Iskandar Puteri and Medini were RM900 per sq ft and RM700 per sg ft respectively in 2015 since we first started tracking data based on our on the ground survey.
However, the latest data from Brickz showed that the median prices have now corrected to RM515 per sq ft and RM542 per sq ft in Iskandar Puteri and Medini respectively.
Likewise, the median condominium prices in Johor Bahru and Danga Bay were RM1,000 per sq ft and RM1,200 per sq ft respectively in 2016.
However, the latest data from Brickz showed that the median prices have now corrected to RM662 per sq ft and RM863 per sq ft in Johor Bahru and Danga Bay respectively.
Impact 5: Iskandar Halal Park and Pengerang Rapid project still ongoing
Iskandar Halal Park and the Pengerang Rapid project were spared from the policy changes.
Iskandar Halal Park is part of the state government’s effort to promote entrepreneurship in Johor.
Recently, Iskandar Halal Park scored a major coup among when US based-company, Chocolat Moderne from New York, picked Iskandar Halal Park as the manufacturing site to set up its first business in Asia.
Meanwhile, the Pengerang Rapid project, with a gross development value of RM70 billion, was affected by the slowdown in the oil and gass sectors.
While both projects were spared from major reviews, there has also been a price correction for residential homes located in the Eastern Gate which spans from Pasir Gudang to Pengerang.
For example, the median housing prices in Permas Jaya and Pasir Gudang were RM300 per sq ft and RM450 per sq ft respectively in 2016.
However, the latest data from Brickz showed that the median prices have now corrected to RM272 per sq ft and RM329 per sq ft in Permas Jaya and Pasir Gudang respectively.
Only Pengerang recorded a price increase from RM80 per sq ft in 2016 to RM236 per sq ft in 2018.
An independent analysis from yours truly