HEATING UP: Johor property experts weigh up the impact of Iskandar on JB, also known as the "Iskandar effect“
Since its launch in 2006, Nusajaya and Iskandar region has practically been in the spotlight on a daily basis. Inevitably, that has led to close scrutiny from all quarters, not least by those whose lives are to be directly affected by the developments — Johor Bahru residents. NST RED speaks to several property advisers and consultants based in JB — Lim Boon Ping (Chief Operating Officer, Tiram Realty and National Vice President , Malaysian Institute of Estate Agents), Sr V. Sivadas (Executive Director, PA International Property Consultants Sdn Bhd) and Sr Halim Osman (Chief Executive Officer, JB Jurunilai Bersekutu Sdn. Bhd).
LIM: Overhang worries: Johor Bahru’s property market has remained stagnant since the 1997/98 financial crisis. It was only two years after the announcement of Iskandar Malaysia in 2006 that we have felt some momentum picking up. Property prices in JB have risen two- to three-fold since 2009. For example, for a 3-storey shopoffice at Taman Nusa Bestari, the starting price was RM600,000 six years ago. Now, it can easily fetch up to RM1.5 million.
As for residential properties, a new double-storey terrace house will easily cost RM500,000 compared to RM200,000 to RM300,000 a few years back. This price hike is also partly caused by rising land costs, labour shortages and the escalating prices of building materials such as cement and steel.
Rising house prices together with rising rentals have further burdened local residents with their daily cost of living. New launches of high-end condominiums are currently selling at RM600 to RM1,000 psf, which is a 200 to 300 per cent rise compared to a few years back.
The overhang of the property sector has haunted Johor Bahru for the past 15 years since the 1997/98 financial crisis. Compared to 2010, new housing supply has doubled in 2011, from 5,000 to 10,000 units.
It is noted that a big portion of high-end residential developments has been snapped up by foreigners. My question is, by the time of completion, who will be the occupants? Are we creating more cowboy towns and condos? Hopefully not.
Hotspots: In JB’s downtown area, developers are looking for landbanks for high-rise developments targeting Singaporean buyers or Malaysians working in Singapore.
JB’s north-eastern Corridor — housing estates such as Taman Molek, Austin Heights etc.
JB’s north-western corridor —housing estates such as Taman Bukit Indah, Taman Sutera Utama, Taman Nusa Bestari etc. Both JB’s north-eastern and north-western corridor are the major business centres outside from Johor Bahru city centre.
Gelang Patah — The heart of Iskandar Malaysia’s developments.
SIVADAS: Infrastructural tipping point: The branding of south Johor into Iskandar Malaysia has resulted in the fast-tracking of long-overdue investments in the infrastructure sector. It was reported that RM2.8 billion has been spent thus far by the federal government in infrastructure projects in the last five years. A substantial amount comprised investments in new highways and interchanges, river widening and cleaning.
The completion of all new roadworks this year, the last being the Eastern Dispersal Link (EDL) which opened a few months ago, has indeed been the tipping point for the transformation of Johor Bahru. Travelling time from Johor Bahru to Bandar Nusajaya, Pasir Gudang and to the North–South Highway has been substantially cut down by these new highways. Much new landbank deemed not suitable previously due to its poor access has now been transformed into prime landbank for property development.
Related to the above is the urgent need for an efficient public transportation system. It is still poor in JB and we continue to see buses lining up and parked along Jalan Wong Ah Fook, the arterial road in the city centre, waiting to fill up with passengers!
It is common to see taxis hogging the lanes on both sides of this road and outside JB Sentral and City Square, causing congestions within the city centre. This has also resulted in the increasing number of private vehicles on the road. Many residents are forced to buy cars as there is no other means to move about.
The plans to transform part of Jalan Wong Ah Fook into a wider rehabilitated Sungai Segget waterway appears interesting. However, it is hoped due consideration has been given to the livelihoods of the various occupants and businesses within the shops and commercial complexes along this busy road.
The city centre continues to appear neglected and poorly maintained. This is disappointing considering that the city is the gateway into Malaysia from Singapore. The city centre transformation programme is not happening as fast as required. Regular maintenance is required for city pavements and drains.
For too many years now, the established hawkers originally from Jalan Ungku Puan have been operating from dirty backlanes of Jalan Wong Ah Fook and Jalan Meldrum. This is a major embarrassment for the city. The original site on the other hand had been landscaped and under-utilised. I believe this original site is the best place for a world-class food centre to be developed catering to the needs of both locals and tourists.
The Singapore factor: Due to its much stronger currency, Singapore has over the last 20 years been attracting much of our labour force. With currency exchange rates hovering in the S$1 to RM2.45–RM2.50 band for quite a while now, a substantial number of Malaysians are working there. Some stay there, while some estimates put about 50,000 commuting daily in and out. It is increasingly difficult for businesses here to obtain or retain experienced staff in many sectors of the economy.
The strength of the Singapore currency makes properties and almost everything else in Malaysia very cheap for Singaporeans and those working there. However, asset prices in Singapore are substantially higher compared to those in Johor Bahru. For example, Housing Development Board (HDB) public housing apartments are within the S$600 to S$700 psf price range, which is equivalent to about RM1,500 to RM1,800 psf.
At the moment, new luxury service apartments/condominiums within Bandar Nusajaya and Johor Bahru are priced at the RM700 to RM1,000 psf range. It is obvious that these luxury units are cheap for foreigners. Landed property prices too show a wide disparity of prices, coupled with the strength of the Singapore and US dollars, making properties here very cheap in comparison.
There appears to be certain areas whereby restrictions on ownership by foreigners have been lifted. However, the benefit of foreign investments must be weighed carefully and balanced with the need for sufficient and affordable housing for the citizens.
HALIM: Cost and yield factors: Developers have increased selling prices of the residential and commercial properties by 20 to 30 per cent from previous selling prices. This trend will probably continue due to high demand. Properties within the strategic locations such as Horizon Hill, Taman Bukit Indah, Ledang East and other areas within Iskandar Malaysia have seen prices skyrocket to between 50 to 100 per cent.
For example, for the last two years, standard intermediate single storey terrace houses have been offered and sold in the region of RM120,0000 to RM150,000 per unit. Now, prices have gone up to RM180,000 to RM220,000 per unit. For double storey terrace houses, previously it was not easy to sell at prices more than RM250,000 per unit but now it is difficult for us to get a unit below RM400,000 per unit in the Taman Bukit Indah housing area.
Cost of running businesses in these areas will be expensive because of higher rentals charged by the property owners. The tenants or the business operators will pass on these extra costs to their end clients and consumers to cover their operating costs and keep their businesses profitable.
Low returns, high risk: Since the selling prices of residential or commercial properties are on the high side and moving at a very fast pace, rental income received from these investments could be unfavourable to land owners if rental yields are unable to catch up with selling prices. The best rental returns for a residential unit is in the region of 3 to 5 per cent but it might be lower than that if prices keep on increasing but rental income does not rise correspondingly. It can be a very risky investment if the rental returns received from these investments are lower than expected because the respective landowners will face a tough time during an economic crisis or a prolonged recession.