by - November 29, 2017

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The answer to whether you should still invest in Iskandar is here | What is Iskandar? Iskandar Malaysia is the main southern development corridor in Johor, Malaysia. The Iskandar Malaysia was established on 8 November 2006. The project is administered by Iskandar Regional Development Authority (IRDA) and was named after the 24th and fourth Sultan of Johor, Almarhum Sultan Iskandar ibni Almarhum Sultan Ismail. Recently, there are a lot of articles suggesting prospective investors to consider to invest their money in this prime location for future growth. There are a lot of projects being launched in the market by powerhouse developers such as Sunway and others. Grid Residence Sunway Iskandar, is one of such property being launch in the market to cater to the demands of the township development.

  • Is there an oversupply in the current market?

Iskandar Malaysia (IM) is currently in a state of oversupply, sharing the same fate as the current market in Singapore. Rental yields have dropped across the board as competition for tenants intensify. A terrace house in Horizon Hills could fetch a monthly rent in the RM3,000 range 2 years ago, but the figure has now dropped to the RM2,000 range. Tenants have a broad choice of options and thus have the upper hand in negotiation. Despite having plenty of new launches in the market such as Grid Residence in Sunway Iskandar, the situation does not seem positive for future investors without holding power.

Despite the fact that there is an oversupply of properties in Iskandar, it does not mean that demand for rental is low. In fact, IM's population has been growing steadily at an annualized 7% per annum compared to just over 1% per annum in Singapore. This has been driven by new job creation for both locals and foreigners with Johor's economy being the second fastest growing state by Gross Domestic Product (GDP) in Malaysia. So where lies the problem?

The first problem is the properties on offer do not match most tenant’s profile. The income disparity between the tenants and the choices of properties available in the market are huge, meaning not all options in the market might suit the potential tenants. For example, Malaysians (earning in MYR) migrating from Kuala Lumpur to work in IM will unlikely rent a luxury high-rise unit in Danga Bay or Sunway Iskandar. They will opt for a mass market apartment or a landed home in the suburbs. These property segments will hence perform much better and are largely resilient. In return, luxury properties or the mid-high-end market do not perform as well as the supply-demand dynamics are less in their favor.

The second problem is that many localities that were popular with Singaporean buyers in the past few years are effectively still construction sites. It is quite common to see recently completed condominiums sit next to other under-construction projects that make the area quite difficult to live in at this point. Not only the conditions are difficult to live with, most of the amenities that comes as the plus point for purchasing the property in the first place would probably not completed yet. Areas such as Medini, Puteri Harbour, Danga Bay and Sunway Iskandar are still new and developing, hence there is a lack of amenities or services required to service a stable population.

  • Investor’s problems are occasionally, self-inflicted.

Poor property management habits is one of the few reasons why some investors are failure to capture the market quickly. This habit is rather apparent with Singaporean investors. Upon completion of the property, these Singaporean owners are always the slowest to do the following - collecting the keys, reporting any defects, furnishing/ renovating, passing keys to property agents and consequently the slowest to get tenants or viewings.

In addition, some owners are not even interested to do anything with the property. Many landlords leave the properties empty for months if not years – they make little effort to dress up the property, doing zero value adding activities while expecting property agents to perform miracles. Any potential buyer or tenant will be turned off and given the choices in the market today, they would have little reason to choose a poorly managed or unfurnished property.

  • New Incoming Supply Will Taper Off From 2018 Onwards

The poor primary market performance has caused many developers to hold off new launches. There is no point launching new properties at current market where most buyers could probably not able to afford. Most of the incoming supply will be completed by end 2018 and thereafter, new supply will drop significantly, very much mirroring Singapore's own situation.
New launches today are driven mainly by mass market properties that rarely target Singaporean based buyers and other foreign buyers.

Given such economic conditions, this would be a good time to start bargain hunting - prices have remained somewhat flattish over the past 2 years and as properties come into the market, bargain hunters start to sniff out choice units that can be bought at a good price and held over the longer term. Well-located freehold landed properties are still attracting quite a huge amount of interest as they are still a fraction of what it costs in Singapore. Buyers now consist of local upgraders, weekend homebuyers or retirement home buyers with longer investment timeframes.

  • IM's Economic Prospects Are Bright And Getting Stronger

Johor is still the state with the highest manufacturing investments in Malaysia for the past 4 years; industrial land and properties in good locations are seeing a strong take-up as IM offers an attractive combination of low operating cost and a strategic location. The latest to migrate from Singapore to IM will be carmaker Volvo's regional aftersales operations joining BMW that has similar operations in IM for several years already.

Other strong economic indicators are seen in tourism, retail and construction sectors, all of which are doing well in IM. As incomes and population rise, there is an influx of new service operators to meet the demand of a more discerning consumer. The popular township of Bukit Indah now boasts a growing Korean and Chinese population, with Korean hair salons and BBQ restaurants coming up alongside Chinese hotpot restaurants. IKEA has chosen Johor Bahru as the site of its third store in Malaysia and will open in late 2017.

When construction of the High-Speed Rail and RapidTransit System commence in the next 1-2 years, confidence in the economy can only improve. The need for it remains as strong as ever, traffic on the two links are still as bad as it was despite toll fare increases 2 years ago. If you are an investor with a 5-10 year timeframe, there is only 1 direction for IM, and that is up.

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Terima kasih korang sudi komen. Nanti komen la lagi,hehe..