Is there a demand shortage for properties in Iskandar Malaysia, Johor or is there an oversupply?
Datamine Malaysia head of research Jerren Lai said Iskandar Malaysia's oversupply is fundamentally different from Klang Valley.
Lai said it is not a case of weak demand or supply that no one wants, but multiple barriers that prevent demand from reaching supply.
His firm has identified the barriers and offer a solution on how to break them down so that it not only resolves the 'supply matter' but unleashes the spending power of the Singapore Dollar on the economy.
"Our basic premise is that Iskandar Malaysia does not have an oversupply problem. It is barriers that prevents demand from reaching supply and the first is connectivity," he told NST Property.
Lai said inefficient connectivity with Singapore is the single most damaging factor that caused record numbers of unsold properties in Iskandar Malaysia and prevents demand from reaching supply.
Datamine estimated that some 600,000 white-collar Malaysians are currently renting or own a property in Singapore.
He said if connectivity between Johor Bahru Checkpoint (JB CIQ) and Singapore is significantly improved with the upcoming Rapid Transit System (RTS) and Thomson-East Coast Line MRT, a nominal 20 per cent who decide to relocate to Iskandar Malaysia would have fully absorbed the oversupply.
In 2013, the RTS and High-Speed Rail (HSR) linking Johor Baru with Singapore were introduced.
Lai said the notion of earning the Sing-dollar and expense in ringgit led to 350,000 daily commuters, many starting life at 4am just to get to work on time in Singapore.
"Actual demand or commuters would be much higher, probably three times more had efficient connectivity been in place. The RTS and HSR proposition opened the floodgates for China Country Garden to make its debut at Danga Bay with 10,000 units at one go. Demand was not limited to Malaysians only.
"For the first time, Singapore HDB dwellers comprising 80 per cent of the population, who are priced out of freehold properties in their homeland are spoilt for choice on the abundance of Iskandar Malaysia freehold properties for a dime. But inefficient connectivity between the two countries is stopping them from coming to the Iskandar region," he said.
"The RTS is a good development but what followed after the two governments first announced it was six times of delay. The RTS was supposed to be completed in 2018 but the agreement was only finalised in July 2020. We understand developers have forward planned supply based on the expected demand upon completion of this rail project.
"There is far more demand that wants to come to Iskandar Malaysia from Singapore but the causeway can only take maximum capacity of slightly over 300,000 commuters during peak hours. When the RTS comes over, there may not be enough residential supply as a lot more Singaporeans will come to Iskandar Malaysia to reside for cheaper cost of living," he said.
Lai predicted that with the RTS, there will be more than 500,000 people commuting to Iskandar and it may double with the HSR.
"The HSR has been delayed for a long time. We understand the Singapore government wants the HSR and has allocated two of their golf courses to build the HSR station...the matter is pending on our end. The HSR development will be good for Johor and Malaysia," he said
Lack of Grade A office space to bring in foreigners
Lai said there is lack of Grade A office space in Johor Baru to attract foreign investors.
He said developers have been building residential units in Iskandar Malaysia because of demand a few years ago and they neglected Grade A offices.
According to him, there are a lot of Singapore-based multinational companies (MNC) and blue-chip firms that require Grade A Offices to relocate their back-end operations and they are looking at Iskandar Malaysia.
"Rental-wise, it is about four to five times cheaper to rent an office space in Iskandar Malaysia than in Singapore. In Iskandar Malaysia, it is about RM9.00 per square foot (psf) while in Singapore, it is RM27 psf to RM30 psf (S$12). It helps Singapore firms cut rental and human resource costs when they operate in Iskandar Malaysia.
"When the Singapore firms relocate to Iskandar Malaysia they will also create employment for locals while bringing in expatriates who will require a place to stay and that itself will fill up all the vacant apartment units in Iskandar Malaysia. For the locals, they will be able to upgrade their living conditions with higher income and employment.
"Currently, there is no single Grade A building in Iskandar Malaysia. There is nothing like those high volume modern types of office buildings that you see in Kuala Lumpur," Lai said.
Lai said the first Grade A office buildings that will eventually make Iskandar Malaysia their home next year are the Southkey office towers by IGB Corp Bhd.
IGB is developing Southkey, an RM6 billion integrated development comprising four office towers with one million sq ft of office space, a mall, serviced apartments, and three hotels, similar to the Mid Valley development in Kuala Lumpur.
So far IGB has completed the mall where the anchor tenant is Sogo, and the serviced apartments.
Lai said the Southkey office towers will be ready in March 2021.
"You can consider this as the first grade A office towers in Iskandar Malaysia and there will be spillover," he said.
Lai said the next Grade A office block to come up is located in Coronation Square, within walking distance to JB CIQ.
"This building will take another year to complete. We do need Grade A office buildings in Iskandar Malaysia. The lack of good quality buildings is what is preventing foreign companies from relocating here," Lai said.
Absence of vital property statistics
Lai said another concern is the absence of vital property statistics up until the Iskandar Property Census by Datamine was made public.
"The third barrier is the lack of market research information on real estate. In Singapore, the government body, Urban Redevelopment Authority (URA), provides very good statistics. URA has very good data and that is what consumers need in terms of references to buy in Iskandar Malaysia.
"Singaporeans who want to buy in Iskandar Malaysia have no means to understand the property market. They are not aware of buildings, be it residential or commercial, that are readily available.
"That is where we come in to provide all that data and information. We have profiled the whole of Iskandar Malaysia and provided data since 2012. Our website provides comprehensive data and we collect the data every six months taking into account supply, demand, hotspot, property prices, and forecasts. Singaporeans do need these kinds of reviews and information for property purchase and ownership," Lai said.
The Iskandar Property Census research, which tracks high-rise residential units in Iskandar Malaysia released its latest third-quarter 2020 (0Q 2020) result that shows a price drop of 8.9 percent year-on-year to RM573,931 or RM577 psf.
Puteri Harbour recorded the highest price at RM979,125 or RM888 psf followed by the Johor Bahru Customs, Immigration, and Quarantine Complex (JB CIQ) at RM836,125 or RM921 psf.
JB Inner City saw the median price at RM694,749 or RM595 psf, JB Outer City at RM394,266 (RM423 psf), Danga Bay at RM648,500 (RM534 psf), Iskandar Puteri RM434,714 (RM491 psf) , Medini RM645,598 (RM773 psf) and Tebrau Coast RM494,520 (RM491 psf).
"The pandemic ravaged the already weak market that saw five in eight areas recorded a price drop. The anticipated RTS kept asking prices alleviated for JB CIQ area," Lai said.
The highest median-priced property in JB CIQ area is Suasana at RM1.32 million (RM1,350 psf) and Tri Tower at RM1.18 million (RM1,253 psf), while the lowest is Skysuites (RM635 psf) and V Summerplace (RM748 psf).
On a positive note, Lai forecasts that JB CIQ median price will likely hit 30 per cent below Singapore Woodlands private property prices upon completion of the RTS.
Singapore Woodlands' median price stands at SGD799 psf or RM2,400 psf (based on RM3 : SGD1) computed from the latest URA (Singapore URA 2020) source.
"This translates to a forecast price for JB CIQ at RM1,700 psf," Lai said.
Lai said the forecast depends on the efficiency of the new RTS immigration clearance system.
"From Woodlands North to Orchard area, it takes only 36 minutes on the upcoming Thompson MRT line. If immigration clearance and the 4km journey from JB CIQ to Woodland North takes around 25 minutes, then Singapore's demand will overwhelm Iskandar properties if it takes around one hour from JB to reach Orchard area," he said.