Johor Bahru

Overview

The second most populous state in Malaysia, Johor has remained attractive to investors. Once a place known for being only a border town, Johor Bahru (or JB), the capital city of the state of Johor is the southernmost city in Malaysia. As Malaysia’s second largest city proper with its relatively large land space, Johor Bahru is a rapidly growing city with more than 2.7 million inhabitants, including those in the suburbs.

Johor’s advantages lie in its proximity to Singapore, rich natural resources, being a self-sustaining state with various economic activities such as tourism, services, manufacturing and its real estate sector.

Established overseas development companies like China-based Greenland Group, Country Garden, R&F Properties Co Ltd and Singapore-based Hao Yuan Pte Ltd, have rolled out developments in Johor.

The five major highways linking the Johor Bahru Central Business District to the outlying suburbs are the Skudai Highway in the northwest, Tebrau Highway and the Johor Bahru Eastern Dispersal Link (EDL) Expressway in the northeast, Iskandar Coastal Highway in the west and the Johor Bahru East Coast Highway in the east.

Johor Bahru is an important industrial, commercial and tourism hub for southern Malaysia. It is conveniently connected to Singapore by the Johor-Singapore Causeway and the Malaysia-Singapore Second Link (Tuas Second Link). To get to Singapore, travellers have the options of bus or train rides. To get to the Senai International Airport, it is located to the northwest of the city and getting there is a 30-minute taxi ride from the Johor Bahru city centre.

 

Catalysts for demand

In Budget 2020, the proposal of a lower threshold from RM1 million to RM600,000 for foreign buyers of high-rise residential properties will encourage more demand.

The RM85 million allocation for the Causeway and Second Link would be a boon to Johor and Singapore considering the significant amount of daily traffic at the two checkpoints.

“The reduced congestion time will encourage investors to invest in Johor, not only in the property sector but other industries as well such as manufacturing and F&B services. Shopping malls in Johor Bahru will definitely feel the positive effects of this move,” says KGV International Property Consultants Sdn Bhd executive director Samuel Tan.

He adds that the property market in the Iskandar Puteri region will observe an increase in demand as people will be able to travel and commute more easily. “The industrial sector will also see renewed interest,” Tan adds.

Meanwhile, Budget 2020 also saw the government proposing to allocate some RM25 million to promote medical tourism. Tan observes an increase in demand for this sector, especially from neighbouring Singapore and Indonesia. “Some hospitals [in Johor] allow Singaporeans to use their Central Provident Fund (CPF) for their medical expenses in the state,” says Tan. Among the numerous hospitals in JB include KPJ Johor Specialist Hospital, Gleneagles Medini Hospital, Columbia Asia Hospital - Iskandar Puteri and more.

In mid-2019, Rahim & Co (Johor) International Sdn Bhd director Loo Kung Hoe said although the market is not as active as it was during the boom in 2013, local Johoreans are still keen to own homes, hence some projects have attracted purchasers with some even seeing overnight queues.

“Landed homes remain the preferred choice for Johoreans. They will buy if the property meets their budget, is in a location of choice and comes with facilities or lifestyle features,” he added. For instance, S P Setia Bhd’s Elata Vita @ Setia Tropika launch in June 2017 saw buyers queuing up a day before the launch for the double-storey terraced houses which were selling from RM588,588. According to a news report, the 138-unit project was 90% taken up on the launch day itself.

In February 2018, Serimbun, a landed residential development by UEM Sunrise Bhd in Iskandar Puteri was launched and 74% of its units were taken up within a month. Serimbun features 215 units of double-storey terraced homes with built-ups ranging between 1,993 sq ft and 2,117 sq ft with prices from RM630,000. The project had received 1,500 registrations of interest before the launch.

 

Amenities and Facilities

There is no shortage of shopping malls in Johor Bahru. The notable and well-frequented ones include AEON Tebrau City, Sutera Mall, City Square Mall and Komtar JBCC. Johor Bahru city also offers foodies a gastronomical experience with a wide variety of food establishments which offer all manner of dining options.

Most recently, the city saw the establishment of new malls such as Midvalley Southkey, Paradigm Mall JB, Toppen Shopping Centre (by Ikea Southeast Asia) and Sunway Big Box Mall.

Meanwhile, neighbourhoods/commerical hubs Taman Mount Austin with its many hipster cafes and bubble teas stores, Eco Botanic (Taman Eko Botani) and Taman Sutera Utama are highly popular with locals and tourists alike.

Although these megaprojects are postponed, the Kuala Lumpur–Singapore High Speed Rail (HSR) project and the Johor Bahru – Singapore Rapid Transit System (RTS) link are expected to contribute significantly to the growth of properties in JB once they begin operations.

With Johor Bahru’s strategic location and constant growth, it comes as no surprise that there are a multitude of both residential and commercial properties up for sale or available for rent.

Border reopening pivotal for Johor Baru market (The Edge, 23 May 2022)

Johor Baru's real estate market is poised for growth following the reopening of borders at the start of 2Q2022. As the country transitions to the endemic phase of Covid-19, most pandemic restrictions have been lifted and fully vaccinated travellers are now allowed to cross the Malaysia-Singapore border without the need for testing and quarantine. This factor is crucial to the development of Johor's property market. 

Whie presenting The Edge | KGV International Property Consultants Johor Baru Housing Property Monitor 1Q2022, KGV International Property Consultants (Johor) Sdn Bhd executive director Samuel Tan notes that the country has taken a big step towards economic recovery after two years of the Covid-19 onslaught. 

"This was a long-awaited moment for the business community. Although reopening borders is a big decision with risks, it is probably time to take a bold step forward, in view of the less fatal Omicron wave and the need to prevent further economic deterioration," he says. 

"The Malaysia-Singapore border remains the most crucial link. If the border reopening between the two countries can be managed smoothly without major hiccups, it will be an immediate boost for sectors such as retail, tourism and hospitality. The economy in general will also benefit, which will cascade down to the property sector." 

Nevertheless, the country should be prepared for bumps on the road to recovery, he adds. New Covid-19 variants that are more infectious and deadly may still surface, as many medical experts have warned. 

Potential disruptors

Apart from Covid-19, there are other factors that may impact the recovery of the Johor real estate market. 

One of them is the Johor State Housing Development Corporation's (PKPJ) plan to use the development concept of Singapore's Housing & Development Board (HDB) as a benchmark to provide comprehensive affordable housing development planning in every district in the state. 

"This initiative is definitely a good start to integrating the affordable housing schemes and policies that are currently parked under different agencies. Having a centralised body to look after the planning and execution of the affordable housing policy in a holistic manner will enhance the housinig quality and development efficiency," says Tan. 

Meanwhile, there is some good news on the Iskandar Rapid Transit (IRT) and light rail transit (LRT) fronts. 

According to Tan, the construction of the IRT - formerly known as the Iskandar Malaysia Bus Rapid Transit (BRT) - which will connect the air, land and sea transport hubs in Johor is schedule to start by mid-2022. With about 10% of the work completed so far, the first phase of the operation is targeted to commence by 2024. 

"Hopefully, the IRT will increase the mobility of Johoreans by connecting to the main transport hubs in Iskandar Malaysia, Senai Airport, Johor Baru-Singapore Rapid Transit System (RTS) Link, double-tracking rail (electrified double-trackng project from Gemas to Johor Baru), Larkin Sentral and Puteri Harbour. Once fully implemented, the IRT will be able to connect 55 feeder routes and 44 direct routes with the main route covering 28 stations," he says. 

"The IRT is definitely a key step in enhancing the Johor Baru public transport network, thereby improving the connectivity and mobility of the people. The enhanced proximity and proper linkage between property developments and the IRT station will become key considerations for homebuyers." 

Nevertheless, Tan cautions that implementation remains the key in terms of ease and convenience of travelling, system intergration, timing accuracy and route efficiency of the new transport mode. If it fails, the IRT will become a "glorified version of a bigger bus", he points out. 

As for the LRT, a consortium comprising of Ancom Bhd, Nylex (M) Bhd and LBS Bina Group Bhd has proposed one each system to be connected to the RTS Link that is being built from Singapore to Johor Baru. 

Currently being evaluated under a feasibility study, the planned LRT project is forecast to have a carrying capacity of 15,000 passengers per hour per direction - matching that of the RTS Link. The proposed project could span 75km, with the initial phase located in the Johor Baru city centre to span about 9KM. 

"The public transport network in Johor Baru will be further enhanced should the LRT get the go-ahead. In addition, the construction of the LRT sytem via an intergated property development using the transit-oriented development (TOD) concept will create vibrancy in the real estate market," says Tan. 

"With an efficient public transport system intergrating the RTS Link, LRT and IRT systems, the location factor of real estate will be defined by the time and ease of commuting instead of being solely based on geographical distance. This will create value for a lot of suburban locations and will decentralise the developments from the overcrowded or over-developed locations."

Another potential disruptor is the outcome of the recently held Johor state election on March 12. Barisan National (BN) won 40 out of 56 seats, or a two-thirds majority. 

"With the recent victories in the Melaka and Johor state elections, an early general election appears to be likely. The business community and the rakyat are more concerned about survival issues like business recovery, job security, inflation and economic performance," says Tan. 

"With the new mandate entrusted to BN, it is hoped that big catalytic projects such as the RTS Link and IRT will be expedited and executed smoothly. At this juncture, many potential buyers may adopt a wait-and-see approach."

Other potential disruptors are the interest rate hikes and the Russia-Ukraine conflict. 

In a bid to tackle the fastest rise in inflation in four decades, the US Federal Reserve recently raised interest rates by half a percentage point and signalled hikes at the remaining policy meetings this year. The series of interest rate increases may bring the key policy rate to about 1.9% by the end of the year. 

Tan expects Bank Negara Malaysia to follow suit, although it may not be a like-for-like pattern in terms of quantum and frequency of interest rate hikes. "The lending rate will nevertheless rise moving forward and this will inrease the monthly housing loan repayment amount. Homebuyers' affordability will be affected. Post-pandemic, hombuyers will be even more cautious when interests rates are trending upwards." 

On Feb 24, Russia began a military invasion of Ukraine and the scale and duration of the conflict have caught the world off guard. 

It has also done much damage to the global economy. 

"Inflation has accelerated further [due to] higher fuel prices, cost of food... the price of raw materials has also gone up drastically across the board. Inflation pressure has been one of the main concerns in the past few years as the global supply chain has already been adversely affected by the US-China trade war and the pandemic," says Tan. 

"This protracted war will definitely push the cost higher. Developers and contractors are facing sharp cost increases to the tune of 18% on average. Moving forward, developers may have to resort to some value engineering by reducing the unit size, delaying launches or cutting prices to reduce profit margins. If the cost continues to remain high, developers will eventually pass the cost on to end-buyers, although not the total cost in view of the current weak sentiment."

New launches in 1Q2022

In terms of new launches, it appears that Johor Baru market saw more activity during the period in review. 

Taman Impan Emas saw the launch of 36 two-storey semi-detached houses under Phase 6E2 Bukit Impian Residence and 176 one-storey terraced houses under Phase 10B2 Iconia Garden Residence. 

"The typical 2-storey semi-detached units at Bukit Impian Residence, with land and built-up areas of about 4,050 and 3,000 sq ft respectively, were prices from RM1.1 millon. More than 60% have been sold," says Tan. 

"The 1-storey terraced units at Iconia Garden Residence, with a land area of 1,760 sq ft and built-up area of 1,240 sq ft, were priced from RM414,800. It has achieved a sale rate of 40% for its non-bumiputera units." 

Taman Eco Spring saw the launch of 2-storey terraced houses under the Forte and Forte Plus series in January. "The 2-storey terraced houses, with land and built-up areas of about 2,500 annd 2,700 sq ft respectively, were priced from RM1.43 million. There are a total of 92 units, and the take-up is about 40%," he says. 

Meanwhile, Taman Eco Spring started the sale registration for its 2-storey terraced houses in Phase 3 Rose series. It comprises 2-storey terraced houses with a land area of 1,800 sq ft, and is priced from RM1.07 million. 

Aurora Resort @ Aurora Sentral, comprising of 464 two-storey terraced houses, were launched in early 2022 under its Sterling and Legacy collection. Aurora Resort has managed to achieve a 100% sale rate within a relatively short period since its official launch. "This is one of the successful recent launches, mainly attributed to its strategic location, meticulous design and reasonal pricing," says Tan. 

The units, which have land and built-up areas of 1,800 and 2,800 sq ft respectively, were priced from RM1.06 million for international units and about RM800,000 for the bumiputera units. 

All in all, the price and rental rate of properties remained stable in 1Q2022. "We expect to see a more active rental market and possibly a gradual pickup in rental rates in the coming quarters with the reopening of our borders. Soem Malaysians working in Singapore may begin renting in Johor Baru to save on accomodation costs."