Iskandar Malaysia’s property market could take a hit

With the Kuala Lumpur-Singapore high-speed rail (HSR) aborted, Singapore’s Jurong Lake District could lose some of its shine. However, the ramifications for Iskandar Malaysia in Johor could be more far-reaching.After all, Iskandar Malaysia — which is three times the size of Singapore — was always regarded as Singapore’s potential hinterland. The HSR would have been instrumental in completing that connection.

The planned HSR project has seven stations in Malaysia: Bandar Malaysia, followed by Putrajaya, Seremban, Melaka, Muar, Batu Pahat and Iskandar Puteri, before terminating in Jurong East, Singapore.

Iskandar Malaysia has been suffering from a glut in high-rise condominiums and lacklustre sales since Malaysia introduced property cooling measures in 2014. The HSR and the station at Iskandar Puteri would have been a much-needed shot in the arm to revive its fortunes.

Now that the HSR has been derailed, “there will definitely be a negative impact on sentiment and property demand”, says Ryan Khoo, director and co-founder of Alpha Marketing, which specialises in marketing property in Iskandar Malaysia. “Many people in Iskandar and the rest of Johor will be disappointed if the HSR is cancelled, as the economic impact of the HSR is large.”

Khoo adds that many business plans and investment decisions made by foreign companies and individuals depended on the HSR’s coming online. The project was first announced in February 2013. “Plans laid out over the past five years have now been affected,” he says. “Singaporeans and Malaysians working in Singapore will also be disappointed that hopes for improved connectivity are again at risk. Traffic on the Causeway and the Second Link is already so bad.”

Developers with projects in Iskandar Malaysia — from Malaysian developers to those from China, Singapore and elsewhere — “are all disappointed”, says Khoo. “It is a setback for Iskandar Malaysia if the HSR does not go through.”

Khoo says, however, that there has been no official cancellation of the HSR at this point. “We only have Prime Minister Mahathir making his preferences known and he has admitted as much that he has not fully understood the implications of cancelling the HSR, nor has he discussed it with the Singapore government.”

Following Mahathir’s comment to the press on May 28 that he intends to scrap the HSR connecting the two countries, Singapore’s Ministry of Transport responded with the following statement: “Singapore has not yet received any official notification from Malaysia. We had agreed to proceed with the HSR project based on mutual benefits and obligations set out in the HSR bilateral agreement. We will wait for official communication from Malaysia.”

The Singapore government will have to find an alternative use for the land designated for the HSR if it falls through. “Property prices in Jurong are not so dependent on the HSR’s presence,” says Khoo.

“The HSR would, however, have had a large positive impact on Iskandar Malaysia’s relatively smaller economy. I think the bigger loss is to Iskandar, and the other smaller cities where the HSR would have a station, such as Batu Pahat, Muar, Melaka and Seremban.”

Some developers have been marketing Iskandar Malaysia projects based on their proximity to the HSR station. “The real estate hype might be affected in the short term,” says Boaz Boon, founder and principal of THRED and director at VestAsia Group.

Malaysia’s new Transport Minister Anthony Loke said on May 30 that the government has agreed to continue with the Rapid Transit System (RTS) Link between Johor Baru and Singapore’s Woodlands North MRT station, “but wants to look at ways to lower costs”.

If the frequency of the RTS is increased, “that will further enhance Johor Baru’s attractiveness” for those who work in Singapore but are considering a second home in Johor Baru, says Boon.

The attractiveness of Iskandar Malaysia has always been its proximity to Singapore and the exchange rate between the Malaysian ringgit and Singapore dollar. “That attractiveness will remain,” adds Boon.

As for the halt in the HSR project, Alpha Marketing’s Khoo says: “The hastiness in which comments are made on the HSR is very disruptive and confusing to the local businesses, economy in Iskandar and Singapore.”

He believes the Malaysian government has to do a thorough study of the pros and cons, and read the cost-benefit analysis of these various projects and details of the bilateral agreements signed “before making any further decisions or announcements”. -- EdgeProp Singapore