5 tips on investing in Iskandar Malaysia

Johor Bahru city skyline. (Photo by IRDA)

Johor Bahru city skyline. (Photo by IRDA)

If you are a Singaporean, Iskandar Malaysia can be a very disorienting experience, especially since it is three times the size of Singapore. First mooted by former Malaysian Prime Minister Abdullah Badawi, Iskandar Malaysia is the most successful of the five economic corridors under the Ninth Malaysia Plan. As of June 2014, it has attracted RM146.2 billion worth of investments with Singapore as the top foreign investor. Here are a few tips to help you before you invest in Iskandar Malaysia.

1. Invest in commercial or industrial property

Bird's eye view of Taman Seri Albion in Pasir Gudang, This mixed use development will feature affordable homes, high speed broadband, green designs and business parks. Photo: Courtesy of UMLand.

Bird’s eye view of Taman Seri Albion in Pasir Gudang, This mixed use development will feature affordable homes, high speed broadband, green designs and business parks. Photo: Courtesy of UMLand.

The supply of commercial and industrial properties is limited compared to residential property. According to data from the National Property and Information Centre (NAPIC), there is an existing stock of 69,912 shop units and 13,793 industrial units, an incoming supply of 13,884 shop units and 1,144 industrial units and planned supply of 14,946 shop units and 3,492 industrial units. In comparison, the total units for existing stock, incoming and planned supply for residential units is almost one million.

This is a good thing, as it means there is less competition for investors who are targeting the huge supply of residential units. However, you must understand the key economic drivers in each flagship zone and the surrounding area before you invest. Federal initiated projects like the High Speed Rail and where major transport hubs are located at will increase the desirability for workers to live and work there.

2. Buy residential properties for long-term stay

Bayou Creek, located in Leisure Farm, offers a slower pace of life and freehold landed properties at a fraction of what you pay for a Good Class Bungalow (GCB) in Singapore. Photo: Courtesy of Mulpha International Berhad.

Bayou Creek, located in Leisure Farm, offers a slower pace of life and freehold landed properties at a fraction of what you pay for a Good Class Bungalow (GCB) in Singapore. Photo: Courtesy of Mulpha International Berhad.

There have been many concerns regarding the huge supply of housing units that will be coming on-stream in the next two to three years. The mistake most Singaporeans make is they apply the same strategy when they invest across the causeway – rent out the property after it is completed.

Investors must bear in mind Iskandar Malaysia measures 2,217 sq km with a population of 1.6 million. In comparison, Singapore is densely packed with a population of 5.4 million with 716.1 sq km. With massive launches by the thousands from Chinese developers, renting out your property in the future will be challenging. In addition, the huge supply will put pressure on your rental yield. Even if you manage to rent out your property, the rental may not be able to cover your mortgage. Hence, the safest bet is to use it for your own stay.

3. Invest in JB Sentral

View of Sultan Iskandar CIQ in JB Sentral. Bukit Chagar RTS Station is planned next to it, subject to Singapore agreeing to its alignment by end 2014. Photo: Courtesy of IRDA.

View of Sultan Iskandar CIQ in JB Sentral. Bukit Chagar RTS Station is planned next to it, subject to Singapore agreeing to its alignment by end 2014. Photo: Courtesy of IRDA.

Johor State Executive Committee Member for Public Works, Rural and Regional Development Hasni Mohammad recently announced that Bukit Chagar has been chosen as the final RTS (Rapid Transit System) station that will connect to Singapore’s Woodlands North MRT via the Thomson Line. Should Singapore agree with the alignment, Bukit Chagar and the JB Sentral area will be a hotspot and serve as the gateway to Singapore and Malaysia.

If we follow historical trends in Singapore, properties around MRT stations generally appreciate between 5 to 10 percent. Therefore, we can expect properties around Bukit Chagar and JB Sentral to appreciate around the same rate due to increased demand to live there and the desirability factor.

Singaporeans will want to live here as they can buy a freehold condominium with full facilities at the price of an HDB flat. Meanwhile, Malaysians, especially those workers who commute daily to Singapore, will find renting a property here much more convenient. In addition, with the rise in petrol prices and the recent toll hikes on both sides of the causeway, it would be more valuable to stay near to the transit station.

Malaysian Prime Minister Najib Razak has already committed RM1.8 billion to rejuvenate Johor Bahru. The opening of Menara Komtar and Angry Birds Theme Park this year as well as the Sungei Segget Rehabilitation Project by end 2015 will increase the attractiveness of JB Sentral.

4. Invest in Medini

The Meridin @ Medini by the Mah Sing Group is exempted from the Real Property Gains Tax (RPGT) and minimum purchase price of RM1 million.

The Meridin @ Medini by the Mah Sing Group is exempted from the Real Property Gains Tax (RPGT) and minimum purchase price of RM1 million.

If you do not have that much budget to buy, look to Medini where as a foreigner, you can still purchase properties for less than the RM1 million minimum purchase price. You are also not subjected to the Real Property Gains Tax (RPGT) on your first property should you decide to sell it. This is the only place in Malaysia where you can do so. Medini is where Temasek Holdings and Khazanah Nasional have jointly invested in two projects – Afiniti Medini and Avira. You can also use your CPF Medisave for medical treatment once Gleneagles Hospital Medini opens next year. There is also a transport hub planned just next to LEGOLAND Theme Park. Business owners are also not subjected to corporate tax for ten years up to 2016. Imagine living in a SOVO here where you can live, work and play and then take the Bus Rapid Transit at the transport hub.

5. Look beyond Nusajaya and JB for great capital appreciation 

Pengerang Integrated Petroleum Complex (PIPC) is a project under the Economic Transformation Programme (ETP). It will be Malaysia's largest oil and gas projects to be undertaken by Petronas. Photo: Courtesy of Johor Petroleum Development Corporation

Pengerang Integrated Petroleum Complex (PIPC) is a project under the Economic Transformation Programme (ETP). It will be Malaysia’s largest oil and gas projects to be undertaken by Petronas. Photo: Courtesy of Johor Petroleum Development Corporation

While Nusajaya and Johor Bahru have always been a perennial favourite among investors, I would advice them to look beyond these areas. One tip when investing anywhere is to look at non-mature property markets where the government has made plans to develop various economic drivers – much like how Nusajaya was way back in 2008.

However, with Nusajaya and Johor Bahru now being relatively developed and where property prices are currently at RM1,000 psf on average, the potential upside in these two areas will not be as great as before.

In March 2012, PM Najib Razak announced that the federal government will be developing the largest oil and gas industry in Penggerang. Now, this is where the next hotspot will be. If I were you, I would look at investing in Flagship ‘D’ in Pasir Gudang as well as beyond in Penggerang. When the oil and gas hub are mature, the spillover economic effects will be felt in the property sector as well, similar to what occurred in Nusajaya and Johor Bahru.

This article was first published by PropertyGuru.

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