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Johor – A state in Fast Forward

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Photo Dzul Ikram
Water vessels will float their way to Puteri Harbour – a waterfront and marina spanning 668 acres along the Straits of Johor.

Photo Schristia
Johor Bahru skyline as seen from the Singapore border.

Photo Roslan Tangah
Johor Bahru – while a city of culture and tradition, it is also a gateway for modern developments.

Photo Kenix Chong
Infrastructure and amenity upgrades will play a vital role in the development of Johor.

Johor is one of the nation’s fastest growing states in terms of new development. Iskandar Malaysia, launched in 2006 can be deemed as the factor that is spurring such fast-paced movement. This corridor, in the southern part of the state is aiming to become Malaysia’s most developed region. And in the process, help the country reach its goals of becoming a developed nation by 2020. The prospects in Johor are spectacular, promising a lot of opportunities as other districts in the state follow in its footsteps.

So what is in store for Malaysia’s fifth largest state? And are there any pitfalls that lurk within?

Johor at a glance
It encompasses a 19,984 sq km area and is three times larger than neighboring Singapore, with a population of about 3.3 million. The state ranks third in the property market share of the country after Selangor and Kuala Lumpur according to the National Property Information Centre (NAPIC). The state has contributed 15.2% to the country’s overall property transaction value as of 1Q 2011 (see State Numbers). Johor’s Gross Domestic Product (GDP) was RM52.5 billion in 2010, equivalent to 6% growth from the previous year. Its main economic contributor remains the manufacturing and service sectors respectively.

Last year, 48,537 transactions were recorded in the property market worth RM11.8 billion, dominated by the residential sector. The highest existing supply of residential property here is the terrace, totaling at 671,988 units by Q1 2011. In 2010, the Johor market recorded 26,863 residential property transactions worth RM4.48 billion. Against 2009, these were higher by 4% in volume and 16.8% in value. The dominant region here is none other than Iskandar Malaysia – capturing 60% of the total residential market share.

“The public perception that house prices are spiraling upwards and the existence of property bubbles in the Johor Bahru property market is not true,” says Dr Rahah binti Ismail, Director of Valuation and Property Services Department (JPPH) Johor.

She says the upward movements of house prices are selected (see House Price Movements in Selected Schemes), notably occurring in the Nusajaya area.

There are more than 1,000 housing schemes in Johor Bahru. Older and established schemes here witnessed a downward trend in the range of 7% to 14% as competition grows. Schemes bordering the Nusajaya region however experienced a marginal increase. In other areas, prices stabilized.

Iskandar
International schools, hospitals, commercial hubs, theme parks, luxury homes and a financial district are some of the transformation taking place within a 2,217 sq km rubber and oil palm plantation land in Iskandar region.

The region is made up of five flagship zones – Johor Bahru, Nusajaya, Senai in Skudai, the Eastern Gate encompassing Tanjung Pelepas and the Western Gate encompassing Pasir Gudang and Tanjung Langsat. The zones will join together to make the international economic region that is Iskandar, targeted to be fully fit by 2025. By then, the total expected would have surpassed the RM300 billion mark to finance, and spread across two decades to complete. 

At present, 70% of the state’s economy is contributed by the manufacturing sector. But the aim is, as Iskandar reaches its peak, the service sector will take claim as the lead.      

The vantage point in Johor is its proximity to Singapore and the ease of traveling to and fro. And the corridor is aiming to boost foreign direct investments (FDI) via this strategic route. It is proven that two cities with good connectivity will thrive on the radiating synergy. Beijing and Shanghai did it, now it’s time for Malaysia and Singapore. The connector will be a RM1.6 billion rail transit network extending from Johor Bahru to Woodlands in Singapore. This could possibly be a defining project for the two nation’s partnership.

Naturally, Iskandar is attracting an increasing number of multinational corporations (MNC). As of June, the Iskandar Regional Development Authority (IRDA) revealed that RM67.68 billion was committed by international as well as domestic investors. 

Among the international and local players developing Iskandar are Australia’s Walker Corporation, SP Setia Bhd, Bandar Raya Developments Bhd, Leisure Farm Corporation (part of Mulpha Land Bhd), Mah Sing Group, Dijaya Corporation and UDA Holdings. Extending the list is IOI Properties Bhd, Asiatic Development Bhd, Hua Yang Bhd and Danga Bay Sdn Bhd. These are but some of the heavy-hitters that will be painting the final Iskandar picture together with local household names like Seri Alam Properties Sdn Bhd (part of UM Land Bhd), Daiman Development Bhd, Crescendo Bhd and Tanah Sutera Development Sdn Bhd. A lot of developments are underway and some projects have already entered their final phase of construction.

Newcastle University Medicine Malaysia (NUMed) is the first of the various education institutions to open its doors in EduCity – Iskandar’s education hub. Over in Medini, Legoland Malaysia theme park (the first in Asia) will be exciting fans young and old as it welcomes visitors in 2012. Another project making headlines is Puteri Harbour in Nusajaya, featuring world-class hotels, serviced apartments and grand resorts.

Residential launches in the pipeline include the 1Medini Residences in Medini North this year, which is a joint-venture between WCT Bhd and Iskandar Development Bhd. UEM Land Bhd also recently launched East Ledang, offering a resort-styled link-duplexes and twin-villas to property buyers. These are but a few of the homely pads launching in Iskandar that will tease and please home buyers.

In terms of house prices, the Nusajaya area witnessed an upward trend (see Price Movements) against figures in 2010. According to NAPIC, an increase of 14% to 20% was recorded for double-story homes in a gated-and-guarded scheme; whereas non-gated environments increased only 7%. The figures support that the gated-and-guarded concept will be the preference of buyers here. And will likely be the trend for new developments.

In the newly formed Kulaijaya district (formerly part of Johor Bahru district), an upward trend is also observed in selected schemes, recording an increase of 8% to 12% over the previous year’s prices. The increase can be credited to the improved infrastructure carried under the Ninth Malaysia Plan. Add to that the opening of Johor Premium Outlets in November – a joint-venture between Genting Group and Chelsea Malaysia LLC.

The Iskandar plan is a delicate one and new housing developments in the area will be under close scrutiny from IRDA, where green development is placed under much emphasis. Housing developments with lifestyle and green concepts will be a focus here and it is a pleasing and good sign that sustainability is a main concern. This will certainly appeal to buyers as it increases property value as well. However, the premium price might not be for all.

Samuel Tan, Executive Director of KGV-Lambert Smith Hampton (Johor) Sdn Bhd was quoted in a report published in The Star on May 7, 2011 as saying the “value for residential, commercial, industrial and land for development have increased substantially. Developers continued land banking in Johor because they are bullish on Iskandar Malaysia.”

He added  that commercial land in Danga Bay has appreciated 181% from RM220 per sq ft to RM400 per sq ft, and this has resulted in property capital and rental appreciation.

Hotspots and Opportunities
The Johor state government also identified four development concentration zones (see
Johor Development Zones), each with its own focus areas. This schematic will promote development in various areas to upgrade the industries within the respective zones. First is the Johor Bahru Conurbation, encompassing the city center as well as Kulaijaya. The second is the Western Planning Zone, with Batu Pahat, Muar and Pontian. The Eastern Planning Zone comes next, comprising Kota Tinggi, Mersing and Kluang. The final zone is the Central Planning Zone, covering the district of Segamat. Each zone will have a main industry to focus on, as well as supporting sectors (see Johor District Developments).

Johor is unique because it is the only state in the country that has two economic zones; Iskandar Malaysia and the district of Mersing under the East Coast Economic Region. This means investors may look beyond Iskandar and into the outer regions for opportunities.

“Hotspots and high potential developments are in Muar, Batu Pahat, Segamat, Kluang and Mersing,” says Tuan Hj Mohd Azam Mohd Adib, Director of Town and Country Planning Department Johor.

This provides a cushion for investors who will be actively finding ways into the Johor market as land and property prices start to flow. Kota Tinggi is another stream that can be tapped as it is one of the checkpoints leading to Mersing, a tourism hotspot. Locales nearby beach-and-resort destination Desaru are also touted to offer good investment options as tourism  picks up.

The Pengerang area is also getting a face-lift; with the construction of a deep-water petroleum terminal with a storage capacity of five million cubic meters. The development involves partnership between the Johor government, Vopak Asia Ltd and local oil and gas player, Dialog Group. Another notable project here is the development of the Refinery and Petrochemical Integrated Development (RAPID) complexes, spearheaded by PETRONAS. This project is estimated to cost RM60 billion. Government focus here includes the expansion of opportunities in logistics and maritime business activities. The advantage lies here for the downstream industries to make use of the resources, facilities and services available.

With all the buzzing in Johor, Professor Dr Christopher Shun, Group Managing Director of Sanctuary Sdn Bhd is quick to warn of the possible pit-falls. The first issue is affordability; with Iskandar coming-up fast, property prices are steadily rising.

“Most locals cannot afford Iskandar properties,” says Dr Christopher, comparing it to the stronger buying power of Singaporeans.

Speculation could also be one of the dreaded monsters. High-end homes will be sprouting, but the lower-income group must not be left out. 

Dr Christopher touches on the black swan theory as well, defined as ‘unexpected events of large magnitude and consequence that play a vastly larger role than regular occurrences’. Here in Johor, a possible black swan is Iskandar itself, says Dr Christopher. With so much change going on, a fear would be the widening separation between the rich and poor, thinning the middle group.

“It is the nightmare of all town planners,” says Dr Christopher, adding that respective authorities must calculate the weight and be swift in responding to any hint of danger.

Overall the state offers a chance for those able, to dive into the array of industries being upgraded in Johor. Marine-based industries like shipping and logistics are some of the areas expected to do well, and is certainly heading in the right direction. Tourism and business sectors are also touted to thrive in developing regions. In terms of property, residential will remain in demand.

The property market in Johor Bahru city center is competing so strongly, it has even been compared to Kuala Lumpur. It will show the same symptoms as our nation’s capital – remember that as the city expands, the fringes will rise as well, spurred through development.

Investing in Iskandar would be a justified move but it is certainly not within everyone’s range. However, with the outer regions having their own development plans, there are various entry-levels for investors to consider. There is no doubt Johor has a lot to offer and plays a vital role in nation building. For those seeking to buy, the Johor property market is a lucrative prospect, with the promise of better things to come.