With current changes in the property market, iProperty.com sought the opinion of a few property experts about their views on Medini and Iskandar Malaysia as a whole. The questions are as follows:-
1) In order to achieve the ultimate goal to become a bustling and vibrant metropolis, what are the issues which you think Iskandar Malaysia should put on high priority at this juncture?
2) The bilateral relationship between Malaysia and Singapore is now at its best. Is Medini leveraging on this factor to draw more investors from Singapore to locate their business and expand their presence in Medini?
3) How do you think the new policy of limiting RM300,000 houses to first-time house buyers announced at the Budget 2016 recalibration will affect the residential property market in Iskandar Johor?
4) Will the weakened Ringgit spur further foreign investments into Medini?
1) The current emerging sectors within Iskandar Malaysia, as well as IRDA’s focus, is on health services, education services, the creative sector as well as financial services. Having said that, these sectors will require lots of skilled workers. Therefore, for Iskandar Malaysia to be a successful and vibrant metropolis, we need to focus on hiring skilled labour. In the near future, we need to be able to attract skilled labours from the Greater Kuala Lumpur, Singapore and from within the region. There must be training for locals to produce ample supply of skilled labours.
2) As Iskandar Malaysia is not being planned as a satellite town, however it is a comprehensive economic region that takes into account the vast advantage it has from being a neighbour of Singapore. Having said that, big developers such as Sunway Bhd as well as E&O Property Development Bhd with projects within Puteri Iskandar attracts many Singaporeans. The price of the average HDB unit of about SGD$800,000 when converted into Ringgit, it can easily be exchanged for a luxurious semi-detached house in Puteri Iskandar, which is very near to Medini CBD. It is also worthy to note that from 2005 to 2013, the change in land use within Iskandar Malaysia has been in the right direction.
3) Currently, the announced policy is too vague and it lacks specific definition. For the sake of the argument, assuming that the new policy is effectively made into the law, the impact for Iskandar Malaysia will be minuscule for landed properties, but it may be an important consideration for developers with development plans for shoebox units. It is important to take note that, assuming with the calculation of 30 years’ repayment period at the current interest rate, RM300,000 will translate into a repayment of approximately RM1,350 per month. At 70% net income, we are talking about the household income of less than RM2,000 which is about 21.7% of Iskandar Malaysia’s population. Therefore, any product that is below RM300,000 will only cater to approximately 20% of the total population. This move can be seen as protectionism.
4) Personally, the weakened Ringgit will not be a factor that will boost investment immediately. It will more likely raise a few red flags among property investors. Having said that, after the initial apprehensive sentiment of the Ringgit is over, investment zones like Medini will soon appear very attractive.
1) These are the issues which need urgent reviews:-
– The RM1 million threshold for foreigners which was raised from RM500,000.
– High Real Property Gains Tax (RPGT).
– Newly introduced state levy of 2% or RM20,000, whichever higher
– Withdrawal of Developer Interest Bearing Scheme (DIBS).
– Strict banking guideline of the TDSR and unattractive loan margin.
2) It is beyond a shadow of a doubt that the bilateral relations between the neighbours as it is more than best. Some of the additional factors that could further relish this relationship would be:-
• Improving current relocation of Singaporean SME/SMI to Medini via the Ascendas, the demarcated special international zone by UEM Sunrise Bhd’s partnership.
• Connectivity seems to keep things apart, however in all fairness, the state government has poured in a lot of money into infrastructure development of highways, flyovers and general road works.
• The work, play, live lifestyle of Medini will be given an additional boost with the materialisation of the High-Speed Rail (HSR) from KL and the planned internal MRT system that will form a loop of connectivity between industrial heartland of Singapore and the industrial powerhouse of Medini.
3) Limiting residential properties of RM300,000 and below to first-time house buyers will not really impact Iskandar Malaysia’s property market. The new policy is more of a home ownership programme for the Gen-Y’s that form the principal backbone of Malaysia. It can be safely assumed that this initiative will have close to zero bearing on the general wellbeing of Iskandar based on these reasons:-
• Johor is six times the size of Singapore and there is more than ample land in secondary locations, namely Permas Jaya, Seri Aman, Masai and Pasir Gudang, among others.
• Connectivity to these secondary locations is amply serviced by public transportation.
1) There are a few indispensable issues that need to be addressed over the next few years:-
• IRDA needs to re-establish the confidence of overseas investors through a wider promotion of Iskandar Malaysia as an economic development region and getting them to understand the full integration of the original Comprehensive Development Plan as well as its 2015 update.
• There needs to be work on Malaysia’s long-term credibility in which IRDA and federal agencies need to focus their promotion on Iskandar’s high sustainability.
2) Medini has the bigger advantage in competitive incentive packages, high accessibility and great infrastructures. It is time for Medini to be made known over foreign markets to attract businesses as well as investors. A revision of the existing master plan should be done to increase its credibility. Iskandar itself must accept the fact that its success is complementary to Singapore and not try to compete with its neighbour. Singapore needs to relocate its production facilities and Malaysia has the means for them to set shop here.
3) Property investors and speculators that have been looking at affordable houses as an alternative product for their investments should now raise their target towards the RM300,001 to RM600,000 category and the impact should be quite positive. Developers will reposition their offer towards these two categories as while properties below RM300,000 will garner strong demand from first-time house buyers, properties above the price range will the targeted by property investors.
4) The weakened Ringgit should be used as a tool by the IRDA and developers to attract foreign investors. Unfortunately, most developers are not interested in bringing their projects to the international market. There is international interest in Iskandar, particularly within Medini, but these buyers and investors will not come to us, we need to show to them the positive outlook of investing into Iskandar Malaysia.
1) Taking into recognition that Iskandar Malaysia is a 20-year development programme and that the current property market is in the midst of a challenging season, it is important to get the priorities right. We are comforted by the fact that the Iskandar region is not expected to be successful overnight or within a short span. It will have to go through the several property cycles, and while the outlook for the year appears to be challenging, we have to take the initiative to do several things:-
• Building human capital – Iskandar should look into importing talents from other states as well as attracting overseas migration for knowledge workers should be made easy and workable.
• Building soft and hard infrastructures – There must be an improvement in soft infrastructures such as creating friendly government policies, world-class banking facilities, and strengthened security grid as well as hard infrastructures such as water, electric, fibre optics for high- speed broadband connection, highways, ports and airports.
2) Medini has been attracting many buyers from Singapore due to the unique features that Medini possesses that no other townships in Malaysia enjoy, namely the zero international quota, zero RPGT and for its proximity to Singapore. To date, most investors are attracted to the residential sector but soon enough the office sector will flourish with Singaporean investors and industrial players.
3) At first glance, the new policy announced at the Budget 2016 revision appears to be noble, however, there are also some possible implications:-
• In areas where property prices are not too high, developers will take this opportunity to build more properties below the RM300,000 range for first-time house buyers.
• This new policy is good in providing first-time house buyers with the opportunity to own a home of their own, but in developed cities such as Klang Valley, Penang and Johor Bahru, it is difficult to find such properties.
• The RM300,000 limitation should not be used across the nation, but implemented in less developed towns or states while maintaining higher thresholds for developed cities.
4) Foreign investments will continue to flow into Iskandar Malaysia and Medini, but the main question should be what type of investments are coming in, the rate of such activities and the impacts that they have. I believe foreign investors will probably adopt the “wait and see” strategy, perhaps not rushing in to buy until they are assured that our currency has stabilised.
1) As far as I am concerned, I have already considered Iskandar Malaysia as a vibrant metropolis region with a fast growing development in many factors. Iskandar Malaysia has open-up many diversified business opportunities and has abundant resources waiting to be penetrated by you, me and other investors and entrepreneurs. However, there is one major issue that Iskandar Malaysia should watch out for, that is the weakening Ringgit as for overseas investors, currency stability is a deciding factor for any kind of investment be it in property or industrial market.
I must admit that there are deferring views on the implication of weakening of RM as some investors may use this as a “golden opportunity” to invest into the property market as a form of diversified investment. Singaporeans are taking this “golden opportunity” and eyeing on some of the investment products in Iskandar Malaysia.
2) Undeniably YES. If the element of “distance” is diminished by an introduction of a good transportation system, then Johor is the next best place for Singaporeans be it for investment or retirement.
Medini, by its loud and bold announcement on “…no restrictions on foreign ownership, no minimum price threshold for foreigners and exemption on real property gains tax until end of 2025 for investors…” has delivered their intention crystal clear to all the investors and entrepreneurs out there that Iskandar Malaysia is ‘THE’ place to live in and/or invest.
3) The introduction of RM300,000 houses for first time buyers and residential property in Iskandar Malaysia is totally a two separate thing.
The noble aim of our Government is to put a roof over the heads of low income earners. However, I believe that our Government must put in place a more systematic borrowing method for first time home owners and also consider the cost of construction and cost of developing and acquiring land that has to be borne by the developer in building RM300,000 worth of residential property.
Amongst others, it is very difficult to find houses below or at RM300,000 in some areas. If we did find one, then the size (space) is not practical (most of us are still living with our parents and siblings even after marriage), and if size does not matter, then the locality becomes an issue and without a good transportation system in place, then the introduction of RM300,000 houses for first time home buyers may create and lead to even greater problems.
This article was first published in the iProperty.com Malaysia March 2016 Magazine. Get your copy from selected news stands or view the magazine online for free at www.iproperty.com.my/magazine. Better yet, order a discounted subscription by putting in your details in the form below!