Top 10 Tips on Investing in Iskandar Malaysia
Iskandar Malaysia will be a challenging market to maneuver from 2014 onwards.
The brainchild of former Malaysian Prime Minister Abdullah Badawi, Iskandar Malaysia is quickly proving to be a favourite with both Malaysians and foreigners.A current hotspot for buyers and investors, Iskandar Malaysia's growth potential may see a plateau post-tabling of the Budget 2014.
Some of the new measures that will kick in effectively in January 2014 include an increase in the Real Property Gains Tax (RPGT) from 15% in the first two years and 10% between the third and fifth year to 30% for the first three years, 20% in the fourth year and 15% in the fifth year.
For foreigners, the RPGT of 15% in the first to third year and 10% in the third to fifth increased to 30% flat from the first to fifth year and 5% from the fifth year onwards. Another significant change is the increase in the minimum purchase sum, now RM1 million from the previous RM500,000 for foreigners.
Also, within the state of Johor, a new levy on foreigners is also been proposed from a flat rate of RM10,000 to 2% of a property price from next year onwards. With so many rules and regulations that one needs to be mindful of, here are 10 investment tips to help you navigate your way to Iskandar Malaysia from 2014 onwards.
In comparison, the residential sector is looking at a bumper supply of 964,918 units (697,753 - existing stock, 113,583 - incoming supply, 153,582 - planned supply) in the second quarter of 2013. This means that it will be challenging to rent out your property or to sell it in the resale market as this total supply is more than Kuala Lumpur's 496, 238 units (425,199, existing stock, 48,543 - incoming supply, 22,496- planned supply). However, do bear in mind that from 2015 onwards, the Government Service Tax (GST) applies for properties with commercial titles.
To qualify for the above scheme, you must have a Bachelor's or Master's degree with at least 10 years of professional work experience in a qualifying activity or have a PhD with at least five years of professional work experience in a qualifying activity. Medini is now the latest foreign investors' darling as this is the only place in Malaysia where foreigners can still purchase properties below RM1 million in 2014, subject to the Ministry of Finance's approval.
Designated at a free trade zone, the federal government has lifted restrictions for foreigners here to ensure Medini will be a buzzing district once the Rapid Transit System (RTS) network connects to the MRT line by 2018. The RTS station will be located just next to LEGOLAND Malaysia. Medini is also a prime area where Khazanah Nasional and Temasek Holdings are involved in two joint-venture projects - Afiniti Medini and Avira Wellness Centre.
If you intend to work long-term in Iskandar Malaysia, then take advantage of this additional incentive. First announced by Prime Minister Najib Razak during Budget 2010, this scheme is aimed at foreign knowledge workers and returning Malaysians to live, work and play in Iskandar Malaysia so as to spur the growth of this special economic zone. This scheme will allow you to enjoy a preferential flat rate of 15% tax on your employment income.
In order to apply for this scheme, you must be working in the nine promoted sectors that IRDA has outlined. They include tourism, financial advisory & consulting, education, healthcare, creative industries, electrical & electronics, logistics, petrochemical & oleochemical and food & agro processing. You can apply via your employer.
With Iskandar Malaysia poised to be the next top investment destination, landed terraced homes will be popular. In fact, they are the most in demand type of property among Malaysians. According to iProperty.com's Asia Property Market Sentiment Survey (H2) 2013, 72% of Malaysians prefer buying terraced homes. In addition, a majority of them (35%) have a budget of between RM350,000 to RM500,000.
The challenge from next year onwards is to find the sweet spots that are still within the budget of Malaysians since foreigners can only purchase properties above RM1 million. iProperty.com's Asia Property Market Sentiment Survey (H2) 2013 revealed that those with a budget above RM1 million is only 4%. However, the survey is spread across Malaysia and does not reflect the ground reality in Iskandar Malaysia. In fact, terraced homes at Horizon Hills that was launched in 2008 at around RM288,000, are now commanding between RM860,000 to RM1.6 million in the resale market. The resale market in Horizon Hills is very active with most of the buyers comprising locals. There is good room for capital appreciation for landed terraced homes in Iskandar Malaysia with the long-term investment benefits.
Malaysians perceive condominiums as a source of rental returns as opposed to capital gains. Using Ujana as a benchmark, a three-bedroom unit there is currently transacting for RM4,000 in rent per month. With the average three-bedroom unit valued at around RM800,000, this translates to a rental return of 6%. The majority of the tenants in Ujana are expatriates teaching at EduCity.
However, the condominium market in Iskandar Malaysia will be challenging. According to the NAPIC, the state of Johor is looking at a supply of 964,918 residential units (697,753 - existing stock, 113,583 - incoming supply, 153,582 - planned supply) in the second quarter of 2013. This means it will be challenging to rent out your units.
According to iProperty.com's Asia Property Market Sentiment Survey (H2) 2013, Iskandar Malaysia is perceived by respondents in Malaysia as the next top investment destination, outside Selangor. This is followed by Georgetown, Penang and Nusajaya, Johor. This means, there is good potential for capital appreciation of your property, since this marks a significant shift in interest among Malaysians from Penang in its previous survey. In addition, by investing long-term, you do not have to pay the hefty RPGT rate that will kick in by 2014.
Bulk purchase deals enable you to enjoy significant cost savings as opposed to buying as an individual.
For those of you who are not familiar with Iskandar Malaysia and want some peace of mind, you may want to buy properties that are nearing completion. This will at least help alleviate concerns you may have in regards to developers who do not have a strong track record but have the financial means to complete a project. However, do bear in mind that properties nearing completion will cost significantly higher that the initial launch price as the construction costs have been factored into it.
A rejuvenated and greener Johor Bahru looks set to rise by 2018 that will coincide with the opening of the Tanjung Puteri MRT station that will connect to Singapore's Thomson Line via Woodland North MRT station. The federal government has so far set aside RM1.8 billion for Johor Bahru's rejuvenation that will include the opening of Sungei Segget (where Jalan Wong Ah Fook is located) in 2015, an increase in the number of police posts and CCTVs, the opening of Angry Birds Theme Park in 2014 next to Menara Komtar as well as Hilton Hotel and high-end residences (Suasana) during the same period. A new Central Business District zone after Menara Komtar is also in the pipeline, as outlined in IRDA's new masterplan and zoning in the area that will include park connectors. The new Johor Bahru is modeled after tourism attractions in Venice and Amsterdam which the authorities hope will bring the river back to life once Sungei Segget's rehabilitation project is completed.
Danga Bay is undergoing massive transformation and will be a bustling metropolis come 2025 once the large-scale township development by CapitaLand Malaysia is ready. This joint-venture project by CapitaLand, Temasek Holdings and Iskandar Waterfront Sdn Bhd is CapitaLand's largest investment by far in Malaysia valued at RM811 million. To be developed in phases over the next 10 to12 years, Danga Bay will soon be home to a premier waterfront residential community comprising high rise and landed properties together with marinas, shopping malls, F&B outlets and restaurants, serviced residences, offices and recreational facilities.
Consumer experiences may differ depending on location or other factors.