Iskandar regulator plays down fears of property glut

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ISKANDAR Regional Development Authority (IRDA), the statutory authority for regulating and driving the development of Iskandar Malaysia into an international metropolis, has played down fears of an impending property glut.

Jobs to be created over the next few years will ensure demand for thousands of homes, it maintains, but concedes that improved public transport, including the proposed rail link between Singapore and Johor Bahru, would be essential in advancing the economic zone.

“The MRT/BRT (bus rail transit) engineering link study has been tabled with the JMC which has until the end of 2014 to decide,” said IRDA chief executive Ismail Ibrahim. JMC is the Joint Ministerial Committee established by Malaysia and Singapore.

In a recent interview, he stated that the link was targeted to be completed “by 2018 or latest by 2020”.

Given reports that the JMC was expected to have made the decision last year, the target seems ambitious.

Indeed, Mr Ismail revealed that multiple configurations have been put before the JMC. The four options – high bridge, low bridge, sunken tunnel or bored tunnel – come with 29 alignment alternatives (combining the four options), in part because Malaysia has yet to decide where to locate its station.

Its choices are JB Sentral, Tanjung Putri or Bukit Chagar while Singapore has elected to site its station on the Thomson line, where the first phase is to open in 2019.

Plans for an intercity rail also do not appear in the distant horizon even though it has been nearly a decade since Iskandar’s launch.

What has been far swifter getting off the ground are property projects as evidenced by the number of construction cranes that now juxtapose the landscape, particularly after Chinese developers including Country Garden Holdings and Guangzhou R&F Properties descended on Iskandar, inundating the domestic market with their “carpet bombing” strategy of building and selling in the thousands rather than taking a more phased approach.

Mr Ismail insists that there isn’t an issue.

“Firstly, I don’t think the supply of high-end units is sufficient for potential purchasers. If we take Iskandar, all the hype about development constitutes less than 5 per cent of the total 2,217 sq km, and this is mainly in Medini, Putri Harbour and Danga Bay. “Secondly, the price is within their reach and determined by supply and demand” here, referencing Iskandar’s main catchment target of Singaporeans or residents working there.

According to data from the National Property Information Centre (Napic), some 300,000 homes are either under construction or in the pipeline, amounting to about 42 per cent of the current 702,000 homes in the state. Even so, Napic’s figures often lag the market. How many of these are high-end or costing at least RM1 million (S$390,000) is also unclear.

The lack of clear property statistics adds to concerns and IRDA was not able to offer any data either.

But Mr Ismail trusts that “the developers have done their forecasts”. Local builders are similarly careful about criticising the deluge of units planned since the Chinese developers are experienced players. Moreover, many purchasers are now viewed as global citizens who are content to buy an apartment for use as a holiday pad.

In any event, Mr Ismail was quick to point out that IRDA’s executive powers are limited. Facilitation and planning might come under it, but not enforcement, he stressed, adding that the onus is on the relevant authorities, including local councils responsible for approvals, to consider the feasibility of a proposed development.

“IRDA is only involved in catalytic projects involving real estate that have a multiplier effect, for exampleindustrial and tourism. We can’t stop others if they want to develop real estate.

“But if the authorities vested with powers act in the way they are supposed to, things should be okay.”

The numerous property developments notwithstanding, the controversy surrounding two to three planned massive reclamation projects has added to the negative sentiment.

Forest City, a proposed man-made island of 2,000 hectares of reclaimed land near the Second Link involving Country Garden and state investment agency Kumpulan Prasarana Rakyat Johor as well as the state monarch recently had work halted by the federal government after Singapore lodged a complaint that its shoreline could be adversely affected.

The development was said to lack a detailed environment impact assessment despite its size and potential ramifications to the surroundings.

Two other proposed reclamation projects involving listed Benalec Holdings and members of the royal family off Tanjung Piai and off Pengerang have also set alarm bells ringing. Local media has reported that a delay in approving the EIA had prompted a rebuke from the Sultan.

Would such potentially disruptive developments – not provided for in the Iskandar Comprehensive Development Plan – put a dampener on further investments which to-date total some RM146 billion? Mr Ismail side-steps. He observed that “a lack of consultative process and engagement with stakeholders” may have contributed to the bearish sentiments at present. If IRDA had been consulted at the planning stage, it would have advised on the suitability of such projects, he said.

He prefers to talk about the many jobs that will be created from catalyst developments such as the US$27 billion Petroleum Integrated Complex (PIC) in Pengerang, and said that in 2013, some 98,440 vacancies were created, out of which about a third were skilled or semi-skilled (mainly in electrical & engineering), and the rest, low and unskilled work. Even so, only 11,180 jobs were filled mainly in E&E, hospitality and tourism.

The first phase of the PIC, to be developed over some 15 years, is scheduled to commence operations around 2019 and according to projections, when completed, will result in some 14,000 jobs, about 4,000 of those professionals.

Under Iskandar’s comprehensive development plan, the workforce is projected to touch 1.4 million by 2025, from 660,000 now.

Given the estimated 800,000 jobs to be created over the period, Mr Ismail argues that some 600,000 units are required over and above the existing housing stock. “I can confidently say the project will bring in the right people to create demand for high-end homes.”

As the billions get invested on the ground, it remains to be seen how much of the ideals underlined in the Comprehensive Development Plan is adhered to. But the tepid rollout of public infrastructure to match investments is likely to crimp progress, especially when more and more homes are completed.

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