Foreign investment in Iskandar’s anticipated economic boom and population growth has been punctured by a very different reality.
And Johor lawmakers have pointed out that the reality is demand in Johor has not caught up with the supply of premium residential and commercial properties.
Last week, Maybank Investment Bank advised investors to be cautious of the region due to an existing glut of homes in Iskandar, a situation it expects will be aggravated by a huge incoming supply this year and the next.
The bank expects property values in Iskandar will come under greater pressure over the medium term, especially with the value of property transactions in Johor having dipped by 33 per cent quarter-on-quarter in the fourth quarter last year.
“There is a misconception of the demand market here… there is a clear mismatch between supply and demand,” Johor Baru MP Tan Sri Shahrir Abdul Samad told Malay Mail Online.
“While there is an oversupply of premium properties, the demand however is for medium and low cost ones owing to peoples incomes,” he added.
Shahrir said it is only natural for developers of premium residential properties in Iskandar to be hardest hit by the dip in prices and secondary sales, as that was never the focus of the region.
“You have to be fair to Iskandar as housing was never part of its main draft. The crux of its investment was more on services, hospitality and manufacturing as well as allocations for small and medium enterprises (SMEs).
“The investments we are interested in are not housing and this is why we have called in Pinewood and Legoland to Iskandar. That is the main investment strategy but because of all these, foreign developers think there is a demand for their properties and that is not happening.
“This is what’s happening and they have to live with it. If they are willing to take the risk then we can’t stop them,” the senior Umno lawmaker said.
Johor opposition leader and Skudai assemblyman Dr Boo Cheng Hau noted that the number of residential projects launched in the state was done without sufficient supporting services or industries in place to make them viable in the near term.
The DAP leader said that the region is not yet able to accommodate a surge in tourism, nor is it able to fulfil the needs of foreign investors seeking to take advantage of Malaysia’s second home schemes.
“There will be a sustainable demand for properties here but not in the near future. It will take another five to ten years to see booms in economic sectors such manufacturing, service sectors and so on before there is a more steady increase of demand for properties,” he said in an earlier email interview.
DAP’s Kluang MP Liew Chin Tong stressed that the the rapid pace of property development in Iskandar has no real legs to stand, a situation that is not helped by the general slowdown in the property market nationwide.
“Johor is a case of killing the golden goose too fast, too greedily. The property market is not sustained by a genuine working population with income to support their investments, while borrowing rates are surging, awaiting the bubble to burst,” he said when contacted.
Umno’s Pulai MP Datuk Nur Jazlan Mohamed, however, believes the upcoming RM53 billion Pengerang Refinery and Petrochemicals Integrated Development (RAPID) project will provided the needed jobs and spending capacity to revive the region’s flagging property market.
“Property in Iskandar is experiencing a down cycle, but it (sales) will pick up itself once corporate businesses like RAPID kickstarts.
“Once corporations set up business in Iskandar, then things will pick up. When businesses come in offering higher job opportunities, only then will the supply (of residential property) be taken up. It (Iskandar) will not become a white elephant,” he said.