Opportunities for selective buyings in East Johor

Since the inception of Iskandar Malaysia in 2006, Johor’s property market has made a remarkable turnaround. When the land swap deal was concluded by the Malaysian and Singaporean governments in 2010, sentiment turned positive, leading to investments by Temasek Holdings and Capital Land in Danga Bay as well as in Medini. At the peak of the market in 2011 to 2013, Singaporeans were seen snapping up properties in Iskandar Malaysia like hot cakes. This had caused property prices to suddenly spike.

Due to its close proximity to Singapore, Iskandar Malaysia is the most successful out of the five economic corridors in Malaysia. The latest figures from Iskandar Regional Development Authority (IRDA) showed that Singapore is the top foreign investor, followed by China, the United States of America, Spain and Japan. The total cumulative investment from 2006 to October 2015 is now RM78.53 billion with the manufacturing sector leading the way at RM50.82 billion.

As Johor is huge, I would like to specifically focus on the property market in Iskandar Malaysia as this region shows the most promise to create wealth for Gen Ys. In all, there are nine economic drivers in Iskandar Malaysia: manufacturing, electronics, logistics, healthcare, tourism, education, oleochemical and petrochemical, finance and food processing.

Iskandar Malaysia measures 2,217 sq km and is three times the size of Singapore. It is divided into five flagship zones, as defined by the IRDA:

 

  • Flagship A: Johor Bahru and Danga Bay
  • Flagship B: Iskandar Puteri (formerly known as Nusajaya) and Medini
  • Flagship C: Western Gate Developments
  • Flagship D: Eastern Gate Developments: Pasir Gudang and the corridors of Pengerang
  • Flagship E: Senai/Skudai

 

Area Analysis for Pasir Gudang

Deemed as an “ulu” area, homes in Pasir Gudang are currently averaging between RM300 and RM400 per square foot. However, this is an up-and-coming area as the Eastern Gate is the only zone that has received allocations from Budget 2016.

In all, RM18 billion has been allocated for the massive oil and gas Pengerang RAPID project that is expected to have a spillover impact in Pasir Gudang. In addition, the Budget had also allocated for a new public hospital in Pasir Gudang to cater to its growing population. With this, the Eastern Gate is poised to be the next growth centre in Iskandar Malaysia. If we study the history of Nusajaya and Johor Bahru, homes in these areas have seen an almost 50 per cent increase in
their values. History could repeat itself in the Eastern Gate.

 

Buyers’ Profile and Income Level

The Eastern Gate comprises Masai, Permas Jaya and Pasir Gudang, which are mainly dominated by locals with some Japanese expats. As the majority here are locals, the average quantum price starts from around RM200,000 with an average income of around RM3,000 per month. There’s not much flipping going on around here, as such prices are less volatile.

 

Case Study

Now, let us assume you would like to buy a studio unit in this area. The unit is priced at RM350 per square foot with a size of 500 square feet.

  • The quantum price will be RM350 x 500 = RM175,000

Let us assume an interest rate of 4.45 percent with 10 per cent down payment and 90 percent loan over 30 years.

  • You will need to put down a down payment of RM175,000 x 10/100 = RM17,500

Now, let’s work out your monthly mortgage payment using PropertyGuru’s mortgage calculator.

  • Your monthly mortgage would work out to RM793.36

If we work backwards using the income-to-mortgage ratio: to afford this unit, your gross income must be:

  • Gross income x 30/100 = RM793.36
  • Gross income = RM793.36 x 100/30 = RM2,644.53

For a fresh graduate earning, say, RM3,000 a month, this property is affordable. So what does the research show?

 

Johoreans: As this area is dominated by locals, property prices here are still affordable. This should be the target area for your first home with the most room for capital appreciation.

Foreigners: There is quite a substantial Japanese community living here due to the industrial parks in Pasir Gudang. Although not as popular as the Johor Bahru CBD and Nusajaya, properties here will benefit immensely from the Budget 2016 announcements.

 

Conclusion

The Pengerang RAPID project and a new business park coming up in Taman Seri Albion will result in more jobs being created. This will help fuel demand for homes in and around the Eastern Gate.

In addition, the state and federal government had allocated spending for public infrastructure. These include the upgrading of the Pasir Gudang Highway and a new public hospital. In fact, the Chief Minister of Johor, Dato’ Mohamed Khaled Nordin, had announced that 865 units of affordable housing will be built here by 2018. Therefore, Johoreans hunting for their first home should target this area.

 

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