Is Iskandar Malaysia development ahead of its time? (The Malaysian Reserve, Oct 2, 2019)

With 6 years to go, there is a high chance for the mega development to realise its target, says expert

by FARA AISYAH

ISKANDAR Malaysia, the mega development, which has been touted as the “ghost town of the southern region” due to the fast-rising number of vacant properties within the neighbourhood, might have been built ahead of its time.

While property experts expressed their concerns about the progress of the project that was initiated 14 years ago, they said it is also too early to call Iskandar Malaysia “a failed project”. VPC Asia Pacific property consultant Bruce Lee told The Malaysian Reserve that the general public has merely interpreted the project from the surface.

“They really need to look at the number. In 2014, when it had 11 years to go, Iskandar Malaysia had already achieved 41% of its investment target.

“With six years to go, there is a high chance for the mega development to realise its target. So I believe Iskandar Malaysia will happen,” he said.

The project was launched by the government on Nov 8, 2006, and administered by the Iskandar Regional Development Authority (IRDA) under the IRDA Act 2007.

Asiacap Valuer & Property Consultants Sdn Bhd property valuer Kit Au Yong said overall, the Iskandar Malaysia planning has its merit.

“Probably the market has not been able to catch up and it has also been overly spread out with a lack of density.

“All this while, the extended supply of many projects has been a risk without strong and sustainable real demand. Perhaps, it would be better if the supply rate was controlled at a less ambitious way,” he added.

Lee concurred and said the private sector was also overly committed on the Iskandar Malaysia’s factors.

“They were committed to building high-end properties. When the local market is not ready for it, the foreigners are,” he said.

Lee added that developers were somehow overly optimistic on the development, which had prompted them to build “for future at a fast pace” and has caused oversupply situation in the Johor market.

For the first half of 2019 (1H19), Johor retained the highest number and value of overhang in the country with 6,195 units worth RM4.65 billion, accounting to 18.9% and 23.5% respectively of the national total.

The figure increased merely by 2.1% in volume and 0.8% in value against 6,066 overhang units worth RM4.61 billion in 2H18.

Similarly, the unsold under-construction units showed an increase of 16.3% to 10,688 units compared to 9,190 units in July to December 2018.

Kit said factors including the controlled capital outflow by China and the change of government policies did not help the progress of Iskandar Malaysia.

He added that Iskandar Malaysia needs more catalysts to boost the project.

“There are currently talks of lowering down the floor price for foreign purchase in Johor, which I think can be a short-term boost but fundamentally, the offering needs to be more intact.

“The market may want to look into its products and pricing. Certain pro- ducts such as high-rise units and service apartments have shown some lethargy as usage demand is not materialising in view of the large amount of supply,” Kit said.

Lee said Iskandar Malaysia is expected to have a spillover effect from Singapore, similar to the spillover effect from Hong Kong to Shenzhen, China.

“In Shenzhen, the economic growth could be almost double in every five years. Although it will not be perfect, Iskandar Malaysia will be a successful project,” he said.

The development region encompasses an area of 4,749 sq km, almost seven times bigger than the Singapore area.

Singapore is estimated to have a population of 5.7 million as at 1H19, while Iskandar Malaysia has only 1.8 million people in 2013.

The economic corridor targets to have up to three million people by 2025, almost reaching Johor’s overall population of 3.74 million in 2018.

The economic corridor is also targeted to achieve RM383 billion in investments by 2025, and achieved a cumulative investment of RM272.9 billion from 2006 until Sept 30, 2018.

It is also projected to create 817,500 employment opportunities by 2025, and has so far created more than 740,000 jobs in the region.

IRDA stated that in November last year, from the total of committed investment from 2006 until September 2018, 59% or RM161.33 billion was realised.

Of which, a total of RM20.8 billion was realised investment for the first nine months of 2018.

The authority added that Iskandar Malaysia recorded a total of RM19.8 billion in investments from January until Sept 30, 2018.

IRDA said domestic investors contributed 60% (RM164.9 billion) to the total committed investment, while the other 40% (RM108 billion) comes from foreign investors.

The top five foreign countries investing in the region are China, Singapore, the US, Japan and Spain.

From July to September 2018, IRDA said the top five sectors that contributed to the total investments were mixed development with a total of RM9.7 billion, followed by logistics (RM670 million), creative (RM540 million), education (RM540 million) and tourism (RM320 million).

Some of the recent investments in the promoted sectors in Iskandar Malaysia include the Shattuck-St Mary’s Forest City International School by Country Garden Pacificview Sdn Bhd, Tunku Laksamana Johor Cancer Centre by Asian American Medical Group and Toppen Shopping Centre by IKEA South-East Asia.

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