Iskandar Malaysia which was officially launched in 2006 covers an area of 2,217 sq km (23.86bil sq ft roughly three times the size of Singapore). Upon launching, its total population was 1.35 million people, of which the total work force was 610,000 employees. Khazanah Nasional Bhd drew a 20-year Comprehensive Development Plan (CDP which is available online at the IRDA or Iskandar Regional Development Authority website) covering all the multi-faceted aspects of developing a new economic growth region.
As at Dec 2013, the Iskandar Malaysia population showed a head count of 1,880,000 of which 750,000 was the total work force.
Here are the 10 reasons why buying into the Iskandar Malaysia Economic Development Idea should be considered as good and sustainable:
The CDP has been studying all the possible aspects of the regional development and acts as a master-plan for the whole of Iskandar Malaysia. The manufacturing and services sectors are the drivers justifying the population growth projection of three million by 2025 with a workforce of 1.5 million.
Besides this, the CDP provided a complete study on existing and planned infrastructure that will be necessary to satisfy the needs of an escalating population count. Water reticulation, power supply, highways, expressways, railways with planned MRT (mass rapid transit), LRT (light rapid transit) and monorail, just to mention the main works, have been properly planned and partially executed. EDL (Eastern Dispersal Link) and the Senai-Desaru Highway are only two of the many public works already completed and in use.
Economic development has been given priority as without FDI (Foreign Direct Investment) and local manufacturing/services investment, there cannot be future development of the region. As at December 2013, out of the RM130 billion of committed investment, IRDA has achieved RM133 billion of which 45 per cent has already been realised.
Interestingly, only RM8.3 billion represents the public investment as this underlines how much the private sector believes in Iskandar Malaysia. The same goes for properties which only total less than 24 per cent of the total sum – highlighting the sustainability of the whole region (As at October 2013).
Differentiated Economic Clusters
The nine pre-defined economic clusters all respect the given timetable and some of them are even anticipating it. The electrical and electronics, oil and gas, food and agricultural processing, logistic, education, finance, tourism, health and creative industries have attracted local and international corporations in the region which have boosted the growth factor of Iskandar Malaysia. More than 20 universities have planned their Malaysian campuses just a stone’s throw away from Medini and some of them have already opened for students’ registration.
Pinewood Iskandar Malaysia Studios has been officially opened last year, received great response from the local and international movie industry which have booked it for the next several months. A good number of new industrial parks have been successfully completed and occupied by Malaysian and Singaporean SMEs (small medium enterprises) and more are in the pipeline giving again, a long-term sustainability effect to the regional development.
Infrastructure Works Completed
The Federal and State Government as well as related authorities have completed a general improvement and upgrading of all the infrastructure (road, water reticulation, power distribution and so on) before the actual property developments are developed. On top of the planned infrastructure from the last two years, we have seen a number of important announcements about the proposed high-speed rail (HSR) linking Kuala Lumpur and Singapore which is now under finalisation in terms of the alignment of stations and more recently, the third link or “friendship bridge” that has been brought up during the last official visit of the Singaporean Prime Minister Lee Hsien Loong to Malaysia.
Singapore Boost To Iskandar
Malaysia Due to Singapore’s stringent land policies, industrial developments are normally getting a non-renewable 30-year lease. The City State’s SMEs are now looking with deep interest into a possible expansion for their manufacturing and productive sectors into Iskandar Malaysia which is the perfect location for these components.
Drivers for the Singaporean decision to invest in Iskandar Malaysia include: freehold properties, low cost of industrial space either leased or built, low cost of labour, low cost of properties in general, ease of accessibility by road (two bridges are offering alternative routes to access Iskandar Malaysia), ease of doing business environment and willingness to improve on the Malaysian side.
Wide and Diversified Investor Base
Even though Singapore can be looked upon as one of the main drivers for the Iskandar Malaysia economic development success, local investment still represents the greatest part (65 per cent) of the total RM133 billion of committed investment as at December 2014. Out of the top 10 foreign countries investing in Iskandar Malaysia, Singapore represents 29 per cent of the total committed investment, showing high sustainability based on a highly diversified investors base (See Table 1).
Moving Towards High-Income Status
The Johor State has been seeing the highest increase of per capita income during the last four years (2009 – 2012 = +33 per cent) as compared to the rest of Malaysia. This raises the average value of affordable houses to a good 25 per cent and the projection is on par with Selangor, which recorded a range of RM38,000/40,000 average per-capita income, by or before the next three years. This rapid growth will boost the development of shopping malls, retail areas and commercial spaces which will expand at a much higher pace generating very interesting yield for experienced and new investors, not to mention the positive impact on property prices generated by a higher per-capita income environment.
Freehold Offered To Foreigners
Malaysia is the only country in the whole South-East Asia region whereby foreigners are allowed to buy freehold real estate properties (residential, commercial, industrial and land) without particular restrictions (currently there is only a RM1mil threshold and a consent letter to be released by the local authorities).
Competitiveness of Property Prices in The Region
Even though valid for Malaysia as a whole, we are still the country where properties are at the lowest price compared to all our regional neighbors. By comparing the ratio between the average per capita income with the average property price of all our regional neighbors, it appears quite clear the advantage Malaysia has and the positive outlook in terms of appreciation (See Table 2).
Still Strong Unmatched Demand for Housing
Iskandar Malaysia is one of the regions in Malaysia whereby the current demand of residential properties lacks adequate offer. This foresees a higher capital gain in the short-term as compared to other states where demand and supply are more balanced. A very good plus factor which can be found in Iskandar Malaysia is the rather balanced offer of affordable houses with values hovering around RM250 per sq ft to RM600 per sq ft and where high-end units are offered in good quantity for both direct or investment purposes. The coastal areas connecting the Second Link, the Causeway and the eastern side of Johor Bahru are currently offering investment products starting from RM500 per sq ft to RM600 per sq ft and upwards to RM1,600 psf while more affordable units can be found in the whole northern corridor comprising Kulai, Senai and Tebrau – right down
to Pasir Gudang. Table 3 shows how sustainable demand will be for the next six years and leaves a clear idea on the possible capital appreciation and ROI (return on investment) that buyers and investors may have on their purchases (See Table 3).
Report is by Dr Daniele Gambero and first appeared in The Star Online.
The full copy of The Special Publication By The High Commission of Malaysia, Singapore – Opportunity Malaysia 2014 can be downloaded here.