An aerial view of Johor Bahru (contributed by Greg Chee)

Is it a bull run-revival or another horror story in the making?

By Faizul Ridzuan

Over the last 30 years, Johor’s property market has played out like a horror trilogy, each installment more haunting than the last. Now, as we enter the third act, investors and developers alike are left wondering: will this chapter finally bring fortune or will it repeat the nightmares of the past?

The first two chapters: A prelude to disaster

The first tale of terror begins with the 1997-98 Asian Financial Crisis, which ravaged Johor's property market. Numerous projects were left incomplete, with many abandoned entirely, leaving a trail of devastation in its wake. Singaporean investors, lured by cross-border opportunities, found their dreams shattered, as the crisis wiped out property values across Johor. Even today, echoes of that dark period remain, with abandoned and neglected properties still visible in parts of Johor Bahru.

The fallout from the crisis lingered for more than a decade. Johor's property market was stuck in a slump, only beginning to show signs of recovery around 2010.

The second chapter unfolded with the grand launch of the Iskandar Malaysia project. There was optimism and excitement as developers aggressively marketed high-end properties, many aimed at wealthy foreign buyers, including Singaporeans. Prices soared, especially for condos and serviced apartments, often out of reach for local buyers. The focus was on high-end development, but the results were disastrous. An oversupply of units, paired with sluggish demand from local buyers, led to a glut of unsold properties.

As if that wasn’t enough, the COVID-19 pandemic struck, worsening the situation. Johor soon became infamous for leading the country in unsold and overhung units. Properties sold between 2013 and 2017 still haven’t returned to their original selling prices, leaving more than 90% of primary market buyers unable to recoup their investments, let alone profit from them.

The final act: A continued nightmare or redemption?

Now, in this final act, Johor's property market has seen a surge in new launches over the past year. Nearly 40% of all new property launches in Malaysia are happening here. Developers, once again, are betting big on foreign buyers, with properties near the Customs, Immigration and Quarantine (CIQ) complex and the upcoming Rapid Transit System (RTS) priced at a staggering RM1,500 per square foot.

With such high stakes, there’s a growing sense of unease. Are developers and buyers walking into yet another trap? The scars of Johor's past property busts are still fresh and many fear that this latest wave of launches might end in yet another oversupply and price crash.

As the third act of Johor's property saga unfolds, only time will tell if this story will finally bring redemption to long-suffering investors—or if it will be yet another horror show in a trilogy of property market nightmares.

Johor Bahru’s dependency on Singapore

Johor Bahru has long been economically intertwined with Singapore, with around 350,000 people commuting daily between the two cities. The strength of the Singapore Dollar (SGD) plays a pivotal role in Johor Bahru’s economy, as many Malaysians work in Singapore but live in Johor Bahru, benefiting from lower living costs. This unique dynamic has helped foster a robust rental market, with Singaporean and Malaysian tenants seeking homes across the border.

One of the most significant developments on the horizon is the completion of the Rapid Transit System (RTS) by 2026, which will connect Johor Bahru to Singapore in just six minutes. With a shared immigration checkpoint, this improved connectivity is set to be a game-changer for Johor Bahru’s property market and overall economy. Already, properties near the future RTS stations are experiencing heightened demand, especially from Singaporean buyers eager to take advantage of the convenience.

Why Will It Be Different This Time?

Unlike the previous property cycles, Johor Bahru’s potential for growth is underpinned by several key factors that suggest a different outcome this time. Since the COVID-19 pandemic, rental prices in Singapore have soared by over 60%, pushing many renters to seek more affordable alternatives. As Singapore’s housing prices continue to skyrocket, Johor Bahru emerges as a viable option for tenants and homebuyers looking for cost-effective solutions without sacrificing proximity to the city-state.

Once the RTS is operational, Johor Bahru could become an increasingly attractive residential hub, particularly for those earning less than SGD6,000 per month in Singapore. The improved connectivity and the ongoing cost-of-living pressures in Singapore—factors that were not present in previous decades—make Johor Bahru a more compelling option for buyers and renters alike.

While Johor Bahru may not replicate the meteoric rise of Shenzhen, which is now priced 500% higher than Johor Bahru despite having similar income levels, the city’s potential for growth remains strong. Ongoing infrastructure projects such as the RTS, the Automated Rapid Transit (ART) line and the Johor-Singapore Special Economic Zone (JS-SEZ) further position Johor Bahru to capture increasing demand from both local and international buyers.

With these developments, Johor Bahru is poised to transform from a mere commuter town into a thriving economic hub, offering a more affordable and practical lifestyle option for those tied to Singapore’s economy. The combination of improved transport links, lower costs and rising demand could very well mark a turning point for Johor Bahru’s property market, paving the way for a new era of growth and opportunity.

Will Everyone Profit?

While this time may be different, it doesn’t mean everyone will profit in Johor. The key is not to overpay when purchasing properties. Understanding the concept of tiering is crucial as follows in Table 1.

Table 1:

Source: Far Capital

Buyers have the potential to achieve significant returns if they purchase properties at or below the recommended prices shown in the market analysis. Careful evaluation of development trends and a disciplined approach to pricing are key to avoiding overpaying in these areas.

For instance, our clients are currently acquiring properties in Tier 1 locations for under RM380 per square foot (psf). Below-market deals are available, but they aren’t always immediately visible to the general public. Knowing where to look and acting with strategic insight is essential to uncovering these hidden gems.

Will the third act end in triumph or tragedy?

We believe Johor Bahru is poised to enter a golden era, with the next three to five years shaping up to be a property bull run. Properties that have been underwater for over a decade, following the crash of the second act, may finally see value resurgence.

However, despite the promising outlook, buyer caution is critical. The risk of an inflated property bubble is very real, especially for those diving headfirst into the RTS (Rapid Transit System) hype. Many new developments near the RTS are launching at RM1,500 psf, while bank subsale valuations in the area are still hovering around RM1,000 psf.

The speculative fervor surrounding the RTS mirrors what we saw during the 2011-2015 period. Those who aren’t mindful of current market conditions may face significant losses if they overpay. We believe that better investment opportunities lie in Tier 1 areas outside the direct RTS corridor, where prices remain more grounded.

The stakes have never been higher

As Johor’s property market enters its critical third act, all stakeholders—buyers, developers and government entities—must approach with caution and a well-informed understanding of the market’s dynamics.

The potential rewards are substantial, but so are the risks. This period could bring prosperity or another round of challenges, depending on how shrewdly the market is navigated. Ultimately, the success of Johor is in everyone's best interest and with the right moves, this act could mark a triumphant new chapter for the region.

Fairul Ridzuan is the founder and chief executive officer of Far Capital.

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