Prime Minister Datuk Seri Anwar Ibrahim (right) and his Singapore counterpart Lee Hsien Loong (left) witness the exchanging of documents by Rafizi (second from right) and Gan (second from left) after signing the MoU. — THOMAS YONG/The Star

MoU signing, RTS progress to reinvigorate Johor's property sector

By: Yip Wai Fong

Johor Bahru is poised for a renewed property surge following the signing of a memorandum of understanding (MoU) between the governments of Malaysia and Singapore last month. This agreement, which paves the way for the establishment of a Special Economic Zone (SEZ) in the southern state, is envisioned as a hub fostering increased cross-border movement of goods and people, complemented by a robust business ecosystem to facilitate investments. If successful, it will emulate the economic synergy in the Shenzhen-Hong Kong conurbation.This initiative builds upon Johor's earlier efforts, starting in 2007 with the establishment of the Iskandar Development Region, later rebranded as Iskandar Malaysia.

With the MoU signing taking place on the same day as the completion of the connecting span for the Rapid Transit System Link (RTS), both countries have sent out a strong signal of their intention to make Johor-Singapore an attractive region for business and investment.

In a joint statement, Economic Minister Rafizi Ramli and Singapore Trade and Industry Minister Gan Kim Yong said that the two countries will work on details for a full-fledged agreement for the SEZ at their 11th Leaders’ Retreat later this year.

“While the specific details of the SEZ are still being finalised, we anticipate that it will serve as a significant catalyst for economic activities and the property market, coinciding with the progress of the RTS and the potential revival of the KL-Singapore High-Speed Rail (HSR),” said Knight Frank Malaysia research and consultancy executive director Amy Wong.

CBRE-WTW director Paul Brendan Chan is also upbeat about the direction that Johor is taking.

“It is not just the SEZ alone invigorating the market. There is also the RTS, (and) the local authorities fast-tracking (processes) to encourage investments. The beauty of SEZ is that it will cause the market to flourish. It may arrive in stages,” Chan said.

Benefits abound

If the SEZ were to emulate the Shenzhen–Hong Kong relationship model, Johor Bahru would be a cost-efficient location with supportive policies, infrastructures and skilled labour to attract foreign companies based in Singapore and beyond to expand their operation in Johor. According to Rahim & Co research director Sulaiman Saheh, this makes the industrial and the commercial sectors at the forefront to take advantage of the SEZ incentives, while Wong expected the industrial and the logistics sectors to be the clear beneficiaries, as well as the tourism sector.

“The primary beneficiaries will be the industrial and logistics sectors. Fiscal incentives, including tax exemptions and duty-free procedures coupled with a digitised process for cargo clearance at land checkpoints, will streamline the process and reduce the cost of doing business, enticing foreign investors to Johor,” she said. “The implementation of visa-free travel will bolster tourism activities, (including) spending on lodging and shopping. (This will) benefit both retail and hospitality sectors.”

Reversing the overhang

The SEZ and RTS also bring high hopes of increasing the population of highly skilled workers in Johor Bahru, as initiatives were announced at the MoU signing to attract and develop the talent pool. This was seen as a catalyst for the residential sector in Johor, which has been challenged by a high number of overhang properties for several years – when what started as a property boom spurred by investments into Iskandar Malaysia, including by foreign sovereign funds in the early 2010s has turned into a property oversupply crisis as the market was hit by change of policies, China’s restriction on capital outflow and the Covid-19 pandemic.

“The oversupply has caused unsold units to snowball in the mid-2010s and peaked in the year 2020. Since 2021, with the slowdown in launches and developers’ shifting focus to clear their inventory (accumulated) during the pandemic, Johor’s overhang numbers have declined steadily,” said Sulaiman, referring to data from the National Property Information Centre.

Chan said that SEZ and RTS will have a positive spillover effect on the residential sector, adding: “For residential and the commercial (property) sectors to flourish, you require a certain mass of high-income population to inhabit and spend at a locality. This will happen as job opportunities for a higher level of expertise increase, for example in the industrial sector where there will be demands for highly skilled workers. The flourishing of one sector will positively affect the other – nothing thrives in isolation.”

Sulaiman added that the potential increase in property demand may go towards absorbing existing supply.

“Economic and employment opportunities could potentially revitalize the state’s residential sector. However, this does not necessarily mean more units are needed in the market as the sheer supply at present is not all taken up or occupied. However, the marketability (of available units) would take into consideration its location, product type and size, and price points.” Sulaiman said.

Keen interest

Wong said that while the SEZ details are yet to be fleshed out, the MoU signing conveys optimism to market players.

“While we don’t anticipate an immediate influx of investors, we firmly believe that market players have initiated discussions for potential business opportunities in this special region, tapping into the benefits of both sides of the Causeway,” she said, noting positively the recent land banking activities by property developers such as EcoWorld Development Group Bhd, Crescendo Corp Bhd and Mah Sing Group Bhd in Johor Bahru.

“For now, there is no wait-and-see approach in Johor Bahru’s city centre, where the RTS is sure to happen,” she added.

Sulaiman said that SEZ will be looked forward to more keenly than in the past, considering the developments that have already been invested in Johor.

“The wait-and-see attitude is expected until a clearer scope is announced and implemented, but it will be with a keener eye today compared to yesteryears. The extent of the property market reinvigoration is dependent on the successful unfolding of the SEZ and its effectiveness in stimulating new and value-added investments in the area,” he said.

Local authorities fast-tracking processes will encourage investments, Chan said.

Property market reinvigoration in Johor will depend on the extent of SEZ's success, Sulaiaman opined.

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