Property Insight > Area Focus > Iskandar Malaysia: The Good The Bad And The Ugly

Iskandar Malaysia: The Good The Bad And The Ugly

Iskandar Malaysia was once the poster child touted by TIME Magazine in 2012 as “one of the most ambitious development projects in the world”.

Since then, the spotlight has shifted to glut concerns, given the breakneck speed China developers have been developing their projects there compounded by launches by local developers.

Almost overnight, Iskandar Malaysia became a construction playground. Attracting China developers accustomed to building cities at astonishing turnaround speed, the launch of a series of high-end, high-rises spanning tens of thousands of property units started flooding the Southern Corridor of Johor.

The problem seemed to resolve itself for a season when these giant China developers attracted mainland Chinese buyers by the hordes. They were drawn to the many initiatives available in Medini and Forest City’s four man-made islands spanning about 5,000 acres which underwent massive reclamation works.


Landserve (Johor) Sdn Bhd Executive Director Wee Soon Chit credits Forest City’s appeal among foreigners to its “prime model of a future city with freehold property at one quarter of Singapore’s prices on a man-made island with its free zone and no foreign restrictions”.

“Since Forest City started selling its Phase 1 units in December 2015, over 15,000 units comprising mainly serviced apartments have been sold, with the mainland Chinese accounting for about 75% of the buyers,” says Wee.

“This project is a joint venture between Country Gardens which is one of the biggest developers in the world in terms of square footage sold holding a 60%:40% share with the Johor State Government.”

Phoenix Hotel with its 200 rooms was constructed at a rapid speed of eight months with the first few blocks of serviced apartments scheduled for completion this year.

Enabling buyers to “enjoy the competitiveness of Singapore and the affordability of Malaysia”, Wee says Forest City saw about 1,000 units priced from RM1,200 psf being sold per month.


However, the euphoria of overwhelming sales, including those at Forest City whose market mostly comprised Chinese mainland buyers was short-lived when China imposed curbs on its foreign fund outflow – throwing a spanner in the works for Iskandar Malaysia.

Adding insult to injury, the problems of oversupply outstripping demand in Iskandar Malaysia is further compounded by other local developers’ high-rise units coming into completion.

“As far as growth rates are concerned, landed properties have increased by about 20% since 2006 whereas non-landed units have risen by about 70%. The trend shows there are increasing high-rise residential units being built in Iskandar Malaysia covering Johor Bahru and Kulai. There is also an anticipated 200,000 residential units coming into the market in the next one to two years.

“Out of this, around 22,000 units of condominiums and apartments are under construction while another 5,000 units’ building plans have been approved but construction works have not yet started,” Wee shares.

This year alone, some 25,000 new serviced apartment units will enter the market. Out of this, about 19,000 units will be focused in the Johor Bahru City Centre and suburb areas while 6,000 units will be concentrated in the Iskandar Puteri area.

Dr. Daniele Gambero, CEO and Co-founder of REI Group of Companies anticipates that 70% of properties in Iskandar Malaysia were transacted to investors between 2011 and 2014. This translates to 70% on-stream units that will enter the market almost concurrently in 2018 that will affect rentals.

“The recent curbs imposed by the Chinese authorities on the outflow of capitals have affected the sales trend that few Chinese megaprojects enjoyed previously. There is an oversupply of high-end properties so the market will take time to absorb the oversupply,” he says adding that holding power is crucial.

Sr Samuel Tan, Executive Director of KGV International Property Consultants agrees that the phenomena of Chinese buyers coming in droves to purchase properties seem to have faded.

“One must be rational, knowing that the mainland Chinese normally buy from China developers with only a remnant purchasing from local developers. So, it is incorrect to say that the Iskandar Malaysia property market will suffer as a result of the capital curbs,” Tan says offering an alternative view, adding that the curbs will impact China mainland developers more than local developers. 


Wee says that only 30% – 40% of Iskandar Malaysia, geographically located next to Singapore and launched in November 2006 covering an area over 550,000 acres has been developed. Therefore, there is still plenty of greenfield there.

Iskandar Malaysia’s blueprint that emulates the new economic corridor patterned and conceptualised after the Hong Kong/Shenzhen model is aimed at making it a sustainable metropolis of international standing by 2025.

“This will propel Iskandar Malaysia which comprises Johor Bahru and  parts of Pontian and Kulai districts into economic powerhouses of the south,” says Tan.

To achieve this, the sustained involvement of various agencies, stakeholders and players including the Federal, State and local Governments, business communities, communities and global industry players are required.

“For this intent and purpose, a Parliamentary Act was passed to establish an agency known as the Iskandar Regional Development Authority (IRDA) headed by the Johor Menteri Besar and a Federal appointed Chief Executive to spearhead the development of Iskandar Malaysia,” explains Tan.

Six qualified services were identified to spearhead its growth while strengthening its existing advantage as a manufacturing hub including logistics, tourism, finance, healthcare, education and internet technology (IT)/multimedia sectors.

Five flagship zones, each having its own economic clusters were identified. Flagship A constitutes the Johor Bahru City Centre for tourism, cultural and financial activities.

Flagship B (previously known as Nusajaya and now identified as Iskandar Puteri) targets education, healthcare, multimedia, tourism and housing.

Flagship C constitutes the Tanjung Pelepas (PTP) and Tanjung Bin Power and the Pulai Forest Reserve with its emphasis on port activities and tourism.

Flagship D comprises the Pasir Gudang Port and Tanjung Langsat heavy industrial area and the Bandar Seri Alam region which concentrates on port activities, manufacturing and education.

Flagship E meanwhile comprises Senai-Skudai where the Senai Airport is situated focusing on logistics, tourism and mainly manufacturing activities.

“Over the last 10 years, Iskandar Malaysia has undergone an interesting journey. It is now at Phase 3 of its master plan which is to innovate and sustain.

“The third phase of investments are expected to enhance the whole eco-system in Iskandar Malaysia as the spillover effects will have higher impact to the region’s economy,” says Tan adding that it has consistently achieved its target as reported by IRDA.


Although Iskandar Malaysia has been plagued with China curbs putting a halt to sales coming in from mainland China, Gambero says the positive side of the coin resulting from China’s earlier interest  in the city brought about global attention to Iskandar Malaysia and Malaysia.

He suggests that China’s curbs may eventually be lifted in time to come.

“I will not be surprised to soon see some softening of the curb measures limiting capital outflow from China, especially towards Malaysia,’” he opines.

Gambero is upbeat about the future of Iskandar Malaysia as he says a huge part lies with its economic drivers, healthy and strong demand for affordable houses and a strong interest by the international community in looking into it as a possible destination for their investments.”

He asserts that economic growth which may have slowed down, mostly caused by the last 18 – 24 months of global recession, has not stopped in Iskandar Malaysia.

“We shouldn’t forget that Malaysia still has strong domestic demand. This has helped our national gross domestic product (GDP) perform quite well during the first quarter of this year.

“Iskandar Malaysia, with its number of incentive packages offered to foreigners and local small medium enterprises (SMEs) and multinational corporations (MNCs), still remains a preferred destination as compared to others in the region,” says Gambero.

“MNCs with ‘bigger than average’ investment plans looking for a destination country with good airports, highways and harbours for their next expansion could also consider Tanjung Pelepas situated in south-western Johor,” he adds.

Tan agrees that the capital curbs is a temporal measure by the China government to “moderate capital flight”.

“Being an international powerhouse, it is a matter of time before the measure will be reviewed,” he says adding that the curbs will affect China mainland developers more than local developers as the latter mainly targets locals and Malaysians working in Singapore.  


Assessing the situation from another angle, the excessive development by China mainland developers in Iskandar Malaysia Tan opines is not sustainable.

“The capital curbs will be an opportunity for China to review its strategies. It also allows the local market to adjust itself to avoid an oversupply of properties to foreigners. The latter scenario will run the risk of developing ghost towns, which are not healthy for Iskandar Malaysia,” Tan says.

Property owners in Iskandar Malaysia have also been reeling from rental yield declines between 15% and 30% due to the glut in properties in the famous southern development corridor.

Gambero even goes so far as to say that it is now a “100% tenant’s market”, with completed units poised to flood the market within the next year.

Coupled with the weakening market conditions in the next 12 to 20 months, a slide in property rentals and values are inevitable. Capital appreciation of properties he says will take another year or so to recover as incoming units continue to flood the market.


Of all the issues flooding Iskandar Malaysia, these industry experts agree that probably, the most challenging would be the perception issue arising from the glut situation casting concern there.  

“Some developers have been slowing down in both their construction and launching of their new phases and this might further contribute in giving a wrong perception to the market,” observes Tan adding that this is perhaps the most negative aspect of the challenge in Iskandar Malaysia, giving rise to the impression that the property market there is now dampened.


Having explored the different aspects of the good, bad and ugly, Iskandar Malaysia still holds plenty of opportunities in the long term, observe industry experts.

Topmost on the minds of everyone is the perceived glut situation, how the recent imposition of China’s curbs will be resolved and who will take the place of the giant player in Iskandar Malaysia.

Tan says “water will have the natural effect of finding its own level”.

“Any developments that are not sustainable will have to change course in order to accommodate those which are supported by market forces.

“Inevitably, in the current challenging environment, developers will have to confront various resistances,” adds Tan.

“Affordability is also another major issue. Inability to obtain end-financing coupled with the tightening of lending policies by Bank Negara Malaysia are among the main reasons why developers were not able to fare well in their sales.”

Tan believes that inflation resulting in lesser disposable income and high household debt are twin contributors to potential purchasers’ hesitancy to commit to big-ticket commitments such as property investment.

Developers also have to contend with higher development cost escalated by increased land price over the years which hinder them from launching cheaper-priced houses. Increased construction and compliant costs also contribute to higher property prices. Such prices are a mismatch to a slowdown market where purchasers are looking for more affordable homes,” he concludes.

Gambero opines that foreign buyers have not only been coming from China but also other countries like Singaporea, Japan and Korea who are “still attracted by Iskandar Malaysia”.

“In any case, China buyers are only a minority as compared to local purchasers. The latest statistics on foreign purchase of properties in Iskandar Malaysia seem to show that they make up less than 15% of the total transacted properties.

“The whole world is available and quite interested in this southern economic development corridor. So, it is mainly a matter of time to let things stabilise first and pick up again soon,” he reiterates.

Units in Iskandar Malaysia he adds are also purchased by locals.

Gambero says the main driver of Iskandar Malaysia’s property market is the economic development of this southern corridor, which is one of the five identified by the Government for the whole of Malaysia. Others include ECER on the east coast, Corridor Utara in the northern part of Malaysia, Sabah Development Corridor and the Sarawak Corridor of Renewable Energy.

“The economic growth in the south is still quite strong and the in-flow of Singaporean and international SMEs and MNCs has not stopped. Demand for housing from both local residents and new families who are migrating to Iskandar Malaysia looking for better working, educational or healthcare opportunities are still on the high side with landed and high-rises priced below RM700,000 still selling at a positive rate.

The latest figures he says shows RM200 billion of committed investments in Iskandar Malaysia alone since 2006, of which 55% has already been completed.

Gambero says that working in Iskandar Malaysia’s favour is the Hong Kong/Shenzhen model but on a wider scale as Shenzhen was designed to serve Hong Kong while Iskandar Malaysia addresses regional and intercontinental demand.


As in life, timing is everything.

Early developers who launched their projects in Iskandar Malaysia include KIP Group of Companies.

KIP Group of Companies Director Valerie Ong says its presence in Johor 15 years ago is marked by its KIP Mart outlets in Tampoi, Masai, Kota Tinggi and Segamat.

“Construction cost is no secret as everybody is operating at about the same rate but the affordable cost of land is our strong selling point as we bought it at a much cheaper rate back then,” she says.

The group’s 8scape development was launched in 2014. Situated in the mature neighbourhood of Taman Perling in Iskandar Malaysia, the project spanning 9.2 acres and comprises 1,225 units of serviced apartments she says, is already 35% constructed is faring well.

“Our semi-furnished high-rise units are priced much lower at about RM480 psf as opposed to those who bought the land in the last five years at a much higher rate.

“We still have land banks in Iskandar Malaysia but looking at the market situation, we want to concentrate and ensure that all our malls are maintaining that kind of yields and rental which is our utmost priority,” she says adding that the group is targeting to launch another two blocks in 4Q17,” shares Ong.

She sees potential in this mature area and despite the current slowdown situation, people are still buying for their own occupancy.

“We are getting lots of local interest from the surrounding townships of Taman Perling, Taman Sutra and Skudai.

“At the end of the day, it will not be a ghost town. We see opportunities in Johor Baru that is not just limited to Iskandar Malaysia because of the scarcity of land in Singapore,” she adds.

Juggling a fine balancing act with its maiden D’Pristine @ Medini in Iskandar Puteri, Iskandar Malaysia development, B&G Property Director of Sales and Marketing Dato’ Soo Kai Chee says its early entry in 2012 gave it its advantage.

Its catalytic mixed-use landmark project here with a gross development value (GDV) of RM1.8 billion located on 8.43 acres of land on a lease nature has seen its SoFo (Small office Flexible occupancy) units record 80% take-up. Its buyers comprise mostly foreign buyers from Taiwan, Singapore and Indonesia.

Dato’ Soo believes that the property market is cyclical will rebound once again. The Singapore effect he says will benefit Iskandar Malaysia as it is much more affordable to conduct business there, given its cheaper back room services, workforce and labour costs.

BCB Berhad Executive Director of Sales and Marketing Tan Lindy opine that for property cycles, booms are usually followed by slumps and then by market recovery.

“The stages in the cycle are driven by various factors affecting supply and demand including interest rates, consumer debt-to-income ratios, confidence levels, Government policies.”

Thus, any positive changes in these factors she says will bring about its recovery adding that the group has over 675 acres of land bank in Johor mainly in Batu Pahat, Kluang, Johor Bahru and Pontian. Phase 1 of the group’s Elysia Park Residence in Medini, Iskandar Malaysia that was launched in 2015 with a GDV of around RM650 million has already seen two thirds of its 981 units sold.

Meanwhile, Landserve’s Wee doesn’t think the current situation will affect the local market but more so, the foreign market. He believes that Iskandar Malaysia’s role is beneficial in the sense that it will help create jobs.

“I tend to believe it’s positive. Imagine when the double sea and land connections take place, Iskandar Malaysia will be more positive in terms of connectivity.”

He adds that once the Rapid Transit System (RTS) is completed in 2019 connecting Johor Bahru to Woodlands in Singapore, the connectivity will encourage more people to live in Johor Bahru and work in Singapore.

“I hope the High Speed Rail (HSR) will be completed by 2026 which is critical for Johor Bahru and Iskandar Malaysia to grow further,” he ethuses.

Gambero says that “time is of the essence” for Iskandar Malaysia. Being a development corridor, Iskandar Malaysia is a long-term game. While demand still exist for high-end products he adds that existing supply of pricey properties might take some time for the market to digest. 

“My personal take on Iskandar Malaysia is that it will take a good three to four years’ timeframe for it to rebound to a good market situation for all types of products. The affordable market there is also backed by strong demand,” he says.

The development of Iskandar Malaysia say Tan, was guided by Comprehensive Development Plan (CDP).

Last year, this was succeeded by the Comprehensive Development Plan ii (CDPii) that follows the Circle of Sustainability with its holistic ecosystem anchored by wealth generation, resource optimisation and low carbon, etc. in a continuous cycle.

Gambero believes that the saving grace at day’s end would be a properly planned and executed economic growth that will take its time to be completed.

“The original CDP for Iskandar Malaysia entails a timeframe of 20 years which is scheduled for completion in 2025. We are only halfway through, so please be patient,” he sums.

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