This article first appeared in City & Country, The Edge Malaysia Weekly on May 23, 2022 - May 29, 2022

Johor Baru’s real estate market is poised for growth following the reopening of borders at the start of 2Q2022. As the country transitions to the endemic phase of Covid-19, most pandemic restrictions have been lifted and fully vaccinated travellers are now allowed to cross the Malaysia-Singapore border without the need for testing and quarantine. This factor is crucial to the development of Johor’s property market.

While presenting The Edge | KGV International Property Consultants Johor Baru Housing Property Monitor 1Q2022, KGV International Property Consultants (Johor) Sdn Bhd executive director Samuel Tan notes that the country has taken a big step towards economic recovery after two years of the Covid-19 onslaught.

“This was a long-awaited moment for the business community. Although reopening borders is a big decision with risks, it is probably time to take a bold step forward, in view of the less fatal Omicron wave and the need to prevent further economic deterioration,” he says.

“The Malaysia-Singapore border remains the most crucial link. If the border reopening between the two countries can be managed smoothly without major hiccups, it will be an immediate boost for sectors such as retail, tourism and hospitality. The economy in general will also benefit, which will cascade down to the property sector.”

Nevertheless, the country should be prepared for bumps on the road to recovery, he adds. New Covid-19 variants that are more infectious and deadly may still surface, as many medical experts have warned.

Apart from Covid-19, there are other factors that may impact the recovery of the Johor real estate market.

One of them is the Johor State Housing Development Corporation’s (PKPJ) plan to use the development concept of Singapore’s Housing & Development Board (HDB) as a benchmark to provide comprehensive affordable housing development planning in every district in the state.

“This initiative is definitely a good start to integrating the affordable housing schemes and policies that are currently parked under different agencies. Having a centralised body to look after the planning and execution of the affordable housing policy in a holistic manner will enhance the housing quality and development efficiency,” says Tan.

Meanwhile, there is some good news on the Iskandar Rapid Transit (IRT) and light rail transit (LRT) fronts.

According to Tan, the construction of the IRT — formerly known as the Iskandar Malaysia Bus Rapid Transit (BRT) — which will connect the air, land and sea transport hubs in Johor is scheduled to start by mid-2022. With about 10% of the work completed so far, the first phase of the operation is targeted to commence by 2024.

“Hopefully, the IRT will increase the mobility of Johoreans by connecting to the main transport hubs in Iskandar Malaysia, Senai Airport, Johor Baru-Singapore Rapid 

Transit System (RTS) Link, double tracking rail (electrified double-tracking project from Gemas to Johor Baru), Larkin Sentral and Puteri Harbour. Once fully implemented, the IRT will be able to connect 55 feeder routes and 44 direct routes with the main route covering 28 stations,” he says.

“The IRT is definitely a key step in enhancing the Johor Baru public transport network, thereby improving the connectivity and mobility of the people. The enhanced proximity and proper linkage between property developments and the IRT station will become key considerations for homebuyers.”

Nevertheless, Tan cautions that implementation remains the key in terms of ease and convenience of travelling, system integration, timing accuracy and route efficiency of the new transport mode. If it fails, the IRT will become a “glorified version of a bigger bus”, he points out.

As for the LRT, a consortium comprising Ancom Bhd, Nylex (M) Bhd and LBS Bina Group Bhd has proposed one such system to be connected to the RTS Link that is being built from Singapore to Johor Baru.

Currently being evaluated under a feasibility study, the planned LRT project is forecast to have a carrying capacity of 15,000 passengers per hour per direction — matching that of the RTS Link. The proposed project could span 75km, with the initial phase located in the Johor Baru city centre to span about 9km.

“The public transport network in Johor Baru will be further enhanced should the LRT get the go-ahead. In addition, the construction of the LRT system via an integrated property development using the transit-oriented development (TOD) concept will create vibrancy in the real estate market,” says Tan.

“With an efficient public transport system integrating the RTS Link, LRT and IRT systems, the location factor of real estate will be defined by the time and ease of commuting instead of being solely based on geographical distance. This will create value for a lot of suburban locations and will decentralise the developments from the overcrowded or over-developed locations.”

Another potential disruptor is the outcome of the recently held Johor state election on March 12. Barisan Nasional (BN) won 40 out of 56 seats, or a two-thirds majority. 

“With the recent victories in the Melaka and Johor state elections, an early general election appears likely. The business community and the rakyat are more concerned about survival issues like business recovery, job security, inflation and economic performance,” says Tan.

“With the new mandate entrusted to BN, it is hoped that big catalytic projects such as the RTS Link and IRT will be expedited and executed smoothly. At this juncture, many potential buyers may adopt a wait-and-see approach.”

Other potential disruptors are the interest rate hikes and the Russia-Ukraine conflict.

In a bid to tackle the fastest rise in inflation in four decades, the US Federal Reserve recently raised interest rates by half a percentage point and signalled hikes at the remaining policy meetings this year. The series of interest rate increases may bring the key policy rate to about 1.9% by the end of the year.

Tan expects Bank Negara Malaysia to follow suit, although it may not be a like-for-like pattern in terms of quantum and frequency of interest rate hikes. “The lending rate will nevertheless rise moving forward and this will increase the monthly housing loan repayment amount. Homebuyers’ affordability will be affected. Post-pandemic, homebuyers will be even more cautious when interest rates are trending upwards.”

On Feb 24, Russia began a military invasion of Ukraine and the scale and duration of the conflict have caught the world off guard. It has also done much damage to the global economy.

“Inflation has accelerated further [due to] higher fuel prices, cost of food … the price of raw materials has also gone up drastically across the board. Inflation pressure has been one of the main concerns in the past few years as the global supply chain has already been adversely affected by the US-China trade war and the pandemic,” says Tan.

“This protracted war will definitely push the cost higher. Developers and contractors are facing sharp cost increases to the tune of 18% on average. Moving forward, developers may have to resort to some value engineering by reducing the unit size, delaying launches or cutting prices to reduce profit margins. If the cost continues to remain high, developers will eventually pass the cost on to end-buyers, although not the total cost in view of the current weak sentiment.”

In terms of new launches, it appears that the Johor Baru market saw more activity during the period in review.

Taman Impian Emas saw the launch of 36 two-storey semi-detached houses under Phase 6E2 Bukit Impian Residence and 176 one-storey terraced houses under Phase 10B2 Iconia Garden Residence.

“The typical 2-storey semi-detached units at Bukit Impian Residence, with land and built-up areas of about 4,050 and 3,000 sq ft respectively, were priced from RM1.1 million. More than 60% have been sold,” says Tan.

“The 1-storey terraced units at Iconia Garden Residence, with a land area of 1,760 sq ft and a built-up area of 1,240 sq ft, were priced from RM414,800. It has achieved a sale rate of 40% for its non-bumiputera units.”

Taman Eco Spring saw the launch of 2-storey terraced homes under the Forte and Forte Plus series in January. “The 2-storey terraced houses, with land and built-up areas of about 2,500 and 2,700 sq ft respectively, were priced from RM1.43 million. There are a total of 92 units, and the take-up is about 40%,” he says.

Meanwhile, Taman Eco Spring started the sale registration for its 2-storey terraced houses in Phase 3 Rose series. It comprises 2-storey terraced houses with a land area of 1,800 sq ft and built-up area of 2,184 sq ft, and is priced from RM1.07 million.

Aurora Resort @ Aurora Sentral, comprising 464 two-storey terraced houses, were launched in early 2022 under its Sterling and Legacy Collection. Aurora Resort has managed to achieve a 100% sale rate within a relatively short period since its official launch. “This is one of the successful recent launches, mainly attributed to its strategic location, meticulous design and reasonable pricing,” says Tan.

The units, which have land and built-up areas of 1,800 and 2,800 sq ft respectively, were priced from RM1.06 million for the international units and about RM800,000 for the bumiputera units.

All in all, the price and rental rate of properties remained stable in 1Q2022. “We expect to see a more active rental market and possibly a gradual pickup in rental rates in the coming quarters with the reopening of our borders. Some Malaysians working in Singapore may begin renting in Johor Baru to save on accommodation costs,” he says.

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