"There will not be a significant price increase as most market participants have already priced in the development of the property. Very highly priced properties are slower to be absorbed by the market.” — Jonathan Lo Kin Weng, director at CBRE WTW Valuation & Advisory Sdn Bhd.
KUALA LUMPUR (July 31): The proposed mixed development along the Johor Bahru-Singapore Rapid Transit System (RTS) link by Mass Rapid Transit Corporation Sdn Bhd (MRT Corp) and Hong Kong-based MTR Corp Ltd is expected to uplift the property scene in Johor Bahru, according to industry observers and analysts.
RHB Investment Bank Bhd (RHB IB) in a research note on Monday (July 31) said the partnership between MRT Corp and MTR Corp reaffirms its view that the Iskandar Malaysia property market will stage a recovery from now on.
“Given the ongoing and upcoming infrastructure developments, special incentives from the government and a favourable environment to attract foreign and local investments, we expect business activities and human traffic in Johor Bahru to gradually increase over the medium term,” said analyst Loong Kok Wen.
New demand for property would be created, benefiting developers with exposure to the Johor property market, she added, noting MTR Corp makes a good partner, considering its matured development of the MTR system in Hong Kong and its expertise in such integrated developments.
MRT Corp and MTR Corp signed the memorandum of understanding (MOU) last Friday (July 28) for the mixed development next to the RTS link. Both parties will collaborate on the planning of space, technical design and integration of lifestyle with rail to ensure sustainability of development and mobility of people. The mixed property development will connect existing transport services in Johor Bahru, including the KTM ETS, city buses and the future bus rail transit.
Profits generated from property development will be used to support the operations and long-term maintenance of the railway, and to finance new railway projects.
“The signing of the MOU and the collaboration is another milestone achieved, which should ensure that the RTS terminal and the related components are properly planned and designed,” the analyst added.
The residential units in this mixed development are also expected to set a new pricing benchmark upon launch, given that other residential projects in the vicinity are already going at RM1,000-RM1,300 psf. This may potentially help to lift property prices in the Johor Bahru city centre in the future, said Loong.
KGV International Property Consultants (Johor) Sdn Bhd executive director Samuel Tan noted that the MRT-MTR Corp project is likely the first and most comprehensive transport oriented development (TOD) in Johor Bahru.
“This TOD will bring about great change to Johor Bahru's property market, not only in terms of the train station but also residential houses, retail offices and hotels. And this is only the first stage,” he told The Edge in a phone interview on Monday.
He believes the partnership will involve land acquisition of surrounding areas, particularly Kim Teng Park, which is seen as a gold-mine of a location due to its proximity to the RTS terminal in JB. “I believe as they progress that there will be more land acquisitions because Kim Teng Park is only about 50-over acres. They (MRT and MTR) would want to maximise their investments by making sure the surrounding areas are also made part of the TOD,” he added.
“If it's just the station alone, it may not benefit them. So they will have to acquire the surrounding land to complement the existing station,” said Tan, adding that residents staying in the area will have to be properly compensated to avoid potential issues.
Jonathan Lo Kin Weng, director at CBRE WTW Valuation & Advisory Sdn Bhd (formerly C H Williams Talhar & Wong Sdn Bhd) said although the proposed development is set to attract many developers to Johor and increase property development investment, property prices may not increase exponentially.
“There will not be a significant price increase as most market participants have already priced in the development of the property. Very highly priced properties are slower to be absorbed by the market,” he told The Edge via email.
Jonathan added that the new and improved connectivity of RTS will help to propel development in less matured areas and unlock values. “This is mainly because a better transportation system will help the population to disperse, to find more affordable prices away from the city, leading demand to increase in the suburban areas,” he said.
JB will be like Shenzhen
Areca Capital chief executive officer Danny Wong said property companies with strong land banks and construction companies with strong visibility for projects are set to benefit the most from the latest development.
“TOD is always a beneficial development. All property and construction companies that have business exposure to the area will be expected to contribute to this growing development in Johor,” he said.
Companies with sizable land banks in Johor are UEM Sunrise Bhd, IOI Properties Group Bhd, and Sunway Bhd.
Understandably, RHB Loong's top picks given the latest development are: UEM Sunrise Bhd (buy; target price: 70 sen) as a prime beneficiary, IOI Properties Group Bhd (buy; RM1.46), and Matrix Concepts Holdings Bhd (buy; RM1.75).
Loong further said that the government's incentive to promote Iskandar Malaysia will further facilitate the development of the area.
Prime Minister Datuk Seri Anwar Ibrahim has also announced a special 15% income tax rate to be granted to eligible skilled workers and companies as part of the government’s efforts to develop a special financial zone in Iskandar Malaysia.
“The government will also offer immigration fast-lane facilities to ease the entry of skilled workers from abroad. This is to ensure that the special financial zone will be competitive in order to attract international investors and knowledge workers to reside in Malaysia,” she said.
And so long as the transportation system matures in this area, investors will easily set up factories, warehouses and infrastructure. "Johor Bahru will eventually be an economic hub because of Singapore,” said Wong, drawing comparisons with Shenzhen in China, which was underdeveloped before Hong Kong’s spillover effect on the region.