This article first appeared in The Edge Malaysia Weekly on August 7, 2023 - August 13, 2023

"OVERSUPPLY”, “glut”,“overhang” — these are the words commonly used to describe the Johor property sector. But this situation is set to change with the completion of the Johor Bahru-Singapore Rapid Transit System (RTS Link) that is slated for the end of 2026.

Located at the southern tip of Peninsular Malaysia, Johor is the second-most populated state in the country. However, for many years now, it has faced a high residential property overhang, especially in the high-rise segment.

According to data provided by the National Property Information Centre (Napic), Johor had the highest number of unsold properties — to the tune of 5,258 units worth RM4.33 billion — in 2022. This accounted for 19% and 23.5% of national volume and value respectively. Nevertheless, it is worth noting that the number of unsold units declined 13.8% year on year in 2022, mainly due to the absorption of supply in the affordable housing segment (priced at RM300,000 and below).

Despite the overhang, property developers are looking at Johor with renewed interest on the back of an improving economic outlook and positive newsflow on the RTS Link.

Once the 4km RTS Link is completed, passengers will be able to travel from the Bukit Chagar station in Johor Baru to the Woodlands North station in Singapore and vice versa, in about five minutes. The train service can accommodate up to 10,000 passengers per hour in each direction.

Mooted in 2010, the RTS Link was initially projected to be completed in 2018 but this was then pushed back to the end of 2024. The link was suspended in April 2019 on Malaysia’s side as the Pakatan Harapan administration reviewed all big projects.

With the new deadline of the end of 2026, property counters with exposure in Johor are seeing fresh interest among investors.

For instance, UEM Sunrise Bhd’s share price has more than doubled since the beginning of the year to close at 51 sen last Friday. Other notable developers with exposure in Johor that have seen interest in their shares include IOI Properties Group Bhd and Sime Darby Property Bhd, whose counters have risen 25.4% and 31.5% year to date, respectively.

UEM Sunrise’s shares were in the doldrums for many years due to the company’s relatively large exposure in the Johor property sector. The group’s 8,000 acres in Johor represent 92.3% of its total land bank.

When contacted, UEM Sunrise CEO Sufian Abdullah says the group expects to launch several projects in Johor with a potential gross development value (GDV) of RM1 billion from the second half of this year to the end of 2024.

He adds that UEM Sunrise already has a plan anchored in the proposed high-speed rail (HSR) project on its land in Gerbang Nusajaya.

“Should the proposed HSR alignment remain, the land is located at the last station before Singapore. The plan is to make it a transit-oriented development,” says Sufian.

“We are also in the midst of building up the Gerbang Nusajaya Interchange, set to connect the population of Gerbang Nusajaya directly to the Second Link Expressway, allowing them to commute effortlessly around the state and even to Singapore,” he adds.

Sufian sees the landed residential and industrial segments playing a significant role in the recovery of the Johor property market, given the ongoing and upcoming infrastructure developments and a favourable environment to attract foreign and local investments.

“Apart from the RTS and HSR, factors that are expected to positively impact the Johor property market are investments in data centres, renewable energy, manufacturing and news on increasing rent and house prices in Singapore.”

Sufian reckons that land transactions will pick up on the back of new catalysts in Johor, positive newsflow on major infrastructure projects and market movement.

Lately, there has been a slew of announcements by property developers on land acquisitions or the launch of property projects in Johor, which has lifted sentiment in the sector.

The most noteworthy announcement came on July 28 of Mass Rapid Transit Corp Sdn Bhd (MRT) and Hong Kong-based MTR Corp Ltd signing a memorandum of understanding on a mixed-use development next to the RTS Link. The two parties will collaborate on the planning of space, technical design and integration of lifestyle with rail to ensure the sustainability of the development and mobility of people. The development will connect existing transport services in Johor Baru, including the KTM ETS, city buses and future bus rail transit.

In July, plastic packaging and property company Scientex Bhd made two major land acquisitions in Johor that included six parcels of freehold land in Kulai for RM299.84 million and 959.72 acres of freehold land from S P Setia Bhd in Tebrau, Johor Baru, for RM547.7 million.

Back in March, Mah Sing Group Bhd revealed that it had acquired a 75.7-acre freehold plot of land in Pulai, Johor for RM76.1 million, which has been earmarked for a landed residential project.

Prior to that, property developer Crescendo Corp Bhd said it was acquiring three plots of land in Johor, totalling 109.86 acres, from Johor Land Bhd for RM67.55 million.

Scientex property division COO Datuk Alex Khaw Giet Thye says the group is always looking to replenish its land bank in locations with high potential to ensure the sustainable growth of its property division.

“Specific segments of the Johor property market, particularly the middle to lower-income group that is looking to move from apartments to landed homes, as well as those seeking to own their first property, are actually robust,” Khaw tells The Edge.

This is why affordable housing will be the main focus for Scientex with the view that demand for landed residential homes will remain high, he adds.

“The RTS Link and HSR revival will have a positive economic impact on Johor Baru, which, in turn, will boost the property market in the region.

“Apart from that, the state’s population is expected to grow 2.5% per year over the next three years, which will certainly drive demand for new housing,” Khaw reckons.

More property developers are also eyeing land banking in Johor.

IJM Land Bhd COO Datuk Tony Ling says the group is looking to increase its land bank in the state with the view that the upcoming RTS Link would improve connectivity between the state and Singapore.

“The unsold units in the state are mainly high-end apartments. Actually, over the last two years, landed property sales have been very encouraging, especially those priced below RM500,000, Ling tells The Edge.

“We believe the market has moved on from the scare of the Forest City project. Actually, there is a lot of potential in Johor as there is always demand from the Singaporeans.”

MIDF Research analyst Jessica Low points out that the residential overhang in Johor was mainly due to an oversupply of high-rise projects and weak demand.

“Demand was particularly weak during the Covid-19 pandemic as foreigners were unable to enter Malaysia. Nevertheless, the situation has improved recently,” she tells The Edge.

Overall, Low reckons that the worst is over for the property sector and she expects to see “marginal” recovery going forward after the slump seen during the pandemic.

For Johor, she adds, the upcoming RTS Link and the revival of the HSR project would improve the much-needed connectivity between Johor and Singapore, which would, in turn, increase demand for property in the state.

“We think the Johor property market is poised for recovery.”

Meanwhile, RHB Research reckons that the 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 should create favourable demand for housing in Johor.

“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 to attract international investors and knowledge workers to reside in Malaysia,” the research house says in a July 24 note.

It adds that Singapore’s high rent and home prices will lift demand for rented properties in Johor Baru, thanks to its close proximity to the city state.

“Malaysians working in Singapore are already renting units near the RTS Link station and commuting time is two hours one way.

“But upon the completion of the RTS Link, the commuting time will be cut to only five minutes.” 

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