Property values in south Johor rising

Property values in south Johor rising

By DANNY YAP

PROPERTY values in the Iskandar Development Region (IDR), south Johor is set to rise, propelled by strong Government support for the property sector and overall buoyant economy and stock market.

Most analysts are optimistic that the IDR would be a key growth driver for the Malaysian economy as a lot of government and private funds would be invested into the region over time to make it a vibrant and international economic hub.

An analyst with UOB Kay Hian said the Government planned to develop the IDR into an “emerging special economic zone” in the likes of Shenzhen, Dubai and Mumbai where the best brains around the world come to live, work and do business.”

The analyst said the IDR has the potential to attract international developers because of three main reasons – its proximity to Singapore, the entry of international theme park (ITP) operators and government policy changes to attract greater foreign direct investments.

The analyst said the Government’s initial projections show that the IDR could attract about RM370bil in investments over 20 years.

“In the nearer term, the IDR is supposed to attract RM50bil in investments within the next five years, of which RM20bil will be in committed developments. The Government plans to invest RM12.2bil, mostly in infrastructure works to spur the initial developments in the IDR under the Ninth Malaysia Plan,” he said.

With so many goodies thrown in, it's not surprising that many property developers are eager to jump on the bandwagon to kick-start property projects (commercial and residential) or new townships – case in point Nusajaya – in the IDR.

In fact most of the established property players such as UEM World Bhd, SP Setia Holdings Bhd and Gamuda Bhd have already started some property development projects in the IDR.

Moreover, the analyst said reputable foreign multinational investors and companies like Flextronics International (Netherlands), OSI System Inc (US) and JST Connectors (Japan), have started to relocate or set up their manufacturing and logistic bases in south Johor, especially in areas with large land parcels at relatively low prices.

He said rising foreign direct investments (FDIs) was expected to lead to various spin-offs for Johor’s economy and create new demand for properties, especially high-end properties.

“The IDR's proximity to Singapore is akin to Shenzhen's situation. The latter is able to capitalise on Hong Kong's emergence as a global player,” he said, adding that the IDR could leverage on the republic's transformation into a global city.

“Singapore, next to south Johor, is fast emerging as an international financial and services hub. Moreover, its new international resort (in Marina Bay and Sentosa Island) is projected to create 100,000 new jobs and is expected to attract 17 million tourists to the island by 2010 (from nine million currently).

“The IDR, being so close is likely to experience some spillover effect in terms of visitors and workers,” said the analyst.

He added that the introduction of two Free Access Zones (FAZ) – IDR Johor Baru FAZ and Nusajaya FAZ – to allow seamless movement of people across the border with no limit on duration of stay would further encourage more people to settle there.

As such, UOB Kay Hian believes large landlords at the southern tip of the IDR will be prime beneficiaries.

It will have the biggest price upside, given the limited real estate supply, compared with the abundant supply of plantation land in mid-northern Johor.

“The super prime locations in south Johor are those within a 10km radius of the Johor causeway and Second Link.

“Those closest to the bridges leading to Singapore and sea or river-fronting properties would maximise on the potential commercial value – especially when developments of international standards are undertaken – as well as those closest to the ITP operators and FAZs in Johor Baru and Nusajaya,” said the analyst.

He cited real estate owned by UEM World Bhd (10,336acres), Mulpha International Bhd (800 acres) and Tebrau Teguh Bhd (1,012 acres) Khazanah Nasional Bhd (5,500 acres) and the Johor Royal family (1,000 acres) as potentially the most attractive pieces of land in terms of value appreciation.