Category Archives: commentary

Iskandar Housing Real Estate Investment Considerations

When investing in real estate, rental price checks help avoid investing in bubbles. No investment strategy is perfect. If you invest in a new area early, it can be that rental prices do not yet reflect long term value (say rental prices near an announced MRT station but one that won’t actually be in service for 5 years). But ignoring rental prices is risky (just believing long term things will keep going up – this was a big part of the problem in the USA bubble – prices way out of line with rental values).

For this reason, I am skeptical, of investing without rental market checks (including vacancy rates). It is also true I think it is not yet a fully functioning rental market in the new housing estates in Johor Bahru. It will likely be at least 3-5 more years to get a decent idea of where rental prices will be going and how much rental demand there is.

Properties can sell to investors from Singapore (and many other places) that buy the properties to use as vacation homes, retirement homes… for their long term plans). This can even be sustainable over the long term (a significant portion of units bought this way) BUT it is much riskier as an investment than if the units bought for investment are rented out and a fair market rate can be determined to evaluate purchase prices.

To me the key to the investment potential of JB real estate is most importantly, JB having jobs that allow people to buy or rent these houses. It seems to me at the current time there are not enough of those jobs. The second key is Singaporean’s buying (and working in Singapore – commuting). The 3rd pool of users of the real estate are retirees (Malaysians, Singaporeans and others). I would put vacation homes… as 4th, after all those others.

At the current time many sales seem to be going to investors. Those investors can sell to other investors but that is not a sustainable model for increasing prices. Investors have to sell (or rent) to users of the properties.

The most important strategies for Malaysia to encourage the real estate market in the Iskandar region therefor to me are:

  1. attracting high paying jobs is important for high cost housing (much of the housing stock being built is high cost)
  2. making it easy to commute and travel between Singapore and Johor Bahru. This is important for both those that want to commute and for say Singaporeans that want to retire to JB (or buy their parents a place in JB) – For some commuting times are important for others they just need it convenient for say weekly trips.
  3. making it reasonable for foreigners to invest: both making it reasonable for foreigners to buy real estate (increasing demand) and reasonable for large investments (factories, back office high rises…) that will create high paying jobs. It seems to me a big way to get things moving quickly is to get companies in Singapore to move some back office jobs to JB (so far there has been less of this that I think would be wise in the market – I think companies are still not convinced relations will remain very strong, though it is getting closer.). This can both decrease the companies cost and provide good paying jobs in JB. It also is a big incentive for those people working in Johor Bahru to live in JB. Many people commute from JB to Singapore but some don’t want to do that; if their high paying job can be located in JB that would make more happy to live in JB.

For several of these education for kids would be useful. Good local schools would encourage high income workers that want schools for their kids to consider the area (sending kids to school in Singapore is an option but the long commute is a drawback). Medical care would be good both for providing high paying jobs and especially for retirees (and young families).

Another thing to consider for the Iskandar region for attractive tenants (for Johor Bahru properties) are MM2H expats. The MM2H visa is an attractive option that isn’t really available in Singapore (unless you are [B]very[/B] wealthy). Right now many MM2H live in Kuala Lumpor or Penang, but Johor Bahru is a very attractive option (especially with the proximity to Singapore). It seems to me, at this time, few MM2H expats are not really considering JB. I think there could be a very large increase in this demand over time.

Related: Real Estate Investments in Iskandar Have Great Potential but Also Have RisksPenang Condo MarketMortgage Crisis Documentary

The Potential of Iskandar is Very High but Investing in Iskandar has Risks

Investing successfully involves picking out opportunities the market does not fully appreciate yet. Often the best returns are for those investments where very few investors see much potential or where investors are not convinced of the larger economic factors (being nervous about investing in some country…). I read more and more anecdotes of people (largely from Singapore) taking new interest in potential investments in Johor. This is potentially a good sign. It is a good sign if more people are sensible evaluating future prospects and deciding the long term viability of Iskandar is increasing. I do think the signs in the last year has been positive for practices to bring about Iskandar (as it can be) are being applied (backing up what people have said would happen). If these investors are merely following the current hot investing trend that is a risk (many markets globally have had problems with such herding investor behavior in the last decade).

Long term commitment, by countries, to economic investment (especially when short term interest get in the way) is fraught with risk. Few countries (Singapore is one of them) have shown the ability to stick to long term economic strategies when difficulties arise. Often short cuts are taken to aid the most powerful, governments fail to follow through with promises (to actually allow businesses to operate freely or to bring off mass transit systems well…).

Iskandar should still offer higher potential returns precisely because risks are still there for what will happen. This is good for investors. But investors need to also remember there are risks. One of the big problems in the last 10-15 years is large scale ignoring of investment risks across the globe.

Another thing investors in Iskandar should remember is the success of that investment is significantly dependent on government action following through on all the good talk. So far things are progressing very well. But investors should be very interested in making sure that continues. As an investor you can’t only notice once the issues reduce the value of your investment directly. If you wait that long, it is too late.
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New Blog Focusing on Johor Bahru Real Estate

I moved to Johor Bahru after taking some time to examine where in Malaysia I wanted to live. You can follow my blog on living in Malaysia. I think the potential for Johor Bahru is great. In my effort to find a place to live I learned a bit about Johor Bahru’s housing options (I was looking mainly at condos).

I also found the housing (and living) information that I could find for expats is not as good as I would have found useful. So I will try to have this site fill in some of the gap between what I would have liked and what I found.

Here I will provide information on Johor Bahru, Johor state, housing options in Johor, information on finding housing, investing options for real estate in Johor and information about living in Johor Bahru. I will focus on expats as an audience to give the site a focus but hopefully a much wider audience can also find worthwhile information.

To some extent “expat” in the Malaysian real estate market is equated with luxury or costly housing. I must say I haven’t seen Johor Bahru housing that is really world class luxury, more it is more just expensive compared to local real estate (but I guess saying luxury means expensive is understood without just saying expensive). I am sure there is some luxury housing (in houses, I would guess – probably out near the 2nd link) but I am skeptical if there are condos, I may find some as I live here.

Singapore, sits right to the South of Johor Bahru and many people, expats – and others, live in Johor while working in Singapore.

Penang and Kuala Lumpor have much more material online for prospective expats (though really even they could do with much more good content, in my opinion). But I really like Johor Bahru much more, myself. I see the scope of this blog to be focused on real estate but as any real estate agent will tell you people want to know about quality of life options nearby when looking at housing so I will include quite a bit on that also. I think that is critical to making good choices for what housing options are right for you.

I think the next 10 years should be very economically dynamic for Johor Bahru (and on a wider scale, Johor state) with significant real estate interest. Great quality of life enhancements are possible and real estate investments have the potential to do very well if the government’s Iskandar initiative can be properly managed. The potential is great and the stage is set very well. The ability to cooperate with Singapore to find mutual beneficial opportunities leads me to believe the potential is as good as nearly anywhere in the world in the next decade or two. But potential can be wasted fairly easily so the future will tell how successfully the potential is realized.

Related: Online Resources for Living in Johor BahruPenang Condo Market