Iskandar Malaysia is Only Going One Way – Down


Just like the California Gold Rush of 1849, investors, both local and foreign have been flocking in droves in the past three years to the region of Iskandar Malaysia to purchase property. Now, the party is over and the fat lady is clearing her throat.

In the past three years, it seemed like nothing could stop the Iskandar train. Malaysia’s richest man Robert Kuok, Australian billionaire Lang Walker, Valencia’s adopted son Peter Lim, and a host of other big players had invested huge sums of money in the region.

Kuok had purchased RM198.72 million worth of land last year for a mixed-development project. Walker had bet more than RM2.68 billion on Iskandar Malaysia to become a boomtown, constructing the “largest master-planned urban project ever undertaken in Southeast Asia”. As for Lim, his considerable influence can be felt everywhere in the area that’s roughly three times the size of its neighbour, Singapore. The businessman has his fingers in many Iskandar Malaysia-baked pies, including a premium security business, a medical hub, and the motorsports city.

It’s no wonder that many investors, especially from Singapore, have made a play in the region in the past half a decade, snapping up properties the moment they become available, eagerly anticipating the welcome flood of talents looking for a job and a place to stay. Unfortunately though, the supposed flood is turning out to be a trickle and the weather forecast is only promising more doom and gloom in the near future.

Too many investors, too few inhabitants

When you drive around Iskandar Malaysia, it’s not uncommon to see swathes of empty apartments with no one living inside. Therein lies perhaps the main issue with the region – the lack of a critical mass of people, especially locals, staying in the area.

In the beginning, the majority of property purchases were made by foreigners, particularly Singaporeans, who were seduced by the attractive price tags. After all, they are used to paying princely six-figure sums for a shoebox, so owning a house a few times bigger than their HDB flats for a cheaper price is incredibly enticing.

Unfortunately, the property cooling measures announced in Malaysia’s Budget 2014 have thrown a spanner in the plans of many of these potential investors. Since the beginning of the year, foreigners can only purchase property worth at least RM1 million, have to pay more in Real Property Gains Tax (RPGT), and must contend with a 2% property levy. These moves have whittled the number of potential property investors in Iskandar.

Couple this with the glut of housing development projects being launched by big Chinese developers such as Country Garden and Guangzhou R&F and you’re looking at the classic problem of unchecked growth – supply outrunning demand.

It’s a problem occurring not just in Iskandar but all across Malaysia. A 2014 Property Industry Survey conducted in the first half of this year by the Real Estate and Housing Developers’ Association Malaysia makes for depressing reading.

  • Less than half of the 10,189 units launched in the first half this year were sold
  • 90% of developers in Malaysia experienced a slowdown in property sales
  • More than half of local buyers had problems getting financing for property purchases

If Malaysians already have issues trying to buy homes that cost below RM1 million, it’s even less likely that they would be able to afford the high-end properties in Iskandar. At the moment, the resale market is practically non-existent.

In Iskandar, purchase bookings have been reportedly down at least 20% and the outlook for 2015 is just as pessimistic.

Too many empty houses, too few businesses

A thriving business and social hub requires a careful mix of houses and businesses. The equation seems simple on paper – investments create jobs, jobs attract workers, workers need a place to stay. Reality, however, is far more complicated and the master planners and authorities in Iskandar are only starting to realise how difficult it can be.


A disproportionate amount of investments has been poured into housing while forays into businesses have been lagging behind. The only industry keeping pace so far is manufacturing. With many housing projects set to be complete in the next few years, analysts are wondering whether there will be enough rental demand from incoming workers to fill up these completed homes. If there aren’t, current property owners will be fighting over scraps and it’s a race to the bottom of the barrel.

What makes the situation difficult to read is the lack of transparency from the Iskandar Regional Development Authority (IRDA), who only releases quarterly figures on monetary investment but not job creation or population growth. The only projection is that Iskandar Malaysia is estimated to have 3.17 million people by 2025, of which 66% is of working age.

The rest is anyone’s guess.

Too little information, too many possible vagaries

Former Minister Mentor Lee Kuan Yew said in his book One Man’s View of the World, “Let’s wait and see how Iskandar develops. This is an economic field of cooperation in which, you must remember, we are putting investments on Malaysian soil. And at the stroke of a pen, they can take it over.”

His words are beginning to ring true, with the new property measures instituted this year. Previously, property developers were rolling out the red carpet for buyers – Country Garden even chartered several buses to bring hundreds of interested investors to the carnival launch of their new properties. Today, the party atmosphere is gone.

The business dealings in the Iskandar region, notably the sale of 116 acres of prime land to Chinese developers Guangzhou R&F for RM4.5 billion, have also ruffled a few feathers. Smaller local developers are being squeezed out of the market thanks to a new bill that gave the monarch sweeping executive powers and sentiments on the ground have been unfavourable of late.

One of the biggest developers in Malaysia, UEM Sunrise, is already reconsidering its business holdings in Iskandar and the company’s CEO has mentioned that it will “reduce its dependency on Iskandar, where it has approximately 60% of its total land bank”.

The suspension of Forest City, a mixed-use development on four reclaimed lands, since the middle of this year has also been a big blow.

Rocky politics, lack of comprehensive information, and more pull-outs from big players will only further shake investor confidence, evidenced by the slowdown of growth in the Iskandar region.

Is Iskandar too big to fail?


There is one thing going for Iskandar – the RM150 billion worth of investments from influential people in the region, which is a huge sum of money to just go to waste.

The Kuala Lumpur-Singapore High Speed Rail project, slated to be completed by 2020, might also be a catalyst for growth in Iskandar since one of the proposed stops is in Nusajaya, which is within the Iskandar Malaysia region. That, however, is far off into the future.

If you’re thinking about buying a house in Iskandar to stay in during the weekends and the holidays, you have a wealth of places to choose from right now. However, if you’re considering investing in Iskandar Malaysia, do so with caution, due diligence, and with an exit strategy, if any, that is at least two decades down the road. The train is definitely slowing down. Whether it’s permanently stopping remains to be seen.

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Sources: The Straits Times, Property Guru, MyPaper, The Star

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