Iskandar Malaysia – 7 Objections To Overcome Before Investing

By on May 11, 2014

If you are a resident in Singapore and have your eyes on property investments even when you are priced out of local properties, you must already have heard about the developments going on at Iskandar. Some major planning, development and construction are going on at a scale that makes Punggol look like a sideshow.

And while many public personalities have been more than bullish on the prospects, there are definitely critics who are sceptical as well. Depending on which side you are leaning towards, you could have already decided whether Iskandar real estate is an investment. And if you are sitting on the fence, here are some objections you have to overcome to move with decisiveness.

It is not safe in Johor

It is understandable should you feel that the crime rate in Johor Bahru is higher than Singapore. But do remember that this is the same with almost every country in the world when compared to Singapore. If your luck is down, you can even be robbed in Orchard Road.

It is a good thing that developers have recognized this important concern of investors as Singaporeans are used to a high level of security and peace of mind in safety. In an attempt to counter this, you can expect stringent security rules that will be implemented in condominiums, town houses, and the like.

It is quite a hassle to travel to transit via the packed Causeway

It is not an exaggeration to say that traffic can be horrendous at the immigration check points. But if you think about it, these days, our expressways are almost jammed packed with vehicles half of the time. If we are to discount the wee hour where few drivers are expected to use the expressways, traffic jams are always there at least two-thirds of the time during normal and peak hours.

Also put into perspective that even major roads can have huge jams that start from the afternoon. Think of Ubi and MacPherson and you will know what I mean. So the thought that jams at the Causeway is a major objection is a rather biased view.

To alleviate this issue of traffic in the near future, we can look forward to bigger and better customs on both side of the Causeway, train connections between the 2 cities, easier mass access to the second link, ferry services connecting the 2 territories, and there is even talk of a third bridge being planned.

The Ringgit seems to be too shy to appreciate against the Singapore dollar

The party pooper which is the exchange rate is a very valid point. Even though a strong dollar can make Malaysian properties more affordable, a weak Ringgit at the point of your exit strategy can eat up all your gains.

This is something that we cannot run away. You will have to bite the bullet if you are a short term investor. But who says you have to sell? In fact, the most successful investors are known to buy, hold, and never sell. Just keep the positive cash flow coming in and you could be set for life.

There are 5 Flagship zones in Iskandar.

A – Johor Bahru City

B – Nusajaya

C – Western Gate Devlopment

D – Eastern Gate Development

E – Senai-Skudai

petronasI will wait for the bubble to burst before entering

Because Iskandar is unproven, there is no benchmark or historical data to forecast how it will perform in the short and long term. So how do you judge what is a low or high price. I must admit that prices do seem on the high side for Malaysian property.

Bear in mind that nobody can truly time the market to perfection. If you use the wait-and-see approach, you must be ready to let go of your plans should prices keep rising to a point where it is no longer a comfortable investment for you.

I’m afraid of unstable government policies for foreign investors

We can always expect the government of the local authorities to implement policies that benefit locals more than foreigners. Those are the advantages of being citizens. Governments anywhere in the world can flip flop on their policies. Even the most developed nations. This is part and parcel of the investment game.

Singapore is not that “free” a market anyway. This can be observed with the multiple government interventions to slow down the market-driven growth of property prices. Down to the point where banks are micromanaged on how to assess a borrower’s loan approval quantum.

Who is going to rent from me since locals have their own less expensive homes and expatriates will likely buy their own place?

You are correct to assess that there might be a shortage of tenants and you could be very likely looking at a vacant house for some time. The bet that real estate investors are placing on Iskandar is that the local and foreign population will rise, heating up the rental market.

Local will presumably seek more value in the outskirts while there is a real prospect that foreigners will buy their own homes. The good thing is that there is a target population of 3 million by 2025. And maybe there will be some spill over effect from the possible 6.9 million Singapore population by 2030.

Clearly, this means that you have to hold your investment for at least 10 to 15 years to see whether it will arrive at it’s real potential.

Why don’t I buy properties in Singapore instead?

You are considering Iskandar in the first place probably because you have been priced out of the local market. Do you really want to revisit those pressing issues again? Here are just some things to serve as a reminder. Additional Buyers Stamp Duties (ABSD), Seller Stamp Dutues (SSD), Total Debt Service Ration (TDSR), low Loan To Value (LTV), restrictions with Minimum Occupation Period (MOP), prices that are so keen to rise yet so stubborn in falling, etc.



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