Are You Investing In Iskandar For The Wrong Reasons?

The Iskandar train is picking up speed. If you go about your day as per normal, you are surely going to either see an online banner on a condominium in Iskandar, hear a colleague mention about it during the day, see an advertisement in the newspapers, notice an article with “Iskandar” in it’s headlines, or even receive an email about the project. It wasn’t the case 6 months ago. Don’t get me wrong. Back then Iskandar was already a hot topic, but there are days where you can get by without running into something about the opportunities there. If more promoters are spending their marketing budgets to bring attention to Iskandar, you can bet that the market is on fire. I even saw a full page advertisement strategically dressed like a news article talking up the real estate market there.

Of course there are risks with pumping your money overseas. That was discussed in the article here. So this article is about something else other than the risks involved in taking your life savings overseas in a place where you have so far only seen in brochures and magazines. As the title of this column suggest, you are probably this close to buying an apartment up north or have already done so. Maybe now you are asking whether you are investing in Iskandar for the right or wrong reasons?

1) Firstly, the number 1 reason why Iskandar has become a hot topic here is because of it’s proximity to Singapore. Being so close make us feel somewhat familiar or affiliated to it. But remember to slap yourself awake and take note that the market there is not even close to the Singapore market. And it’s unproven. Just because you live in Singapore and it is an hour’s drive away does not make it as sound an investment as in Singapore. If anything, you are taking your money to an unfamiliar land just like if you are buying a place in Bangkok or Hong Kong. Have you even seen Iskandar for yourself? In all likelihood, you have probably seen more of Bangkok and Hong Kong than Iskandar.

2) Maybe you have been priced out of the Singapore real estate market. So you have made buying a fancy condominium overseas as your redemption to yourself. If this is so, you have to ask yourself why you absolutely have to invest in properties. There are so many investment vehicles around that are good alternatives to property. And a lot of them have less risks, proven track record, and less hassle as well. Does the benefits of buying a property overseas really outweigh the alternative investments available in Singapore? Get a friend to help you get out of your real estate trance and evaluate if you are making a logical decision.

3) Talking about friends, you may have also been bullish on Iskandar because a lot of big name players are going into it. Well guess what? One of the intentions of these big players going in is to get you to buy from them. Just because brand names are setting up shop does not mean that you can be assured of the safety and stability of your investment. Yes there must be something magical about the development for big players to go in. But remember that what is good for big players does not necessarily mean that it will be good for small players.

As you run into industry players and experts who cannot stop praising the potential of Iskandar properties, do a check of where these guys are promoting projects over there. If they are, you really cannot take what they say at face value simply because they could be trying to sell you something, most likely a new condominium. I’d rather have a property agent be upfront about trying to sell me something rather than go one big circle and coincidentally have apartments on hand to recommend.

4) Buying a penthouse could be one of your dreams since young. But owning a penthouse or landed property in which only your tenant lives in is not really fulfilling your dream, is it? I would imagine that anyone who dreams about owning a penthouse or landed house includes the pleasure of living in it. We are so accustomed to landed property as a symbol of status in Singapore that we tend to forget that landed properties are not as much of a status symbol overseas. You have crafted the dream of owning a luxury property in Singapore because of your aspirations. But owning one in Malaysia is the norm for our friendly neighbours. It’s not much of a status symbol. The cost of a HDB flat here can buy a few landed homes with change to spare. Don’t buy for the sake of buying and being able to tell yourself that you own a luxury home.

5) To feel safer about your investment, you could be part of a group buy. This makes you feel safer as other investors in the group have given their verdict that it is a good investment. Once you get involved in group buys, you could feel pressured to see through with it due to social aspects. You don’t want to embarrass yourself by chickening out when there are so many investors looking at you. The other thing about group buys is that it goes against the grain of property investing. When you buy an investment property for generating rental income, you want as little competitors as possible within the same project so that it would be less competitive in getting tenants. Why do you want to get into an investment together holding your competitors’ hands along?

6) You want to get your feet wet in real estate and Danga Bay is a good training ground to start off. If this is indeed what is on your mind, there are better training grounds in proven markets. Again, just because of the location’s proximity to Singapore does not make your exit strategy or contingency plans any easier. There are many great places in proven markets to get your feet wet in the region. Why jump in at the deep end when you can start in the shallow pool?

In every location, there are surely good opportunities that are available. There will surely be good buys in Iskandar. But if you are buying a condominium over there for investment, remember to treat it like one and base your investing decision on analysis and assessment. Not based on market hype or a glossy brochure. There are instances in Malaysia whereby projects are never completed or way overdue on completion. Are you sure that will not happen for projects in Iskandar? The good thing is that the Malaysian government seems to put the Iskandar project as a priority. It would be years later before we see how the huge project turns out.

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