Expert Series Q&A – Iskandar, Johor – Mr. Ryan Khoo

Ryan Khoo is the Director and Co-Founder of Alpha Marketing, a real estate investment club based in Singapore. He started off investing in studio apartments in Kuala Lumpur back in 2007 and today owns properties both in Malaysia and Singapore with a significant portfolio in both countries. He advises club members on their property portfolios and how to achieve the best returns via property investing. Alpha Marketing organizes regular events on the property market, networking nights, property tours and helps investors to bulk buy property or co-invest together. Membership is FREE. Do sign up as a member via alphamarketingsg.com or on Facebook at Malaysian Investors in Singapore. He can be reached at ryan.khoo@alphamarketingsg.com

1) After the latest round of cooling measure, specifically the RM1 Million requirement, Iskandar has cooled down tremendously, at least that’s what the public is thinking. What are your thoughts about this specific requirement for short term (6-12 months) and longer term (over 12 months).

Cooling measures always create an initial period of doubt, especially when the implementation is not clear as they have been for Iskandar with the uncertainities of actual implementation date, exemptions for Medini and un-founded rumours on foreigner purchase restrictions. As such we see the number of transactions have dropped significantly as people take time to digest the impact and evaluate options.

My thoughts is that this doubtful period will be temporary and buying interest will return by Q2 this year. The market basically needs some good news to reignite interest, and fortunately for Iskandar there is much good news coming in the coming months.

2) Do you believe the Singapore government would want Iskandar to succeed as well? What are some of the reasons for them to support Iskandar?

Yes its definitely in the Singapore government’s interest for Iskandar to succeed. While I do understand that some people have reservations on this but for both Malaysia and Singapore, the success of Iskandar is imperative and is just a matter of time. Malaysia needs the economic spillover effect from Singapore and earn the strong SGD for it to escape the middle income trap while Singapore has issues with soaring housing, healthcare and education costs, not to mention the long suffering manufacturing and services industries, all of which can be resolved in Iskandar.

This process will take time and different industries will benefit at different timelines as Iskandar matures but anyone who spends some time studying Singapore’s economy can see how Iskandar can help alleviate some of its structural issues.

3) If I am a Malaysian holding Singapore PR and would like to buy for rental income first and capital appreciation second, should I buy Medini or JB first?

There are 2 schools of thought. The first school of thought supports JB city because it is where most of the economic activities are today and where the future RTS will link to Singapore first. Hence people invest into JB city because they foresee increased demand when the RTS is completed, mirroring what happened in Shenzhen, greater Tokyo and other major cities. However JB city has the reputation of being “unsafe” and there are many older, poorly planned developments there so there are question marks if people actually want to live in the city. Though there are many initiatives to rejuvenate the city center, this might take a long time and developments are patchy in nature.

The second school of thought supports Nusajaya (where Medini is in) and because it is a well planned, new city center, it would be a preferred choice for those from Singapore, who have higher requirements (such as security & design) when it comes to the living environment. Nusajaya also has many economic catalysts (such as the theme parks, business parks, Educity, Pinewood Studios, healthcare facilities) that has changed the economic landscape in Iskandar and promise high growth in jobs and other economic activity. It is also still close to Singapore via the 2nd Link. The negative points is that Nusajaya economic maturity may still be a few years down the road, and it is hard to say for sure whether we are buying too early or not.

As a property investor, I would say that the property market overall is in a low yield environment today, whether Klang Valley, Penang or Iskandar. As much of the properties involved are still under construction and much of the new job growth catalysts in Iskandar are still in infancy, its difficult to predict how rental yields will be. Investors in Iskandar today make their decision based on the 2 schools of thought above.

4) It seems that Chinese buyers from China are flooding into Iskandar. Would this pose a potential risk for Iskandar as a whole?

Chinese buyers and developers in Iskandar is a good thing. A good economy/industry is one where there is a vibrant and active market especially if it involves money from overseas. That shows that the market is interesting and attractive enough for them to invest in. Chinese buyers have the funds to buy anywhere in the world, and if they choose Iskandar, that says something about their beliefs. And the reason why they buy is because they see a Shenzhen – Hong Kong relationship and they are buying before the big catalyst, which is the RTS and High-Speed Rail connections to Singapore.

The fear that most Singapore/Malaysian investors have is that Chinese buyers buy with no concerns about rental yield and that they create a false impression of demand. Well that is true, the typical Chinese investor is not going to put too much thought or effort to manage tenants. They are basically buying an asset with the belief that the asset will appreciate in value after some time and why they are confident is because of the Shenzhen – Hong Kong relationship being replicated in Iskandar/Klang Valley – Singapore. Its not right or wrong, just a different investment methodology. The Chinese also have different investment horizons and holding power capabilities.

And the Chinese have put money into not just property but also various businesses. Huawei is opening a shared services center in Iskandar (not Klang Valley or Penang) and there have been many similar investments into manufacturing. Chinese banks such as ICBC and BoC are also very active granting business and property loans in Iskandar vs other parts of Malaysia.

5) In your opinion, if RTS between Singapore and Iskandar happens, what would happen to the property prices in Iskandar? Your conservative opinion.

Property prices will definitely move up once the RTS is completed, and again when High-Speed Rail to KL is completed. How much will it go up to? Don’t know. But I like to use Singapore prices to reference against instead of KL prices simply because Singapore is so much nearer about 50km away (with an SGD earning 7mil population by 2030) vs KL’s MYR earning population 8-12 million that is 350km away. Singapore outskirt prices are about SGD1,000psf today, so basically Iskandar should be lower than that, the question is by how much and if it is connectable by train, the discount should not be too significant. Singapore central prices are hovering between SGD1,800-3,000psf today so that goes to show how much potential upside Iskandar has.

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