Buying property in Iskandar Malaysia: What Singapore investors need to know

Back in November 2006, a masterplan regional corridor for economic development was launched in the Southern Malaysian state of Johor.

At about three times the size of Singapore, Iskandar Malaysia has already attracted tens of billions of ringgit in investments and is expected to become an engine for comprehensive development for Malaysia as a whole.

Ten years on, the development continues to benefit from an influx of interest from foreign investors. But is it really a good place for you to invest your money in?

How does it matter to Singaporeans?

With one of the highest property prices in the world, Singapore is a very expensive place to live and work in. Many Singaporeans live in Johor as a result and commute back and forth for work.

So, when Iskandar Malaysia was in development, property prices per square foot did not even come up to one third the price of a similar property in Singapore. So it makes sense for Singaporeans to invest in the promising Iskandar region, whether it is as a primary home or secondary property for investment.

However, before putting in all your hard-earned savings in this up and coming region, here's what you need to know about property in Iskandar:

You need to be in it for the long run

Since Iskandar is still in its infancy as a township, you have to consider that the appreciation of your own property will not happen till much later.

And if you're buying a unit in Iskandar for investment, then be prepared to wait for at least ten years before the property rises to a level that will result in a profitable sale opportunity.

So, be sure you can afford to wait.

Does the currency exchange matter?

The exchange rate of the Malaysian Ringgit against the Singaporean dollar is of great importance when considering any investment decision across the border and its profitability. Usually, a depreciation of the Ringgit makes property in Iskandar less expensive for Singaporeans, but this also affects the returns on investment.

But as long as the appreciation of the property outweighs the depreciation of the Ringgit, you still stand to make a profit.

Increase in the minimum threshold of property price for foreigners

There was a time when non-Malaysians could purchase any property if it sold for RM500,000 or above. In 2015, that figure was increased to RM1 million.

Potential Singaporean investors need to bear in mind the possibility that this limit may be raised again in the future, which might make it impossible to sell off recently purchased units in the short run. As an investor, one must be willing to wait it out until the property market picks up again to be able to make a decent profit out of their investment.

The price floor for foreign buyers of property may be abrogated altogether in the future given the volatile nature of the market.

Improved connectivity to boost the property market in Iskandar?

With the High Speed Rail (HSR) linking Kuala Lumpur to Singapore planned for commencement of operations sometime around 2025, and the Rapid Transit System (RTS) connecting Johor Bahru (JB) to Singapore expected to come online in 2019, Singaporean investors will find it much easier to commute to and from Johor.

Malaysians who would like to work in Singapore to earn in Singapore dollars but spend in Malaysian Ringgit can live in Johor and commute to and from Singapore, as well. The HSR and RTS is also expected to push up prices of property in Iskandar and Johor Bahru.

Iskandar is also starting to see more investments flowing in from manufacturing, logistics, electronics, oleochemicals and petrochemicals, healthcare, finance, food processing, tourism and education. Over RM150 bil in investment commitments were made in Iskandar by 2015, with more slated to come.

ZUU Online aims to help individuals enhance their financial literacy and deepen understanding of the investment arena.