Wednesday, June 11, 2014

Iskandar Johor

There has been rather a lot of excitement surrounding the Iskandar region in South Johor bordering Singapore in the last few years.  Many Singaporeans were very excited at the prospect of owning landed properties so close to their country. I have friends who have made investments and made a lot of money as the property prices there shot through the roof.

People asked me what I think of Iskandar. I say, very good... people made money. Properties prices appreciated over 100% the last 3 years and some people are looking at something like 15% rental yield. There is apparently more room for appreciation as the federal government keeps announcing incentives for investors in the Iskandar region. There is even talk of the Singapore MRT extending into Iskandar and Iskandar will be like Shenzen to Hong Kong or Zhuhai to Macau.

The more they give, the more concerns I have. I am not talking about the tax breaks and incentives. Those are good and in the right direction to pull people in to settle here. But Malaysia is an apartheid of sorts. Doing business here means one has to give (literally give...) shares (about 30% to 50% depending on the type of business license) to local Bumiputeras (children of the soil - meaning Malay Muslims and  other natives, but usually it just means UMNO Malays). This requirement is being relaxed in Iskandar. There is also land ownership for foreigners being relaxed allowing foreigners to freely buy and develop land in Iskandar.

Now, this is where it is going to be a problem. First of all, in the short term, land prices are at sky high. This prompted many land owners, mostly Bumiputeras and the Royal family included to sell their land. Foreign developers now come in to build tens of thousands, if not hundreds of thousands of homes and offices in a yet to be tested area. If Iskandar is to flop, this will turn out to be a mother of all gluts!

In the longer term, if Bumiputera equity in this region is to drop too drastically, insecure locals might push the government to tighten regulations and take back incentives offered to foreigners. As much as the federal government is pushing for the success of the Iskandar region, land matters still falls under the erratic state government. The latest fiasco is the passing of a bill to give sweeping powers to the state's Sultan over land matters although many of the clauses have been watered down to appease the public over the uproar. But this is a step towards protecting their interests over the interest of new migrants and investors into the state. Another example of what the state can do is the sudden change in weekend days from the usual Saturday/Sunday to a Friday/Saturday in line with some Muslim countries.

So, there you go... while investors are falling over themselves to put money in Iskandar, I still feel the world is big enough where one's hard earned cash can go to... :)

No comments: