As it gets more costly to live in Singapore, some expatriates have packed up and moved elsewhere.
However, an anticipated surge in demand for property in Johor, especially those in the high-end segment, has yet to materialise.
Furthermore, property prices in Johor have also risen, making it less attractive for Malaysians to move back home only to make the daily commute across the causeway to work.
Just last year, rental rates in Singapore surged 30%. Over and above that, the tax rate on property sold to foreigners has doubled to 60%, prompting some expatriates to consider moving out of the island republic.
Had there been an exodus, it would have been quite significant, given that 40% of Singapore’s residents are foreign born, with a huge proportion of them from Malaysia.
Property experts told FMT Business this has not given the Johor market the hoped-for boost.
Most purchases in the secondary market
The Johor property market is still attracting buyers. Many from China and some from Singapore have snapped up residential units there, said Johor-based real estate negotiator Stanley Chui.
According to property search site PropertyGuru, the median price of property sold in the last 12 months was RM973,000.
In the Klang Valley, the median price in the same period was RM1.52 million, based on the sale price of 736,694 units.
Chui said foreigners have picked properties in Johor to serve as vacation homes or a place where they can spend their retirement. Otherwise, they are for investment purposes.
He said Malaysia’s shift in focus towards the technology and financial sectors has also boosted foreign interest in investing in Johor.
The southern state will see some RM17 billion in data centre investments in the coming years, a spillover effect from Singapore’s decision to tighten conditions for setting up such facilities to meet sustainability requirements.
Challenges in the property market
However, the new investments in residential property are mostly for old properties, leaving new ones largely unsold, quantity surveyor V Sivadass said.
“In fact, 80% to 90% of all transactions in the residential sector are in the secondary market, and they are driven mostly by Malaysians who are working in Johor or Singapore,” he said.
Sivadass, who is executive director at PA International Property Consultants Sdn Bhd, said Singapore-based expatriates and businesses are unlikely to uproot themselves and head for Johor.
He pointed out that Malaysia is still not comparable with Singapore on several fronts. For instance, the republic is recognised as a global financial centre.
“On the other hand, Malaysia’s less-than-friendly policies have worsened the situation for the country,” he said.
“The business and socio-economic environment here is immature. It is not attractive for expatriates and multinationals in the services sector.”
He said most people in the middle and low-income groups who have moved back to Johor have done so to enjoy the benefits of living in Malaysia on salaries paid in the stronger Singapore dollar.
Malaysia also lacks a stable, long-term asset ownership policy for foreigners.
Ad hoc policy changes and sudden introduction of new fees for foreign buyers may also deter investment, he said.
Sivadass said the funding for infrastructure construction and maintenance is also “ridiculously low”.
He said that even in the industrial property segment, which has been more attractive to Singaporean businesses, 10% to 15% of such infrastructure have been left in a state of neglect.
Johor is nowhere close to Singapore as a financial centre and Kuala Lumpur has a better chance than Johor Bahru of attracting the spillover of the property price surge in Singapore.
Not all doom and gloom in Johor
Chui, the more optimistic of the two, said there is still a significant number of people from China and Singapore, especially, who are looking to invest in properties in Johor.
But, he said, foreigners prefer to rent first to acclimatise themselves to local conditions before making a purchase.
In that context, Johor is more attractive. It could cost as much as S$1,000 to rent just the master bedroom in Singapore. For that sum, one could rent a whole house in Johor.
Consilz Tan, a fellow at the Center for Market Education, said Malaysia’s rental market, especially Johor, remains promising, thanks to political stability, good economic outlook as well as policies that support foreign direct investment and foreign home ownership.
“Expatriates are prepared to commute from Johor to work in Singapore,” she said.