Iskandar Malaysia: Supply Fears Overblown

By Ryan Khoo / Alpha Marketing, The Edge Property | June 10, 2015 5:00 PM SGT
Iskandar Malaysia has received quite the media bashing recently especially in Singapore with the recent highlight in parliament that as of Q4 2014, there were 142,567 units "incoming" in Johor and another 193,271 "planned". This total is almost 335,838 units, which is equivalent to the existing private housing supply in Singapore. Data was quoted from Malaysia's NAPIC (National Property Information Center).
This statement caused some alarm within the investor community as it seemingly portrayed Iskandar Malaysia as having an over-supply of property. But before you make any conclusions, it is best to understand how the figures are defined and the differences between the Malaysian and Singapore systems.
1. The figures quoted are for Johor state in entirety.
The 335,838 figure quoted is for the entire state of Johor. Iskandar is only a sub-set within Johor state and should be approximately about 2/3 of the entire Johor figures.
2. Definition of "incoming" supply and "planned" supply is different compared to Singapore.
"Incoming" is defined as any property project that has been approved by the local authorities. "Planned" supply refers to projects that are in submission with no approvals given yet and hence also no timeframes to build. Approved projects do not necessarily have started construction and typically approvals have a 2 year validity period in which if no construction has begun, the developer will have to seek re-approval. An approved project that does not receive good response from the market can always be deferred or amended (new approvals will be required in this case). Hence out of the 142,567 units defined as "incoming" in Johor state, the actual figure that has started construction on the ground is much lower.
3. Malaysian developments look at land cost differently compared against a Singapore equivalent.
Land cost as a component of the overall property project cost is lower in Malaysia compared to a similar project in Singapore. As such, a real estate developer in Malaysia can afford to hold on to the land for a longer timeframe and choose not to build if they do not have good market response and there are no penalties involved from the authorities. Many developments are also the result of joint ventures between land owners and the developer, hence the land carries a low holding cost or none at all. This is unlike the Singapore market which is dominated by Government Land Sales (GLS) and where most developers and...