Johor is not (yet) the new Shenzhen

The second most populated state of Malaysia, Johor has been aiming to implement around Singapore, what Shenzhen has successfully done around Hong Kong, but with quite a different outcome so far. It was about 2006 (back then I just moved to Singapore) when Johor announced a 20 years development plan for the area of the Sultanate bordering the West side of Singapore. An area now known as Iskandar. Within the plan, a few new cities were to be launched. Medini City, Forest City, Edu City, to mention some of the most hyped. Collectively, the whole plan has attracted $71 billion in investment with both some lights and shadows.

The elephant in the room are the over 6,000 brand new properties still hanging around unsold, the highest amount among all states of Malaysia. This number does not keep in account an unquantified amount of condo units, villas and apartments that mostly foreigners from Singapore and China have purchased over the past decade as an investment, but until now was unable to rent or resell: all together an enormous 51 thousand units for sale., summing up to more than $8.5 billion in value.

On top of that, over the years, property developers have complained about the unclear terms of bumiputera, a series of policies designed and implemented by the Malaysian central government to favour the indigenous people of Southeast Asia. According to the pricing segment of the properties released, developers are required to leave quotas for affordable housing.

So for properties priced below Malaysian Ringgit 200,000 (approximately $48,000), developers are supposed to allocate 40 per cent of the units for bumiputera. For those priced between Malaysian Ringgit 200,000 and Malaysian Ringgit 300,000 (approximately $71,000), the quota is 30 per cent. The last group is for properties exceeding Malaysian Ringgit 300,000; the developers would need to allocate 20 per cent of them to bumiputera. However some parts of Iskandar has areas where the quota was allocated to 50 per cent, while only 20 per cent of bumiputera were actually eligible to buy.

In addition, the timeline of construction, launch and delivery of each unit, versus the timing when the quota becomes applicable, have left some property developers struggling with cash flow and over 16 thousand bumiputera units unsold.

However, according to Iskandar Regional Development Authority (IRDA), last year the property trend started growing again for the first time since 2015. The number of real estate transactions increased sharply by 7.8 per cent compared to the 3.8 per cent a year before, for a new high in transaction in the Sultanate. Quite an interesting volume, considering that foreigners can only purchase property priced over 1 million Malaysian Ringgit (approximately $240k); a rule not applicable to Medini City though, where foreigners can buy at any price.

The investments were also targeting the manufacturing sector as well as the service industry, but have yet to fully flourish or sustain. Like the famous Legoland, which in the first few years attracted hoards of tourists, but over time lost the novelty effect and became a ghost town. A few months ago, the owner announced to the public the intention of selling the theme park if anyone had an offer. Still quite popular are Hello Kitty and Thomas the Train theme parks, located on Puteri Harbour, perhaps one of the best developed areas in Iskandar.

Educity has begun attracting students and lecturers from within Malaysia and from abroad. Japanese and Korean families are common encounters along the promenade. Rumours said that the new marina will be managed by the Singapore jewel Sentosa Cove (although not confirmed and still under construction).

Despite the positive signs, the core issue remains the struggle to cross border at peak hours. The only 2 bridges connecting Singapore to Johor experience massive queues during the weekend and pretty much every day for those who decided to live in Johor and work in Singapore. Hong Kong moves to a completely different speed, with dozens of ways to go across the straight to Shenzhen. The plan in place to build a train connecting the checkpoints of Singapore and Johor fell through in the aftermath of the past political elections, when the new Government decided to pause the investment.

I frequently cross the border on my motorbike, and seldom experience queue for more than 10 minutes, but the last time I drove over the weekend, I regretted the decision. It took me 3 hours to leave Singapore on a Friday evening and 3 hours to leave Johor on a Sunday afternoon. All together less than 20 km to get in and out of the Sultanate.

Johor is a lovely place to visit and populated by very friendly people, but reaching it from Singapore is still time consuming for anyone who wants to drive in and out frequently. Until logistics and optimised mass transportation are in place, Iskandar is not likely to bloom to its real potential.