JB properties advertised as condominiums in Woodlands Singapore!!?

I’m not sure how many of you have noticed this, some property agents are advertising properties in JB city as located in Woodlands in Singapore! I understand the online property sites do their daily scrubs but you should still find them Go to any of the online property listing sites to confirm what I say.

Well , JB city centre is just a bridge away from Woodlands so it is understandable that they are treating JB City as a natural extension of Woodlands.

In my opinion, if the rejuvenation of JB City is followed through properly, I do think that JB city can offer a better quality lifestyle, better amenities and maybe better food than in Woodlands. And if that is translated to property prices, it is not hard to imagine that the prices of properties in JB City can surpass those in Woodlands. Also, JB City is a mature area, so any new property supply coming online would likely involve en-bloc redevelopment of existing properties. I think prices should appreciate and if not hold steady.

However, do note that it is always possible for the rejuvenation to be stalled. The risks are best summed up by my Uncles and Aunts from both sides of the causeway “if JB city has stayed in this state for so many years, what makes you think that it is going to change for the better any time soon.”

What’s in vogue? - Medical Hub, Wellness Centre, EduCity

The pictures above are not in Iskandar Malaysia(IM), I took them in the new NUS(National University of Singapore) University Town. Why University towns and Medical centres are taking centre stage in IM? Well, the simple answer to that is you instantaneously get a large captive population that is going to live, work and play in the area.

I like to frequent the NUS university town (I get food at staff rates shh…. ), it is spacious, not crowded and very new. Singapore is known for this sort of infrastructure-driven model. I also remember popping into the food court every now and then at Gleneagles Hospital Singapore during my stay-in when my wife delivered our two girls.

This can be similarly replicated in Iskandar Malaysia, (remember, IM is 3 times that of Singapore). But like I mentioned in “Knowing your Bandars and Tamans”, while this model of town planning has a proven record of being successful, it can take a long time before universities get filled and hospitals get crowded. You can try to shorten that process, but you can’t do away with it.

If you have yet to invest in Singapore, think Singapore first! Areas around NUS is already vibrant, well-connected and in a new commercial belt that will be included in the new Masterplan. Prices range from $800psf to $1600psf(estimated) in the District 5 area. In my opinion, the potential of the Buona Vista, Pasir Panjang and West Coast area is not fully appreciated while the regions on the eastern side of Singapore continues to steal the limelight.

Yes it is a lot more than what you can get in EduCity (estimated RM800-1000psf and rising), but the universities in Nusajaya are hardly more than 2-3 years old and the surroundings are still largely work-in-progress. And while EduCity goes about establishing its reputation, we may have to weather a few more economic cycles before you see the place really take off. Saying that, I would still go into EduCity area if there is a good enough bargain.

I would like to spend a bit more time on Flagship Zone A- JB City and Flagship Zone B- Nusajaya in my later postings. Hope this posting surpasses 150 reads :)

You mean there is no MRT at my doorstep?!! - Small country mindset in big country series

Photo source : pictures taken at Iskandar Waterfront Holdings gallery

You mean there is no MRT at my doorstep?!! - Small country mindset in big country series
There was a huge argument in the coach bus over the location of the MRT stop in JB when I was on a company survey trip yesterday. Property agents will never lose an argument 

While there were many well substantiated guesses, there were many wild, ridiculous guesses as well. But I got my confirmation of the location from the representative from Iskandar Waterfront Holdings (IWH) – this is a government-linked company incorporated to serve as the masterplanner for 4000 acres of waterfront land (in flagship zone A of Iskandar region). This is also where Capitaland will be sinking in RM800 mil(Danga Bay) for a mixed integrated project comprising of landed and high-rise developments. For more information on IWH, please visit their official website. http://www.iskandarwaterfront.com/

The location of the MRT stop in JB is earmarked to be at the previous lorry clearance area. Well, no surprises and I think it makes perfect sense for a straight line extension from Singapore side to Johor Bahru that runs parallel to existing causeway. Why would they even consider elaborate tunneling works or multiple bends/twists just for a MRT stop from Spore and JB. It would also be a complete engineer’s nightmare to maintain a twisty complicated stretch of MRT track, I don’t think any of our train operators are prepared for that!

Now back to the concept of doorstep MRT. Typically in Singapore, you would expect a property located near to the MRT to fetch a 10-15% premium. Not so in Malaysia. Using WorldBank’s statistics, Malaysia has about 360 vehicles per 1000 people, Singapore on the other hand is 149 vehicles per 1000 people. See http://data.worldbank.org/indicator/IS.VEH.NVEH.P3/countries?display=default&cid=DEC_SS_WBGDataEmail_EXT

Cars are a lot more important than public transport in Malaysia and you can see why it is so. The most successful hypermarkets in Johor are the ones that cater for a large car park space (think Aeon Bukit Indah and Aeon Tebrau City). While the building footprint doesn’t have to be very big, it needs to sit on a very large piece of land for carpark purposes. Furthermore, it may not be such a good idea to be located near to MRT stations or train stations because there is a large transient population which makes the particular place especially “complicated”. I learnt this when I asked why there aren’t many multi-storey caparks in Johor 
So ditch that idea of having a doorstep MRT. It is good be close to one, somewhere well-connected with multiple access roads, ample carpark lots and big drop-off areas. Having a doorstep MRT station doesn’t necessarily help with the price of properties in Johor.

Putting the plans together!

Putting the plans together!
Remember I said that the untapped potential of Iskandar Malaysia is just too huge to ignore. Here's what I mean.

1. Everyone is quite familiar with Singapore's Land Use planning till 2030 by URA. An overview of how land will be used beyond 2030 (See Picture)
2. Iskandar Malaysia has also put up a blue print for its integrated Land use. (See picture)

Let me put the 2 together side by side to show you (Pay attention to the legend, where the centres of activity will be located in both places.

Then you decide for yourself if they are aligned. Actually they do!
The reality is that planners on both sides can no longer plan land use in isolation.

Ask yourself a few questions:
a. Where is the concentration of Residential, Commercial & industrial activity in both places?
b. Why Spore Govt is encouraging SMEs to shift base if the cost structure in Johor suits them?
c. Where do you think the High Speed Rail(HSR), MRT link and even the "3rd causeway" should be build?
d. Where are the ports in Johor and in Singapore(new location)?
...

Even if you're not interested in property investment, an understanding of land use in Johor and Singapore tells you the economic shifts, how our careers, our lives, our children's lives will change... more importantly how you should adapt to these changes.

Now do you really need “insider” information?
I will come back to this again in later postings.

Costs involved in purchasing a property in Johor Malaysia

This should be used only as a reference, please seek proper legal and tax advisors on your property transactions.

Immediate / During Purchase
1. Purchase Price (10% downpayment , balance progressive )
Depending on which stage of completion, may have to fork out next stage of payment if already completed during sale.

2. State Consent Fee (Applicable to foreigners only.)
- Johor State Consent (Approval fee- RM10,000, Application fee - RM500)
- Processing time about 3 months

3. Stamp Duty for Sales and Purchase Agreement(SPA)

4. Stamp Duty for Loan Agreement(0.5% of loan)

5. Legal Fee for Sales and Purchase Agreement(SPA)

6. Legal Fee for Loan
 First RM150,000 – 1%
 Next RM850,000 - 0.7%
 Next RM 2,000,000 – 0.6%

7. Disbursement Fee
- include fees for registration of charge, land search and bankruptcy search, etc)


Upon Issue of Certificate of Completion and Compliance (CCC)
a. Stamp Duty (Memorandum of Transfer – MOT/ transfer of title)
b. Registration Fee
c. Legal Fee

Stamp duty involved in Property Transactions

Again, this list should be used as a reference only.


1. Stamp Duty (Memorandum of Transfer – MOT/ transfer of title)
 First RM 100,000 – 1%
 Next RM 400,000 – 2%
 Balance – 3%
Payable upon obtaining Certificate of Completion & Compliance (CCC)

2. Registration Fee
 Below RM 1,000,000 – RM 3,000
 Every RM 50,000 above RM 1,000,000 – additional RM100

3. Legal Fee
 First RM 150,000 – 1%
 Next RM 850,000 – 0.7%
 Next RM 2,000,000 – 0.6%

What is the rental yield?

When it comes to rental yield, I'm pretty sure many salespeople will tell you that Iskandar is about future potential and capital appreciation. So current rental market is not a good assessment of what you will get for your property. Some may pepper their pitches saying there will be an influx of expatriates, knowledge workers coming in and needing a place of their own. I even hear someone saying the students enrolled into one of the colleges will be most willing to rent a place from you. I let you decide for yourself.

Let me provide a different perspective. I think a lot of emphasis has been placed on attracting FOREIGN knowledge workers from overseas into Iskandar (engineers, consultants, educators, designers, etc). There is also the Malaysia My Second Home (MM2H) programme http://www.mm2h.gov.my/, enticing people to spend their retirement years in Malaysia with attractive tax incentives. Johor is actually quite attractive, I was told it has the most number of golf courses in a single state. 

Malaysia doesn’t lack talent at all, both in terms of depth and scope. But the issue is that a large percentage of these talents is residing overseas (UK, Australia, NZ, US, China, Taiwan, and of course Singapore). Most of us are not aware that some of the tax incentives are also extended to returning Malaysians. Many will actually return, especially with a stagnating European economy. Many will also choose Johor to ride on the wave of growth. To me, this is a much larger target market than the so-called expatriates, Singaporean retirees or Singaporean looking for holiday homes. If you agree with me, read on…

My next question is where in Johor would these returning Malaysians with ties in Malaysia stay? Would they consult a relative or a friend residing in Johor? So do consult your Johorean relatives or friend. Also, read my earlier postings about town planning and choosing townships that are mature or have the potential to grow.
My take is to go where the Johorean population is staying, look for the best developments. Select from a good price category as it ensures good resident-mix. Cheap is not necessarily good, you really don’t want shady characters living in your neighbourhood, especially for landed properties. Developments that are well-managed will fetch good rental and worth a lot more in the longer run. This is true not just in Iskandar but Singapore as well.

I hope this insight is useful for you.

Abandoned projects, can it still happen?

The cheeky answer to this is that of course it can happen. And the same can also happen in Singapore and anywhere else. As some of you are probably aware, more recently we have instances of construction firms going bust in Singapore. Pacific Mall in the picture above is a stark reminder of a not-so-happy past, a commercial project in Johor that was sold but abandoned halfway.

For those who are invited and participated, this building is always mentioned regularly in Q&A sessions whenever IRDA(Iskandar Development Region Authority) holds their industry engagement event.

But let me put it this way, no government in the world wants their property market to boom one day and go bust the next, this creates a lot of uncertainties, definitely not good for political points. Therefore, they have put in place safeguards to protect the buyers of residential units in Malaysia, the Housing Development Act (HDA).

Developers regulated by HDA would first have to get an APDL (Advertising Permit & Development License) before they start the sale process. Also for transactions regulated by HDA, there are standard statutory contracts (most commonly we will encounter Schedule H- strata titled houses & Schedule G – landed). This means that the contract of sale (please note that this only applies only for purchases direct from developers) must be in the prescribed form with standard clauses and covers things like the payment schedules(progressive payment). For more details, please seek your malaysian lawyer’s advice.

But in the event that a project is abandoned, there are 3 scenarios that can take place:

1. New developer takes over. A white knight developer will come in and complete the project, buyers will get their property at same price but will not receive any late delivery compensation. This process will take time as the new developer would have to contact all the individual strata-title owners , negotiate and come to an agreement.

2. The government takes over and appoints a developer to take over, quite similar to 1. However, there will be extra conditions such as state consent needed for resale subsequently.

3. Worst case scenario, project remains abandoned but buyers would still have to serve the mortgage loan.

I hope this is useful for you.

Feedback

Dear readers, I have received feedback offline from a very good friend of mine whom I respect a lot. He was hoping that I could provide timely “insider” investment tips in Iskandar Malaysia. I note his feedback and I also observe that there are many self-styled property analysts out there today claiming to have this and that information about Iskandar.

If you reading this bro, I’m sorry I have to disappoint you because this is really not my intention of starting this page. In fact, this is also not how I assist clients for property transactions either in Iskandar or in Singapore.

What I do is to share insights and help people figure out what’s hype and what’s real. When we are able to do that, it would not be difficult to know where and how to look for these so-called “insider” information, take action and be rewarded.

Thank you for your feedback.

Taxes involved in Property Ownership in Malaysia

This list should be used as a reference only. Please clarify with the vendor before you decide to commit into any property transactions.

1. Real Property Gain Tax (If you sell your property within the 1st 5 years)
- Sold after 1st & 2nd year – 15% of the gain
- Sold after 3rd to 5th year – 10% of the gain
- Thereafter – 0% tax

2. Income Tax
- Liable to be taxed 30% of income

3. Assessment Tax
- (A percentage x by the government valuation of the property)
- Residential title – 0.14% of government valuation
- Commercial title – 0.23% of government valuation

4. Quit Rent (premium payable to land Office)
- Nominal sum based on land value

Feedback.

I’m writing these articles assuming that you, my readers, are already aware of what and where is Iskandar Malaysia. In short, it is a special economic zone drawn out from the state of Johor and it comprises 5 flagship zones.

In recent years, the Malaysian government has also embarked on various Economic Transformation Projects - these key projects are aimed at raising Malaysia's GDP per capita in the longer term. The Iskandar Development Region is one of these Economic Transformation Projects.

If you do need more background information on Iskandar Development Region, please feedback to me. If I do see sufficient interest in this area, I will be glad to give a quick summary or point you to the right places to get more information.

Town-planning – Knowing your Tamans & Bandars (Malay word for Parks & City)

Photos by my daughter

For the uninitiated, “Bandar and Taman” are common naming nomenclature that Malaysian property developers use for their new towns. More recently, we do see more sophisticated and creative naming efforts, I guess more “atas” names also equate to higher property prices.

Today, for most of us investing in Johor, you’re likely to be buying a residential, commercial, industrial unit situated in a new town. These towns are most likely carved out from former oil palm plantations, forests, swamp land and more recently reclaimed land(e.g. Danga Bay)! Good town planning and more importantly good execution of the plan will ensure vibrancy and sustainable growth of the town. More important to us as investors, a vibrant growing town will see good appreciation in property prices.

So when we invest in Johor, it is not enough to evaluate a development as a standalone project (e.g. gated guarded 300-unit development with full resort style facilities), but we have to look at the town in which it is located, the maturity and growth potential of the town. There is also a danger of comparing it to what you get in Singapore, some people say S$1000 per square feet (psf) is expensive in suburban Singapore, but RM500 psf in Johor to me can be equally expensive if the location is not right.

Unlike in Singapore, we know that when HDB announces, “Let there be a mega HDB town in Tengah. And it was so”, town-planning in Johor is a little more complicated and not always sure-wins. Typically, towns situated at intersections of major highways have inherent advantages. Even so, it is not always sufficient to be located next to the highway .Visible road signs (Look out for my subsequent article on “The mysteries of missing Johor Road signs”) and good landmarks such as large billboards and high rise buildings do help. In a big country, size does matter!

“Demand for any type of real estate within a larger national built-environment is one derived from the consequent growth in human needs and economic activity” – (Collier’s report Come 2030 will there be suitable spaces for small and medium businesses? Feb 2013). So there are 2 ways of doing that, either you entice enough people to live in the area or you create enough economic activity for people to work and play (transactions) in the area. Do note the consequent growth can be a long process that can take up to 5-15 years (any longer you should reassess if it is worth investing in the first place). Hence, buying into new townships can reward you handsomely but it can also be a long wait before you see the fruits of your investment.
Anchor operators such as Hypermarts (JUSCO, TESCO, GIANT), Hospitals and Schools are usually brought in to kick start economic activity. This explains the influx of major investments in medical and education businesses in Johor. But a word of caution here, hospitals (I know that) and schools don’t build their reputation and get crowded overnight.

For me, I want to see hypermarts because they are the biggest crowd-puller. I would also like to see banks, both local ones (CIMB, Public Bank, MayBank) and even better if there are foreign ones. Taman Molek has a large concentration of local and foreign banks located in close proximity to each other, people do their transactions there instead of having to travel all the way to the city centre, Johor Bahru. I would also pay close attention to the presence of clinics (GPs, O&Gs, Dental) and nurseries/kindergartens, both absolute numbers and trending . On the other hand, eating houses and car workshops in my opinion are not very good indicators, many do come and go.

I will be going through the different flagship zones in Iskandar Malaysia in my subsequent postings. I have to clarify that each zone offers unique property investment opportunities, but as with all investments, it will also involve different levels of risks. But what I hope to do is to help you make informed decisions about your investments. I would also be providing more photos in my postings, so thank you for the feedback that more pictures would be good. 

Why share now?

<> I'm pretty sure I'm not the first to share insights of real estate investment in Iskandar Malaysia and I'm definitely not the most experienced. But I guess my timing was right, I witnessed how the early investments in Iskandar were finally bearing fruits in the last 3 years and how these in turn are attracting more investors. Many improvements made may have gone unnoticed even by Johoreans or those who think they are familiar with the place. Things that have been dismissed as commonplace are actually signs of better things to come. The more important reason why I took the plunge to leave a stable career and work in Johor was the opportunity to work with great mentors - business leaders, financiers, professionals. The 2 years that I have spent there was intense but very fruitful. Well, let me end my first post by saying this, Johor is more than just a place for good makan, cheap petrol and short weekend getaways. The enormous untapped potential of Iskandar simply cannot be ignored!