SINGAPORE – Those planning to buy a home across the Causeway would have seen countless ads of luxe condominiums and lush landed houses being launched in Johor, with developers touting them as sound investments.
Indeed, the number of overhang or unsold property units in Malaysia’s southernmost state declined in the third quarter of 2024, boosted by buying interest amid rapid economic developments in the region.
“After nearly a decade of downturn, the market has finally recovered,” said Mr Samuel Tan, founder and chief executive of Olive Tree Property, a real-estate consultancy firm based in state capital Johor Bahru.
The latest figures from Malaysia’s National Property Information Centre (Napic) for the third quarter of 2024 show Johor with a residential property overhang of 3,030 units, down 33 per cent from 4,500 units in the same quarter the previous year. This puts Johor in third place – behind capital Kuala Lumpur and northern Perak state – after it topped the country’s overhang list in 2023. According to Napic, property overhang refers to properties that remain unsold nine months after their launch.
According to Napic, Johor’s residential property overhang numbers, including condominiums and landed homes, fell 20 per cent to 4,228 units in 2023, from 5,258 units in 2022. The number was at 5,627 units in pre-pandemic 2019.
High-rise developments such as serviced apartments, which are listed separately as commercial properties by Napic, also showed improved sales from a high of more than 16,000 unsold units out of more than 61,000 units launched in the four quarters of 2021 during the pandemic. This has come down to 11,810 unsold units out of more than 55,000 units launched as at the third quarter of 2024.
Lower cost of living, affordable homes and RTS Link are pluses
Property agents say that for Malaysians or foreigners working and living in neighbouring Singapore, a huge draw is Johor’s lower cost of living with its more affordable homes, especially given the favourable Singapore dollar-ringgit exchange rate. In addition, there is the impending Rapid Transit System (RTS) Link Project that will connect Singapore and Johor Bahru, which is expected to begin operations in December 2026.
“The appeal is clear. Property prices in Johor are much lower than in Singapore, offering the opportunity to buy larger or landed homes that would be unaffordable back home,” said Ms Chua Shir Yee, head of international sales at real-estate firm PropNex.
“With the improvement in cross-border connectivity, like the upcoming RTS Link, Johor has become a popular choice for those seeking a second home or weekend getaway,” she told The Straits Times.
The Johor-Singapore Special Economic Zone (JS-SEZ) and Forest City’s Special Financial Zone (SFZ) also have a positive impact on the local property sector.
Better transport connectivity and economic prospects linked to the two special zones, plus affordable housing and prices of goods and services in the southern state, make it an attractive place for home renters, buyers and investors.
“All these are followed by job creation and more business opportunities, which means higher disposable incomes among the population, and this may translate into property investment,” said Olive Tree Property’s Mr Tan.
He noted that property sale transactions, particularly those in the residential sector, have increased substantially in terms of volume and price since the land borders between Singapore and Malaysia reopened in April 2022. He attributed this to pent-up post-pandemic demand and the steep cost of accommodation in the Republic, which has led to Malaysians and others choosing to buy homes in Johor and commute to work in Singapore.
In the first half of 2024, Johor was ranked second highest after Selangor in terms of total property transactions in the country, at RM9.02 billion (S$2.7 billion), which is 15.3 per cent of total volume and 18.2 per cent of total value.
But industry observers say it is too soon to cheer because Johor continues to record some of the highest overhang levels in the country, and new property developments in the works will only add to the unsold inventory, leaving demand struggling to catch up with supply.
There are many housing options to choose from, and the influx of new launches is not slowing.
For the past five years, Johor has been among the states with the largest number of newly launched residential units. In 2019, before the onset of Covid-19, there were 9,711 new property units in Johor. By the end of 2023, the number rose to 12,390 – the highest among all the states.
If developers do not manage the situation well, this could lead to oversupply – where the number of units built in a selected residential area far exceeds demand, Mr Tan noted.
“In an ‘up market’, it is easy to inadvertently fall into the trap of a ‘build, and they will come’ mindset,” he said.
Property oversupply or a supply glut occurs when the number of available housing units exceeds the demand from buyers or renters. This results from a mix of factors such as over construction, weak demand due to economic downturns or poor market sentiment.
In the case of Johor’s Iskandar project, launched in 2006 and spanning 2,217 sq km across southern Johor – an area three times the size of Singapore – what resulted in an oversupply “with prices and volume far above average for local purchases” led to a heavy overhang, said Napic in its 2023 Malaysia property overhang report.
Iskandar Malaysia was conceptualised as a southern economic growth corridor, leveraging its abundant land, natural resources, sustainable business environment and proximity to Singapore to woo foreign investors. Today, it houses tech parks with data centres operated by major players like Nvidia, an education city and world-class healthcare facilities.
Back in 2016, the US$100 billion (S$135 billion) Forest City island mega project was launched, and with it a slew of housing units in Johor.
Several years later, following policy changes to the Malaysia My Second Home long-term visa programme that included clampdowns on foreign home ownership, and a calamitous virus that upended the world and global markets, ambitious projects like this are at an impasse.
Forest City’s debt-laden Chinese developer Country Garden said in September 2023 that it had completed 28,000 units, with more than 80 per cent sold to buyers from at least 30 countries. But fewer than 10,000 people actually stay there – way below its 700,000 target.
Fewer than 10,000 people stay in Forest City.ST PHOTO: HAZLIN HASSAN
Buyers should exercise caution in a ‘saturated market’
Still, the Johor government has been working hard to revitalise the region.
In September, Forest City’s SFZ was launched to spur economic growth and activities in Johor. Meanwhile, plans for the JS-SEZ – estimated to cover more than 3,500 sq km, to ease the movement of people and goods between Singapore and Johor – are being firmed up and the two countries are expected to sign an agreement on the matter in January 2025.
For now, property brokers are enjoying the sectoral bounce.
Ms Lindy Tan, chairwoman of the Real Estate and Housing Developers’ Association Johor, told ST that positive market sentiment and concerted government efforts to stimulate investment and economic growth in the state have boosted interest in local properties.
“Malaysians, particularly those working in Singapore, are leading the demand for properties in Johor, especially with the anticipated benefits of the RTS Link, motivated by the potential savings of owning a home in Johor rather than renting in Singapore,” she said.
Among them is recruitment consultant Jason Lam, 35, a Johorean who works in Singapore, who recently made the move from a rented room in Yishun, in north-east Singapore, to his own three-bedroom apartment in Meldrum Heights. His new home is a five-minute walk to the proposed Bukit Chagar RTS Link station in Johor Bahru, which will link to the station in Woodlands, Singapore.
“I think Malaysians from all other states who work in Singapore or are planning to do so will want to seize this moment before things start to get more expensive,” he said.
Nevertheless, Mr Albert Chou, advisory executive associate director from property firm OrangeTee, advises home buyers to exercise caution, “rather than being swayed solely by government-led projects or hype”.
“The overhang issue highlights the need for better planning and more strategic developments… many developers have built units that have yet to find buyers, leading to a somewhat saturated market,” he said.
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