New projects are springing up in Iskandar, Johor but where are the tenants? Buyers are concerned about high crime rates in JB.

By Mathew Yap
“What do you think of Johor-Iskandar as an investment?” I casually asked Delvin, a director of a well-known Singapore-based property consultancy firm. He paused momentarily, then retorted: “Where are the tenants? I have yet to see tenants flocking in and meanwhile the projects are springing up very quickly.”
Excitement on Iskandar seemed to hit fever pitch six months ago after the prime ministers of Malaysia and Singapore officiated at the signing ceremony for Danga Bay Marina on Feb 19, 2013.
According to press reports, the two giants, Khazanah Nasional Bhd and Temasek Holdings, will develop a $3.2 billion township with another private Malaysian firm, Iskandar Waterfront Holdings, in the once swampy Danga Bay. The 71.4- acre site will be turned into a waterfront marina city by 2018  overlooking Sinagpore’s  Sungei Buloh shore .
But just as new marketing brochures for Iskandar rolled out, a word of caution flew out of the pages of  Lee Kuan Yew’s book,  One Man’s View Of The World. “Let’s wait and see how Iskandar develops. This is an economic field of cooperation in which, you must remember, we are putting investments on Malaysian soil… And at the stroke of a pen, they can take it over. They are not likely to because they want more investments… When we go there, we must understand that any real estate or building that you plant on the ground belongs to the owner of the ground.” Mr Lee said in his book.
In response, Malaysia’s Johor’s former chief minister Abdul Ghani said Iskandar had been rapidly progressing in the past five years and therefore negative views were unwarranted.
And, as if to help prove Ghani’s point, one of China’s top developers, Country Garden, on August 11, chartered several buses to bring in hundreds of  Singapore residents and Chinese nationals to  the carnival-like sale launch ceremony for its $300 -400 per sq foot Danga Bay Country Garden condominium . The event was even graced by the Johor Sultan. Half the buyers were from China, 30 per cent Malaysians, and the remaining 20 per cent Singapore-based residents.
The Iskandar fervor is understandable having seemingly reached a tipping point last year – with the apparent successful completion of LEGOLAND, Puteri Harbour Family Theme Park and several education institutions, coupled with the announcement of the High-Speed Rail Singapore-KL line.
This led one major Malaysian bank to proclaim: “We remain bullish on this growth corridor and advise investors to position for the longer term.”
The main lure of Iskandar for property buyers, especially those from Singapore, is the price and, by implication, more space. Singapore property prices are now at new peak levels – 45-50% up from 2008 – which has prompted the government to introduce stringent measures to curtail investment demand. While average prices at Johor-Iskandar have also more than doubled since 2008, current house prices remain 5-10 times lower than  in Singapore.  As one Singaporean, Jonathan, in his 40s, puts it : “Sadly prices of HDB may be even higher than that of some properties in Iskandar, JB. But, rather than gripe about the situation, it might be better to take advantage of it and invest.”
Many analysts have given the thumbs up for Iskandar, often citing the buy-in of top political leaders and direct investment from the GLCs like Khazanah Nasional and Temasek Holdings as the key reason for optimism.
But not all is rosy for Iskandar. Crime remains a serious concern for many residents and investors – only 10 per cent of the 112,000-strong police force is actually “field-deployed” in fighting crime, according to one UMNO Vice-President source, and with the recent spate of high-profile killings in Malaysia, though not in Johor itself, many Singaporeans are understandably spooked.
Another potential source of discomfort is the regulatory and governance framework on contracts and investment issues which may be subject to changes depending on the Johor state and federal capital policy directions. For example, there is talk that the foreign ownership consent levy will be raised from the current RM10,500 RM (including RM500 administrative fee) to RM30,000.
In June, Johor Menteri Besar Datuk Mohamed Khaled Nordin said the state government would impose higher taxes on properties owned by foreigners by year’s end.
Currently, Malaysia allows foreigners to buy residential and commercial properties above RM500,000  in value. Industrial properties, agriculture and development land have other requirements to comply with. But recent press reports suggest that the Government may increase the threshold figure to RM1 million to curb rising prices and keep them affordable for the average Malaysian households.
Such changing political winds dictated by local needs may be the single greatest worry for new investors getting into new ventures in Iskandar.