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Is the Johor property industry prepared for the worst?

LETTER | Whenever I return to Malaysia from Singapore’s end of the Causeway, an off-white structure slides into view on the left, a persistent fixture on the landscape with its distinctive cylindrical towers propped at the sides.

On closer inspection, you can see that the walls are cracked and covered with creeping weeds.

Right across from Singapore and along the Straits of Johor lies the abandoned JB Waterfront City project, which serves as a stark reminder of too much too soon.

In addition, large-scale land reclamation continues unabated over the Johor Straits, which has not only affected marine biodiversity and water quality but also disrupted bird migration patterns.

As a proud Johorean who was born and raised in Johor, I have witnessed major developments in this region over the past decade.

We now have modern high-rise buildings, various recreation and theme parks, resorts and world-class golf courses, technology and business parks, and an education hub.

However, the area is now facing headwinds and challenges such as congestion at the border crossing and severe oversupply in the property market.

The congestion at the Johor-Singapore Causeway and Tuas Second Link is a perennial problem that has long been left unresolved. The recent suspension of the Malaysia Automated Clearance System (MACS) has further worsened the congestion at border crossings.

Furthermore, the construction of the KL-Singapore High-Speed Rail (HSR) has been postponed to end-May 2020.

Recently, the Johor Mentri Besar announced that the state would discuss with Singapore on the possibility of reviving the “crooked bridge”, an alternative to the current Causeway.

Nevertheless, considering the new government’s austerity measures and the lack of general consensus among lawmakers, the bridge may not be an immediate priority.

A cheaper and efficient solution is needed to address the congestion issue.

I believe that if the suspension of the Malaysia Automated Clearance System (MACS) was lifted, it would speed up the customs procedures at the border and reduce the waiting time significantly.

Looking at the bigger picture, the improved connectivity would have a positive impact on the sales of properties in Johor and address the oversupply, as more people would be encouraged to own properties in the state.

This is important, as the outlook of the Johor property market is said to be at its worst.

According to Bank Negara, unsold residential properties in Malaysia totalled 72,239 units on average from 2004 to 2016, while in Q1 of 2017, the average unsold residential properties had increased to 130,670 units. Johor housed the largest percentage (27%) of these surpluses.

Bank Negara’s report on property imbalance also raised concerns regarding the systemic risk of the property sector that would lead to an increase in the unemployment rate and a slower economic growth.

Nevertheless, the overhang shouldn’t come as a total surprise to many, as Malaysians have long complained of property prices skyrocketing over the past few years.

One cannot help but wonder why the government allowed foreign developers from China to carry out developments on reclaimed lands in Johor such as Forest City, R&F Princess Cove, and Tropicana Danga Bay.

Have we learned nothing from the previous economic crisis o9f 2008?

Forest City is an enormous scale development of over 3,400 acres of land reclamation to build four man-made islands. As an analogy, this makes the project almost 80 times the size of the sprawling Mid Valley development in Kuala Lumpur and 40 times the combined size of Mid Valley and KL Sentral development.

In addition, the oversupply situation in Johor has worsened ever since China tightened its capital control in 2015 to curb capital outflows, impacting projects such as Forest City, where the Chinese made up 80% of the purchasers.

It goes without saying that prolonged oversupply and pricing pressures will hurt the bottom line of property developers.

This would inevitably lead to a cut in operational expenditures and large-scale job layoffs to stay alive, and these measures may last until the market fully recovers.

One only has to look at the oil and gas industry as an example. The slump in global oil prices in 2015 contributed to large-scale job retrenchments.

During that period, thousands of jobs in the local oil and gas industry were cut. Petronas announced a massive restructuring exercise that affected nearly 1,000 jobs.

What we need to learn from this is that we should address the root cause rather than the symptoms. Otherwise, we will be headed down the same road of having to deal with job losses and unemployment, and the financial impact on the individuals affected, the companies and the nation at large.

As an employee who has been working for a local Johor property company for almost two decades, I care greatly about the outlook of the property industry as my colleagues, families and friends could be affected by the economic downturn.

Is the property industry prepared for the worst?

Does Johor have any plans to support employees, especially Johoreans, to deal with the worst and help them to re-skill and secure new jobs?

It is high time for the government to look into policies that can improve people’s wealth and purchasing power, rather than making it easier for people to incur more debt just so unsold properties can be taken up at the expense of even more expensive properties in the future.

On behalf of all Johoreans, I sincerely hope that the Johor state government and the federal government collectively address this and take concrete and lasting measures that will benefit the rakyat.


The views expressed here are those of the author/contributor and do not necessarily represent the views of Malaysiakini.

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