Update on Iskandar Malaysia Project

Er Dr Lee Bee Wah asked the Minister for National Development in light of Singapore being the Co-Chair of the Malaysia-Singapore Joint Ministerial Committee for Iskandar Malaysia (a) whether he can provide an update on the Iskandar Malaysia project in Johor; (b) whether the lower ringgit has made more Singaporeans invest in properties there, especially in the Forest City project; and (c) whether a property bubble is forming in Iskandar Malaysia and what are the safeguards to protect Singaporeans from being caught.

This year marks the 10th year of collaboration between Singapore and Iskandar Malaysia since the Joint Ministerial Committee for Iskandar Malaysia was set up in 2007. Over this decade, Iskandar Malaysia has continued to develop its infrastructure and economy, and attracted new investments, including from Singapore.

In the residential property segment, however, the lower ringgit has not resulted in more Singaporean purchases of properties in Iskandar Malaysia. As I shared with this House last year, investors are concerned about the over-supply of residential properties in Iskandar Malaysia and Johor, which can result in a potential decline in property values. Based on data from Malaysia's National Property Information Centre, there are around 351,000 new residential homes in Johor in the pipeline as of end-2015. This amounts to almost half of the current housing stock of 731,000 units in Johor. As a result, buyers are becoming more cautious.

Last year I updated that the purchases of Malaysian properties through real estate agencies in Singapore have fallen from 2,609 transactions in 2013 to 838 in 2014. Since then, the figure has continued to drop to 241 in 2015, even as the Malaysian ringgit depreciated further against the Singapore dollar. Official Malaysian data also suggests that the Johor housing market is continuing to slow further, with the value of residential property transactions falling by about 30% in 2015 compared to 2014.

There are many risks involved in overseas property purchases. These include the risk of housing over-supply, foreign exchange risks, as well as tax and regulatory frameworks which can easily change against the investors' favour. The Council of Estate Agents (CEA) has stepped up efforts in raising awareness and highlighting these risks over the past few years. CEA has come up with a checklist and guidelines to educate the public on what to look out for in the purchase of overseas properties. I strongly encourage Singaporeans to go through the checklist, which is available on CEA's website, before deciding on any overseas property purchase.