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M'sia's Iskandar plan may aid S'pore housing market

posted 2 Oct 2011, 05:28 by Straits View

SINGAPORE: Malaysia's ambitious Iskandar development in southern Johor may have a spin-off effect that would eventually aid Singapore's crowded housing market.

It may even help cool prices, as foreign investment meets increased demand for services and homes.

A plan for seamless connectivity from Johor Baru, Malaysia, to Woodlands in Singapore by 2018, is an attractive allure for investors.

Funds are pouring in, in the hope the development will yield economic benefit.

Singapore has invested some US$153 million (RM 463 million) into the services, education and health sector of the Iskandar Malaysia development, and analysts say further down the line, this will have a positive impact on the Singapore economy.

CIMB Research economist Song Seng Wun said: "If we do have at our doorstep an increased pool of qualified knowledge based labour force, we may be able to tap on that pool, bring them to Singapore and add to Singapore's productivity growth prospect, going forward.

"So if those two investments in those two areas were to work out over the near term, I think it could lead to more significant investment from the Singapore side.

"So I think while the outlook is positive, there are still perhaps many hurdles along the way before we can say we are going to get a significant upgrade with regard to property being moved to a higher plain in Johor.

"That could mean the pressure on property in Singapore could be alleviated because there is certainly now a much more viable option in Johor as a result of the improved communication, logistic network, the whole landscape as an alternative for Singaporeans to base themselves in Johor either for home or for business."

Singapore has already implemented measures to cool booming property prices, and the government may get some help in calming the market, now that the Iskandar project is open for investment.

Credit Suisse analyst Tan Ting Min said Malaysia will benefit from stronger investments from Singapore while Singapore could operate out of Iskandar, which has good infrastructure, and relatively cheaper land and labour.

"Hence, we expect the land price arbitrage to narrow from the current estimated 1-to-16 ratio.

"How quickly this land price arbitrage narrows depends very much on how quickly Singaporeans adopt the idea of moving their manufacturing bases to Johor," Tan added.

"I think we are realistically talking about something that is still in the works, perhaps a decade or more before we can really talk about Johor as a real hinterland," Mr Song said.

KPMG corporate finance partner Vishal Sharma said: "I think in terms of the land price arbitrage I expect you would see the Iskandar land prices going up,

"I don't particularly envisage Singapore land prices... coming down so the arbitrage will narrow but I don't think that it is ever going to go away. But yes, I expect that the arbitrage is going to narrow."