• Maintain OVERWEIGHT. We are feeling more upbeat on the Iskandar property market after our recent trip to Johor. We believe the cross-border traffic will naturally be more rampant with the completion of Johor Bahru- Singapore Rapid Transit System (RTS) in end-2026 and perhaps the KL-Singapore high speed rail (HSR) in ten years’ time. In addition to the healthy investment inflow to support the state’s economic growth, the Johor property market will likely be back on the radar again in the coming years. UEM Sunrise is a good proxy for this thematic play in our view

• The market has moved on. We think the Iskandar property market has moved on from the supply glut issue and the “scare of Forest City”. Since we last visited in 2019, we feel that the momentum has picked up in Johor, especially in areas surrounding the RTS station at Bukit Chagar. Although none of the listed developers have projects in the Johor Bahru (JB) city centre, the overall Iskandar property market is expected to benefit from the return of property investors and buyers, both locals and foreigners. This will further be boosted by increased spending from visitors from Singapore as well as the revival of the KL-Singapore HSR project.

• Skyline of JB city centre will change. There are c.11 projects surrounding the RTS station at Bukit Chagar going at an ASP of MYR1k-1.3k psf. This is on par with the average prices of condominiums in the KLCC area. A visit during the night shows that many residential units located near the station are well lighted up. In years to come when the connectivity is enhanced and more buildings are tenanted, JB city centre will likely expand.

• Expensive rental and house price in Singapore will lift demand for rental in JB city. Apart from the positive news flow, the expensive rentals and house prices in Singapore are becoming a push factor for Malaysians or expats working in Singapore to relocate to Johor, given the proximity and price differentials. Rentals for condominium in Singapore grew 32% YoY in 1Q23, and the Singapore government has also imposed a steeper stamp duty in April this year. We expect rental demand for houses in Johor near the causeway and second link to increase over the next 1-2 years.

• Eco Boulevard is a good example. The commercial hubs at Eco Botanic (Eco Boulevard), Sutera Utama, Bukit Indah, and Mount Austin are the favourite areas frequent by visitors from Singapore. The shops are well- tenanted and carparks were full during our visit on a weekday morning. With the ease of travelling in three years (or perhaps 10 years for HSR), the visitor flow between Johor and Singapore will be even more intense in the future.

• Rising investment inflows to support economic growth in Johor. In the recent years, apart from the usual investments in manufacturing sector, Johor is also receiving rising investments in data centres. It was reported that Johor will see MYR17bn worth of new investments in data centres in 2024 alone.

Source: RHB Research - 24 Jul 2023