Examining its impact on property prices in Kuala Lumpur, Iskandar Malaysia and Johor Bahru. - By Caroline Chan
The recent joint announcement by the governments of Malaysia and Singapore about their intention to build a High-Speed Rail (HSR) Link connecting Kuala Lumpur has been received with much optimism particularly by analysts and industry experts.
The proposed HSR link, which will reduce travel time between Kuala Lumpur and Singapore to a mere 90 minutes, is expected to cost between RM20 billion and RM30 billion and is scheduled to be completed by 2020.
Based on the latest announcement, the link will serve three key areas, i.e. Kuala Lumpur, Singapore and Johor, with stations along the Malaysian route at Seremban (Negeri Sembilan), Ayer Keroh (Malacca), Muar, Batu Pahat and Iskandar Malaysia.
Economists are positive about the opportunities that will emerge from this project, both during the building of the link, and more importantly upon its completion. This high impact infrastructure project, besides improving connectivity between Kuala Lumpur-Singapore and the bilateral ties between the two countries, will take sectors such as construction, transportation, tourism and property to the next level with the property sector projected to experience the most growth. The project would potentially accelerate the development of much of the area between the two cities and yield synergies particularly in the area of property pricing.
Although contentions raised by certain parties include the high cost of the project and the possible environmental damage suffered if not undertaken with the necessary diligence, the outlook of its multiplier effect on the various sectors, especially in property, has been positive even amongst the general public.
In a recent online poll conducted by iProperty.com Malaysia for an indication of public opinion on the impact of the proposed HSR Link on properties in the Klang Valley and Iskandar Malaysia, Johor, 50% of the respondents were positive that both locations would enjoy an increase in the demand for property.
A quarter of the respondents projected growth in the demand for properties in Kuala Lumpur specifically, while close to 24% responded positively to an increase in demand in Iskandar Malaysia.
There are several factors that have encouraged this favourable outlook towards the impact of the project. Increased connectivity in any mega city influences property values because it reduces commuting time for the public.
The link would also anchor Kuala Lumpur International Airport (KLIA)-Low Cost Carrier Terminal (LCCT)-Changi International Airport as the premier transportation hub of the region offering improved accessibility and will serve well in attracting multinationals to set up operations at a lower cost in Kuala Lumpur or Iskandar Malaysia.
Property prices in both locations, which many property analysts view as undervalued, would benefit from the surge in demand by foreign investors. The wide difference in property prices between Kuala Lumpur and Singapore will likely see a narrowing as was reflected by the impact of the Eurostar Train link in the London/Paris scenario a few years ago.
The reduction in travel time will also be a boon for Singaporeans. The island’s high property prices, despite strict measures to regulate it, has made owning property out of the reach of many Singaporeans. The HSR link will offer Singaporeans the alternative of living in Malaysia at a lower cost while working in Singapore.
Upon completion, the rail service will also speed up economic integration between the two countries. Iskandar Malaysia has become an obvious choice for Singaporeans eyeing investment opportunities closer to home.
The entry of Singaporean corporate giants such as CapitaLand Ltd, Ascendas and Temasek Holdings into Iskandar Malaysia has successfully raised its international profile and helped boost the confidence of non-institutional investors in its potential. Furthermore, Singapore’s plan to redevelop, reclaim and recycle land in old industrial areas is likely to create an interest amongst Singapore based manufacturing industries to relocate to Iskandar Malaysia.
The next decade will see tremendous growth in the services industry. Kuala Lumpur is well placed to serve this growth with its timely transformation as a regional hub with enhanced connectivity.
Organisations will be able to leverage on the Greater Kuala Lumpur infrastructure to establish their regional presence with an agile workforce that can efficiently commute between Kuala Lumpur, Iskandar Malaysia and Singapore.
This increased connectivity will be a growth driver for high end properties with sophisticated facilities that can support the lifestyle of expatriates. Growth in prices for both residential and commercial properties is expected in the Damanasara, Mont’Kiara, Kuala Lumpur city centre and U-Thant localities.
In addition to Kuala Lumpur and Iskandar Malaysia, the HSR link will also boost development in areas surrounding the new stations along the rail line. Demand for property is expected to increase in Seremban given its proximity to Kuala Lumpur.
Johor Bahru too will benefit from interest in Iskandar Malaysia and its outlying areas. Melaka, which is designated as a UNESCO World Heritage City, is an international tourist destination. Enhanced connectivity via the HSR link will increase Malaysia’s attractiveness as a tourist destination.
A robust tourism industry in the country translates into growth in hospitality focused property developments, yet another boon in the property sector which can be attributed to the HSR link and its far reaching implications.
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