MAY 23, 2018
[28 MAY 2018 UPDATE: Malaysia PM Mahathir Mohamad has confirmed the decision to scrap the Kuala Lumpur-Singapore High-Speed Rail (HSR) project.]
With the recent election outcome in Malaysia, some property investors in Jurong – as well as the Iskandar region — are in panic mode. Prime Minister Mahathir Mohamad has announced that Malaysia is reviewing the much-hyped Kuala Lumpur-Singapore High-Speed Rail (HSR) project, along with other high-value projects of the Najib era. Will Mahathir’s announcement take a chunk out of Jurong condo property values? Or, do investors have nothing to worry about?
HSR and the Jurong condo: a recap
The Singapore-Kuala Lumpur High Speed Rail (HSR) was initially planned to start this year, and begin operations in 2026. The presence of the HSR has been used as a major selling point for many properties in the areas of Jurong East, Jurong West, Lakeside, and Bukit Batok.
One reason is rentability. Because many Malaysians work in Singapore, they will seek out locations near the HSR (many travel home on the weekends). This ensures a steady stream of prospective tenants, and property owners could even charge a nice premium on the rental rates.
It’s also expected that heavy foot traffic will result due to the HSR. This is a major draw to retail and food businesses, which are more likely to set up in the area and provide amenities for residents.
This has resulted in tremendous interest, in Jurong condos with close access to the HSR. Take, for example, Le Quest in Bukit Batok: in August 2017, the condo managed to sell 100 per cent of offered units at S$1,280 per square foot. Part of the reason for the draw was proximity to the HSR.
To use a more recent example, we could also look at Twin VEW, another condo with close access to the HSR. Twin VEW sold 85 per cent of offered units during its launch weekend, on 7th May this year. Again, one of the points highlighted by the seller was proximity to the HSR.
But with a question mark hanging over the HSR:
The election in Malaysia throws the proverbial spanner in the works, as major cross-straits agreements and projects are now in review. This includes the HSR project, which the PM Mahathir was seemingly against in 2017.
However, there continues to be interest in Jurong condos. Why?
One reason could be wilful ignorance; a refusal to believe the HSR will be shot down. When you’ve already put money down on a condo, this is all you can do. And as for those who are still rushing for HSR-associated properties, it could simply be a case of momentum: hype takes a while to die down. But this is simplistic speculation, and we find that property markets are often wiser than we assume.
There are some alternative reasons as to why Jurong doesn’t seem affected by Malaysia’s new Prime Minister. These are:
- The Jurong Innovation District and Jurong Lake District
- The Jurong Region Line
- The lack of a hard “no” regarding the HSR
The Jurong Innovation District and Jurong Lake District
The Jurong Innovation District (JID) and Jurong Lake District (JLD) are still major attractions, with or without the HSR.
The JLD has, since 2008, shaped Jurong into a thriving lifestyle hub. The planned Jurong Lake Gardens in the district will encompass an area of 90 hectares (about 90 football fields), becoming the park of such scale in a heartland district. The overall plan is to have 116 hectares of “green space”, as well as a car-lite environment.
In the meantime, the commercial side of the JLD (Jurong Gateway) is expected to create 100,000 jobswhen completed in 2040.
Further off in Jurong West, the Jurong Innovation District (JID) is envisioned as being our answer to Silicon Valley. It’s a research-driven area that will attract students (there are close collaborations with local universities), as well as a multitude of start-ups. This is slated for completion in 2022.
Both of these bring interested buyers and – eventually – premium rental rates among those who work in the area. With both the JID and JLD underway, the HSR is more of a nice bonus, than the core selling point of the area.
The Jurong Region Line
The HSR is under review, but the Jurong Region Line (JRL) is for certain. Slated for completion in 2026, Phase 1 will add 10 stations linking Choa Chu Kang to Boon Lay and Tuas. By full completion in 2028, it will add 24 stations to the network, and more or less put an end to Jurong’s former reputation as being inaccessible.
Coupled with the JID and JLD, this can turn Jurong into Singapore’s next lifestyle and business hub – with or without the HSR.
The lack of a hard “no” regarding the HSR
Malaysia’s PM hasn’t dismissed the HSR yet. In fact, he has reassured that the review will be completed “very soon”. It’s entirely possible that there will be a few tweaks to the HSR, such as Malaysia’s share of the costs or the type of contractors used (Malaysia may be incentivised to go ahead if more of their local businesses and workers are involved, as opposed to foreign rail developers). But the project will, barring a shocker that will affect diplomatic ties, still go on.
So is it hype or hope that keeps buyers interested in the Jurong condo?
The answer is probably neither. Buyers seem interested in the real, existing developments in the Jurong area – with or without the HSR. If the HSR happens it will be a nice bonus to them. If it doesn’t, they know they’re going to see good rental yields or property appreciation anyway.
Despite all the news about the HSR, what’ selling Jurong properties is the halo effect from the successful Jurong Gateway transformation. Singaporeans have seen how, over the course of a decade, Jurong has gone from swampland to being the home of major malls like JEM, and to having some of our best park lands.
This has created a lot of confidence – and to some degree even presumption – that Jurong can only be on its way up. The HSR is just the cherry on top of a very attractive cake here. In other words, Jurong condo buyers would just shrug and smile if it doesn’t happen.