COVER STORY: Speeding towards high growth
FAST TRACK: The High Speed Rail between KL and Singapore could raise KL’s profile as MNCs are expected to relocate there due to its lower cost
With the construction of the MRT (Mass Rapid Transit) in the Klang Valley already in full swing, another transportation game changer is set to transform the public transportation landscape in Malaysia.
All eyes are now trained on the proposed High-Speed Rail (HSR) link between Kuala Lumpur and Singapore. To be built at a cost of RM40 billion, the long-awaited train is scheduled to start construction in 2015 with completion targeted by 2020.
It is estimated that upon completion, millions of people would take the train to commute between the two cities with some experts predicting that people may even stay in KL and work in Singapore to take advantage of KL’s lower cost of living.
The 330km journey on the HSR will take a mere 90 minutes (for express/non-stop travelling from KL to Singapore) while the total journey time for five potential intercity stops which include Seremban in Negeri Sembilan, Ayer Keroh in Malacca, Muar, Batu Pahat and Iskandar Malaysia in Johor will take about 120 minutes.
With the MRT already creating a buzz over its potential impact on the property market, the HSR’s spillover effect on the property market is expected to be greater than the MRT because the rail’s coverage extends to several major cities apart from Kuala Lumpur, whereas the MRT is limited only to within the Klang Valley.
Catchment areas
Although the exact locations of the HSR stations are still uncertain, property developers are expected to buy prime land in potential HSR catchment areas to “follow the infrastructure” as per what Ho Chin Soon, the renowned map maker, has said in his property books and seminars.
A good example is Sunway Bhd that is already strategising its township connectivity with the HSR in mind. “The BRT Sunway Line demonstrates that public transport does not require large acquisitions of land. It is planned to connect to the MRT and LRT through the proposed HSR to provide absolute connectivity,” reveals Kumar Tharmalingam, Executive Director of Sunway Bhd.
Kumar is positive that housing values will benefit from the HSR due to current market factors such as the gap in new home construction, rising construction costs, local council and utility companies’ requirements.
Triggering growth
What other impacts can we expect from the HSR on the property market? According to James Wong, Managing Director of VPC Malaysia, in the long term, with better accessibility, foreign companies from Singapore may be attracted to relocate their operations to KL and the other five intercity areas where operating costs are lower.
“The foreign companies’ growth in the main cities will trigger the growth of nearby second and third–tier cities. The spread and growth of the population and more efficient allocation of business activity will increase the demand for housing, commercial and industrial properties. Upon completion, KL and the other five intercity stops will attract more high net worth individuals from Singapore as the high-end condominiums in Singapore are at least five times more expensive at over S$2,000 psf (RM5,000 psf) compared to high-end Malaysian condo prices of around RM1,000 psf,” explains Wong.
In addition, higher tourist and business visitor arrivals will have immediate to medium-term positive impact for retail space, retail operators, hotels and hotel operators as well as commercial office space, says Veena Loh, General Manager of MPI (Malaysia Property Incorporated).
“Higher business and tourist arrivals will increase occupancy, lift prices of hotels, increase businesses of restaurants, retail and recreational activities in the area. It would make economic sense for Singaporean SMEs (Small Medium Enterprises) to relocate their business offices to KL. This would increase occupancy and rental rates of office space,” Loh observes.
The GM of MPI also adds that in the longer term, residential property prices are likely to rise, particularly in the vicinity of the HSR. Higher prices may encourage developers to rebuild some of the older parts of KL city. If the HSR, starting from the Tun Razak Exchange (TRX) is well planned and executed, says Loh, the land area around the TRX may rival or even overshadow the KLCC area which is some 15 minutes’ driving distance away.
Loh observes that better connectivity also increases the demand for residential properties, especially for holiday retreats for occupation by Singaporeans and expatriates. In a recent survey by iProperty conducted among 2,099 Singaporeans, 42 per cent chose Malaysia as the number one destination for overseas real estate investment.
Wong the MD of VPC meanwhile envisages that the major beneficiary of the HSR will be the housing developments in Iskandar Malaysia, Johor because of its close proximity to Singapore.
Condos upsurge
“Currently, there are many Malaysians who are working and staying in Singapore. With the HSR connectivity between Singapore and Iskandar Malaysia, many Malaysians who are currently working and staying in Singapore may opt to buy condominiums or apartments in Iskandar. There is a big upsurge in condominium developments in Iskandar Malaysia with many marketing campaigns targeted at Malaysians living and working in Singapore. Singaporeans will also be attracted to the cheaper housing in Iskandar and the HSR connectivity between Singapore and Iskandar will facilitate their purchase.”
Currently, foreigners account for less than 5 per cent of all residential property purchases in Malaysia, adds Wong. With the HSR connectivity between the two cities, he expects more Singaporeans to flock in to purchase properties in KL and the five intercity stops.
MICE to flourish
Other than residential properties, the HSR could also impact other segments of the property sector. Loh of MPI feels that hotels and retail properties would experience the most immediate and biggest impact.
She explains that this is because the 9.7 million Singaporean tourists formed the biggest portion (40 per cent) of the total 25 million tourist arrivals in 2012. Moreover, foreigners other than Singaporeans will also take this opportunity to visit Malaysia when they go to Singapore given the seamless and fast connectivity between the two cities.
In the medium term, Loh predicts that the MICE (Meetings, Incentives, Conferencing and Exhibitions) market is likely to flourish as a result of HSR as it would make sense to conduct more business meetings and conferences in Kuala Lumpur due to its lower cost. Other commercial properties like office buildings would also benefit from the HSR.
HSR positioning
As in the case of the MRT, the feel good factor of the HSR is not necessarily unanimous among industry observers. Some are more cautious about its prospects in relation the property market. For example, there are question marks on the exact positioning of the HSR, feels V Sivadas, Executive Director of PA International Property Consultants.
“I am of the view that Iskandar Malaysia itself may not really need the HSR now. What is more urgently required is an extension of the MRT from Woodlands into Johor Bahru, with connecting light rapid train lines or the cheaper alternative of dedicated rapid buses to Kulai, Nusajaya, Pasir Gudang and Ulu Tiram.
There has been an unacceptable congestion on the causeway over the last two decades that is causing substantial economic losses to both Johor Bahru
and Singapore. Tens of thousands of Malaysians and Singaporeans travelling to and fro both cities are suffering almost daily and the situation gets worse during holiday seasons. The expensive CIQ (Customs, Immigration & Quarantine) built here, not surprisingly, has not solved the problem. For starters, it would be good if more checking booths are opened up to clear traffic during peak periods,” Sivadas proposes.
With the ongoing dual tracking railway project by KTM (Keretapi Tanah Melayu) between Gemas and Johor Bahru and with land acquisitions almost completed by the Land Office, we should be able to expect railways to improve connectivity and frequencies between KL and Johor Bahru/Singapore. If electric trains can be introduced on these dual tracks, Sivadas suggests that this perhaps is the way forward.
“As more Singaporean residents, (either citizens, expatriates or Malaysians residing there) begin to move and reside in Iskandar Malaysia, we cannot continue to ignore the elephant in the room, looking for multibillion ringgit solutions. Any new solutions, however, must include substantial allocation for car parks and connectivity via efficient public buses and taxis. The latter two remain a mess here, with a visit along the main thoroughfares in the city centre showing buses and taxis parked almost throughout the day,” laments Sivadas.
Rational decisions
The Executive Director concludes by saying that what Iskandar Malaysia needs is an efficient transportation system that allows its residents to move seamlessly within Iskandar and between Iskandar and Singapore.
“If Iskandar Malaysia is to realise its full potential to take advantage of the vast potential that Singapore presents to it, it is hoped that some quick decisions are made without further delay. Given the vast disparity in income and property prices between both these regions, the upside potential for Johor is huge.”
Ahyat Ishak, CEO & Founder of AhyatPropertyTV concurs with Sivadas’ general views on the HSR’s impact on Iskandar. “Although the HSR will bring Singapore and KL closer, it might also have a negative impact on Iskandar. KL now has a population of approximately 6-7 million people while Iskandar’s population is approximately 1.5-1.6million. By the time the HSR is completed, the population in KL would probably be still far greater than Iskandar and many MNCs (Multinational Corporations) would still find KL to be more attractive to base their regional headquarters. Some corporations may consider relocating to KL from Singapore, perhaps due to reasons such as lower operational cost and access to workers. KL may turn out to be the main beneficiary of HSR and not Iskandar.”
Airline effects
Another possible side effect of the HSR would be on the airline industry. Wong, the MD of VPC explains that the HSR would rob Air Asia and other budget airlines of some of their business.
“Flying time one way takes about 45 minutes. The journey to and fro the two airports (KLIA – Changi Airport) plus check-in time add about two and a-half hours to this – making the entire journey more than three hours. In contrast, a 90-minute ride (plus perhaps 30 minutes for customs and immigration clearance) is an attractive alternative option. The HSR link could result in a huge drop in air traffic between Singapore and KL, and change the dynamics of competition between Changi and KLIA particularly if the line includes stops at either or both airports.”
Currently, Wong states that the Singapore – KL sector is now the largest International LCC (Low-Cost Carrier) route with total LCC capacity of 178 weekly flights in each direction and 101,248 weekly seats from KL (including both KLIA and Subang Airport) to Changi Airport, Singapore. He also cites a UOB Research Report that reveals that about 12 per cent of Malaysian Airport Holdings Bhd’s passenger throughput involves traffic from Singapore and at least 60 to 70 per cent of these passengers could opt for HSR instead of flying due to its time savings.
Challenges
Although the HSR is expected to be a major economic catalyst by improving inter-city connectivity with spillover effects cascading onto the major cities within its catchment areas, challenges are expected ahead in trying to kick-start the HSR.
“Negotiations between the two countries could stall if there are disagreements over where the immigration points and stations are to be located. How does one apportion the cost of the HSR between the two countries? There has to be much dialogue before the green light to go ahead can proceed,” cautions Loh, the GM of MPI.
