Singapore’s High Costs Won’t Dethrone The Money Center… Yet

Southern Malaysia is becoming popular as housing prices surge. The commute to Johor brings its own challenges.

Daniel Moss

23 May 2023, 08:05 AM IST

People at Merlion Park in the central business district of Singapore, on Wednesday, May 19, 2021. In the financial mecca of Singapore, technology companies have been steadily growing their footprint in recent years, chipping away at the dominance of banks in the island-state's central business district. Photographer: Lauryn Ishak/Bloomberg

(Bloomberg Opinion) -- Singapore’s post-Covid bull run has brought more than its fair share of grousing. The city-state basks in its status as Asia’s destination of choice, a beneficiary of disillusion with magnets such as Hong Kong. That’s come with a big caveat: High costs that push workers to consider packing for the suburbs — of another country. Happily for Singapore, one very proximate would-be competitor needs to work a lot harder to be a serious rival.

Johor, the southern state of peninsular Malaysia, is often depicted as an arm of the island’s economy. Singapore was briefly part of Malaysia before becoming a republic in 1965. People flow across the border each day by the hundreds of thousands. Cars, trucks and motorcycles line up at rush hour. Food, goods, water and power cross the Johor Strait, which is less than half a mile at its narrowest point. With the cost of putting a roof over your head becoming prohibitive for some in Singapore, Johor is getting a fresh look. It’s not only right next door, it’s cheap. Enhancing the attraction is the decline of the Malaysian ringgit, which has skidded against the Singapore dollar.

Singapore’s High Costs Won’t Dethrone The Money Center… Yet

But embracing the ex-spouse has its pitfalls. Johor is struggling with public services. The commute can be long, thanks to chronic congestion at peak times. While easily available in Singapore, domestic help is harder to come by and, with more employers cracking the whip on return-to-office, logging into Zoom too often from your spacious abode in Malaysia might not be such a great career move.

I lived in the Malaysian capital Kuala Lumpur, a few hours drive north of Johor Bahru, the state’s biggest city, in the 1990s. I have been back a number of times after moving from the US to Singapore in 2019. However, I hadn't spent much time in JB since Singapore rents skyrocketed. I was intrigued by the idea that the global financial center was, perhaps, on the verge of pricing itself out of the market just when it became the flavor of the moment. Anecdotes constantly arise in conversations among foreign professionals about someone who knows a person who fled north, despite their robust salary or the deep pockets of their multinational employer.

Chatting last week with some of JB’s leading realtors, I came away with an appreciation for the wrinkles in the current crush, or fantasy. Yes, property transactions by volume and value hit a record high last year in Malaysia and its southern state. But it's driven more by Malaysians than by expats looking to make their Singapore packages stretch.

The common thread, for sure, is the tie to Singapore. “If anything happens in the Singapore economy, we are very affected,” Sr Vadeveloo Suppiah, a former chairman of the Johor chapter of the Malaysian Institute of Estate Agents, told me. There are Malaysians working in Singapore and seeking to trim overheads, or who are flush and can afford to stay on the island, but want to buy a home across the strait. There are Singaporean citizens who want to move to JB to save cash. Expats employed in Singapore, but without bulging relocation deals that cover rent and school fees, are an emerging group. Most of Vadeveloo’s clients are Malaysians working in the city-state. It’s not all about expats like me — for now at least.

As confident as agents are, the real test of JB’s appeal and whether Singapore's star is dimming, if even slightly, will come in a few years. That’s when a light-rail system joining downtown JB with the island’s northern transport hub of Woodlands, and from there to the hyper-efficient underground train system, is scheduled to begin. Days before I visited, Singapore announced that construction on its side of the Rapid Transit System was halfway complete. “It’s going to be a game changer,” Vadeveloo declared.

For a long time, there was just a single crossing. The Causeway, erected by British colonial authorities, marks its centenary in September. In an effort to ease bottlenecks, a second road link was opened in 1998 after years of delays owing to disagreements about precise location, size and scope. While clearly not being able to live without each other, the two nations don’t always see eye to eye.

Among areas often mentioned as good deals is Puteri Harbour, around 30 minutes drive southwest of central JB. Along the highway, billboards protrude from the hillside promoting international schools such as Marlborough College and Raffles American School. Strolling around the waterfront retail area that abuts hotels and high-rise apartments one recent afternoon, I could see what fans were getting at. I also recognized this place, like many in Malaysia, had a generous amount of hype to go with its substance. Plenty of shopfronts were chained up with dusty signs plastered to walls advising they were closed for Covid. On the promenade, security guards and janitors outnumbered others by about six to one.

Later, at a bar called Rock Bottom, financial planner Adrian Paul is happy with his choice to relocate. A 37-year-old Malaysian with Singapore permanent residency, he and his Singaporean wife started considering leaving the city-state with their daughter when rents began the giddy ascent soon after Covid curbs were eased. The rent on their three-bedroom condo was climbing to S$7,000 ($5,250) -$8000 per month. For 8,000 Malaysian ringgit ($1,777) a month, the family now lives in a five-bedroom house with a yard, pool and space for several cars in the nearby Leisure Farm neighborhood. “Here we can save and have a better quality of life,” Paul said. “This place is much busier on weekends.”

But this isn’t simply transplanting an existence from Singapore. Internet connections aren't so great, Paul found. There are problems with trash collection, and taxis and ride-hailing services can sometimes take more than an hour to arrive. Paul is careful not to schedule meetings in downtown Singapore before, say, midmorning, and he has flexibility that enables him to work from home a couple of times a week. He recounts the experiences of a neighbor working for an investment bank in the financial district. If she leaves at 6 p.m., she may not get home until after 8 p.m. “It’s great as long as you don’t have office hours.”

Singapore has taken steps to cool its property market, whose astronomical values the government attributes largely to delays in construction during the pandemic. Last month, in an effort to take some heat out of the industry, stamp duty for second-home buyers was increased and raised dramatically for foreigners purchasing private property. Singaporeans buying their first home are exempt. The state plays a huge role in housing; most citizens reside in apartments bought from the Housing & Development Board and politicians are acutely sensitive to perceptions of affordability. Days after the new measures, the likely next premier, Lawrence Wong, pledged to keep valuations manageable. “In Singapore, the Prime Minister has to be a real estate agent,” Wong told a May Day rally.

An aging society heavily urbanized and with a languishing birth rate requires immigration, and Singapore embraces it more than many advanced nations. Its economy will always be inextricably linked with Malaysia, especially Johor. The latter wants the money from investors coming in. The city-state needs fresh food, vegetables, technicians, barmen, caterers, bus drivers and postal workers. Singapore needs to watch it doesn’t become uncompetitive. For Johor, there are the challenges unleashed by geographic fortune: Demand from Singapore residents is making food, education and shelter more expensive for locals whose paychecks are in ringgit. The JB area is itself sucking in talent from across Malaysia.

For all its allure, Johor isn’t close to replicating Singapore, even if more people are prepared to at least contemplate a shift. It’s not as simple as build and they will come. The dynamic reminds me of perennial complaints about the US dollar’s premier standing. The search for an alternative to the greenback, some magical currency that has all its advantages and no drawbacks of its own, keeps coming up short.

Singapore’s moment in the sun isn’t over. The boom in JB doesn’t do normal business hours. The towering sign on the approach to the border checkpoint that proclaims its love for Johor is firmly planted on Malaysian soil.