Cut-Price Luxury Homes Fuel Singapore Tri-Nation Sprawl

Darren Chin gave up a 15-minute train

journey to his office in Singapore for a two-hour drive with a

stop at passport control. The reason: By commuting from Malaysia,

he can afford his own two-story home and car.

“It’s worth it,” said the Malaysian financial adviser,

who leaves his house before 6:45 a.m. to get to his job at
Oversea-Chinese Banking Corp. (OCBC) on time. “I’m saving on rent and

I’m paying for my own house.”

Chin is part of the expansion of Southeast Asia’s richest

city across its borders as residents and companies seek property,

labor and amenities, often at half the cost or less. The result

is a three-nation urban complex with a population bigger than
London and an economy that would rank as one of the fastest-growing in the region.

“Without the regional perspective it would be a lot more

difficult, if at all possible, for Singapore to maintain the

role that it has as a global city,” said Milica Topalovic, an

associate professor at Future Cities Laboratory in Singapore.

“Most of the pressing questions that Singapore has today — of

land, of workforce, of aging — can be solved easily in a

regional perspective.”

Combine the dominant forces of the 21st-century economy –

globalization and urbanization — and the result is a metropolis

that crosses borders, cultures and currencies. Southeast Asia’s

prime example is known as Sijori, an acronym derived from

Singapore, the neighboring Malaysian state of Johor, and

Indonesia’s Riau Islands.

Photographer: Roslan Rahman/AFP/Getty Images

Yachts are moored at a marina in front of new buildings in the southern state of Johor Bahru, Malaysia. Singapore has invested at least 11 billion ringgit ($3.4 billion) in Iskandar Malaysia, a special economic zone in southern Johor established in 2006 that’s three times the size of the city. Close

Yachts are moored at a marina in front of new buildings in the southern state of Johor… Read More

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Photographer: Roslan Rahman/AFP/Getty Images

Yachts are moored at a marina in front of new buildings in the southern state of Johor Bahru, Malaysia. Singapore has invested at least 11 billion ringgit ($3.4 billion) in Iskandar Malaysia, a special economic zone in southern Johor established in 2006 that’s three times the size of the city.

Land Costs

For an island-state at its limits, access to land and labor

in neighbors that were once arch-rivals is crucial. Economic

growth and soaring immigration have strained Singapore’s

resources, making it one of the most expensive places to live in

the world.

Singapore’s population density rose to 7,540 per square

kilometer in 2013, closing in on New York’s 10,425. The Ion mall

in the Orchard Road shopping district descends four stories into

the ground, and the government is exploring building underground

storage, transport hubs and shopping areas.

The island, whose $290 billion economy is bigger than that

of Nigeria, the Philippines or Greece, has seen its population

surge by almost a third in the past decade to 5.4 million. Add

Johor and the Riau islands, and the number was about 10.1

million in 2010, according to estimates by Aris Ananta, a senior

research fellow at the Institute of Southeast Asian Studies in

Singapore. That could rise to 18 million by 2030, he said.

Triangle Economy

The Sijori triangle’s economy will expand 5.7 percent

annually in 2013-2020, compared with an average of 4.2 percent

for Singapore, show forecasts by Toh Mun Heng, an associate

professor at the National University of Singapore Business

School.

Relations among the countries weren’t always cordial.

Singapore and Malaysia were part of the same union for two years

after independence from Britain until the city-state was ousted

in 1965 by the leaders in Kuala Lumpur. Colonial bonds remained

in the form of a pipeline from Malaysia that still supplies

about half Singapore’s fresh water and a railway that ran across

the island, but was owned by Malaysia until 2011.

Those links caused decades of squabbles between the two

nations as the fledgling countries competed in economic

development. In 1997, former Singapore Prime Minister Lee Kuan Yew apologized after describing Johor as “notorious for

shootings, muggings and carjackings.”

Stronger Ties

His son, Prime Minister Lee Hsien Loong has developed a

stronger relationship with Malaysian Prime Minister Najib Razak,

solving the rail dispute and encouraging joint development.

We’re “trying to manage the consumption of scarce

resources, like water, energy, and pricing them properly so

people have the incentive to save and not waste these

resources,” Lee said on June 1 at the opening of the World

Cities Summit in Singapore.

With cheaper land plentiful in southern Malaysia, money is

pouring across the border. Singapore has invested at least 11

billion ringgit ($3.4 billion) in Iskandar Malaysia, a special

economic zone in southern Johor established in 2006 that’s three

times the size of the city.

Khazanah Nasional Bhd. and Temasek Holdings Pte, the state-owned investment companies of Malaysia and Singapore are

developing projects including a 210-acre area that will comprise

a wellness center, apartments, malls and spas valued at about 3

billion ringgit ($930 million).

“There’s a natural economic dynamic that will make a lot

of Singaporeans invest in Johor Bahru,” said Francis Yeoh,

managing director of one of Malaysia’s biggest builders, YTL

Corp. “It’s quite a good time to invest in property.”

A five-bedroom, two-story home with private pool in

Iskandar was advertised last month for 3.9 million ringgit. A

similar-sized home on Singapore’s prime Sentosa district with a

waterfront view was on sale for about 15 times as much.

Traffic Jams

The tri-nation super-city does have some unique problems.

With only two road links to Malaysia, rush-hour traffic can

cause delays of 90 minutes or more at immigration. More than
130,000 vehicles a day cross the kilometer-long Causeway, built

in 1923, Singapore’s Deputy Prime Minister Teo Chee Hean told

parliament in February. The second route, a bridge opened in
1998, has the capacity to take another 200,000.

“I try to leave Singapore as late as possible, or the

traffic is very bad,” said Chan Ong Yong, a Malaysian truck

driver who lives in Johor and works in Singapore delivering and

installing sheet glass. “If I lived in Singapore, the rent

would be too high and school would be too expensive.”

Chan, a 30-year-old father of three, earns about S$3,000

($2,393) a month, twice what he would get in Malaysia. The cost:

Some nights, he doesn’t get home until after 11 p.m.

“Sometimes I fight with my wife because I spend so little

time at home,” Chan said.

Contraband Search

Commuters like Chan face two stops for passport control and

customs each way, with vehicles frequently searched for

contraband goods that are cheaper in Malaysia. Singapore-registered cars entering Malaysia are required to have fuel

tanks at least three-quarters full, as gasoline is less than

half the price across the Causeway.

Developers and businesses also face currency risks and the

need to deal with different legal systems. Singapore’s dollar

has risen about 4 percent against the ringgit in the past year

and 20 percent against Indonesia’s rupiah, making the satellites

even more of a relative bargain.

Less than an hour from Singapore by fast ferry across the

Singapore Strait, one of the world’s busiest shipping lanes, the

Indonesian islands of Batam and Bintan, two of the largest of

the Riau Islands, also are booming.

Batam Factories

Singapore-listed Amtek Engineering Ltd. completed moving

all its manufacturing operations to Batam in October and expects

lower costs to improve profits after about a year, according to

Chief Executive Officer Daniel Yeong.

“The cost is by far lower,” Yeong said in an interview on

May 7. “It’s a 45-minute ferry away. I don’t have to lose any

of the high-quality people.”

The airline PT Garuda Indonesia (GIAA) and Singapore-based Gallant

Venture Ltd. (GALV) agreed in February to build a new runway and

terminal at Bintan’s airport.

Gallant operates ferries between the islands as well as

managing a stretch of resorts on Bintan’s north coast that

includes a Club Med, an elephant park and golf courses designed

by Greg Norman, Jack Nicklaus and Gary Player.

Last October, it began marketing 139 villas as vacation or

retirement homes, with two-bedroom units starting at S$770,000.

Access to the resorts area is restricted to resort guests and

employees, according to Gallant’s website.

“The region as a whole maybe in terms of culture, tourism,

might be seen increasingly as one entity,” said Topalovic from

Future Cities Laboratory.

For OCBC’s Chin, who used to lease a room for himself in a

Singapore public-housing block and now has a four-bedroom house,

the benefits are worth the inconvenience.

“I’ve got more control on where I want to go,” he said.

“I couldn’t afford a car in Singapore.”

To contact the reporter on this story:

Sharon Chen in Singapore at

schen462@bloomberg.net

To contact the editors responsible for this story:

Adam Majendie at

adammajendie@bloomberg.net;

Stephanie Phang at

sphang@bloomberg.net

James Hertling

Cut-Price Luxury Homes Fuel Singapore Tri-Nation Sprawl