_The economic impact of the upcoming RTS
The economic impact of the upcoming RTS
Knight Frank Singapore’s Residents Aspirations Survey data points to how excitement over the transport node could drive more people to live or work in Woodlands
Presenter
The overall works to install the RTS link is 56% complete. Observers say the RTS link will be a significant driver of Singapore, Malaysia connectivity and economic growth when it starts passenger service by the end of 2026.
More importantly, the RTS link is poised to reshape Johor and Singapore's property market, driving demand, boosting property values, and spurring broader economic growth. For more let's speak with Terence Fan, Assistant Professor of Strategy and Entrepreneurship at the Singapore Management University.
Aside from enhancing cross border connectivity between Malaysia and Singapore, what are the key benefits both sides will see from this RTS link?
Terence Fan
This is a link that involves purely transit trains, and what that means is that it's a major step up in terms of the capacity of how many people can travel between Singapore and Malaysia. It's kind of the debate that we had many years ago. Why do we need MRTs in Singapore when we have buses? Because one, MRT trains, depending on how many train cars, is equivalent to multiple buses packed full of people running, chained to each other at the same time. It's a major step up with how many people can travel between the two places in a day or in an hour.
What that means is that would sort of bring in some business opportunities. When this mass of people travel, they will bring businesses and that in turn, can drive up some of the value of business, the location, shops, and even maybe hotel accommodations or even property for people who are living there or working nearby. Of course, some of these people who travel may be business people themselves, so they may have business meetings, exhibitions, that sort of thing. In general, that will also drive up some of the land or property prices in both places as well.
Presenter
Indeed. According to a survey by Knight Frank Singapore, 35% of Singaporeans would like to move to the North over other regional centers like Tampines and Jurong. So that says a lot about the excitement surrounding this, not just the RTS thing, but also the SEZ, the Special Economic Zone.
You talked about the property sector. We could well see the increase in perhaps speculative buying, especially in areas near the RTS stations. Immediately we think of bases like Woodlands, for example and these could lead to higher prices as a result. What's the potential of buyers being priced out of the area by the time the RTS link is up, or even before then?
Terence Fan
That’s very interesting, because in Singapore, at least for residential property, we do have some laws and controls on like, how much people can buy without having to pay for the Additional Buyer’s Stamp Duty. People can't own too many residential properties at the same time. I think on the Singapore side, people who are willing, who are thinking about selling may now say, “Hey, I'm gonna sell it at a higher price.” But at the same time, it depends on the buyers. On the Singapore side, the increase may be a bit more restrained on residential properties, but maybe on the commercial side of things, because we are seeing people moving, that may be up a little bit more.
On the Johor side, I hear some Singaporean investors have already gone ahead. And some prices may have already appreciated a bit, so we'll see how that works. I believe they also changed or increased a bit of the sales tax for foreigners, like Singaporeans, buying properties in Malaysia a short while ago. I think the increases may have already been there, but hopefully the excitement will continue, and we'll still see some further increases, you know, between now and when this actually opens.
Presenter
With these higher prices, what's the likelihood then that returns on these investment properties are not deemed as attractive? Would it reduce the appeal of investments into the areas?
Terence Fan
We have to think about buying up properties, or investing in these properties, and the actual use of them. As long as people can rent the shop spaces at a reasonable price, and they can actually open their shop and serve the traveling public, it's fine. Speculators may actually lose a bundle if the returns are low. The question is whether or not that, in turn, could unsustainably drive-up rent to the point where very few shops can afford to open and people would think there's nothing to buy. And therefore, why would they go there in the first place? I think that's the trap that hopefully we don't quite get into.
Presenter
There's still a bit of uncertainty over the success of the Special Economic Zone between Johor and Singapore, how it would work and so on. How might the RTS link connectivity actually allay these concerns, and perhaps reassure people that the SEZ is going to work?
Terence Fan
The fact that the transportation link is there, it provides for a capacity that people can move. And this is a lot more capacity than what we've experienced in Woodlands or Tuas, for example. So that provides sort of a baseline. There’s less restriction now for people to move. Whatever turns out to be for that economic zone should be based on that. Because one thing you can have is a lot of economic activity, but not a lot of people moving around. That sort of restricts what you can do.
So now, at least one thing that they could sell is how there will be a lot more Singaporeans or maybe other tourists. It'll be easier for them to just take a peek at Johor Bahru and then perhaps stay a little bit longer, because they realize, okay, there are more things to do. I think that would be sort of a confidence booster.
Presenter
The RTS link is expected to ease congestion. We're talking about both human and vehicular at the Causeway. Do you then see demand slowing for other modes of transport into Johor and vice versa once the service commences?. How much reprieve would the train service actually bring?
Terence Fan
There's a fair amount of people currently crossing the border at Woodlands, through buses, various public buses, and also privately run ones. Plus, they may have a rental car or taxis. Part of this traffic, I believe, and part of the people who currently drive over will consider the RTS as an alternative, because it's just simpler. The frequency is there, and you don't have to worry about parking a car. And then for people on buses, especially if they have bags or children just getting up and down to clear customs or immigration twice… you only have to do at one point, you get on the train and then off you go. So, I think it's, it's a lot more convenient.
But having said that, I don't think vehicle traffic would actually come down to zero and near that because a lot of people going through right now, they're just not going just to the centre of Johor Bahru. They’re going to the rest of the state, or maybe beyond. And for that to continue, it's hard for them to just connect onto a train, unless the high-speed rail opens up. I think vehicular traffic will come down, but I wouldn't think it's going to be a totally drastic amount.
On the other hand, I would see some new group of people over time who will say, why don't we take a look or take a day trip over there? Because it's just now easier. Likewise, and maybe people from the Johor side say, hey, why don't we go to Singapore a little bit more often, because now it's easier as well. So that increase, this new kind of people who would otherwise not travel before, is going to take shape, and that's what I think is going to ultimately support the RTS.
Presenter
Well, one and a half years to go before we see the first RTS service activated. Until then, we'll keep watching this space, as I'm sure you will too, Professor. Thanks very much for your thoughts this morning.