It has been touted as an affordable real estate investment destination in an up-and-coming market, an attractive alternative to Singapore's pricey housing scene.
But property buyers in Iskandar are now facing two big investor problems: a potential oversupply of homes and an inadequate supply of property data.
The Iskandar region encompasses an area of more than 2,000 sq km in Johor. It covers the city of Johor Baru and the adjoining towns of Pontian, Senai, Pasir Gudang and the construction of a new administrative capital in Nusajaya.
Mainland Chinese developers have been launching mega housing developments, with thousands of units each in the Malaysian territory, sparking fears that a supply glut might dampen residential prices and rents.
Complicating the situation is a dearth of data about Iskandar's property sector, underlining the risks of investing in a market less transparent than Singapore's.
Basic data such as the volume and value of home sales, average transaction prices and average rentals are not easily available. Neither is information on the homes being built, launched or completed in Iskandar alone.
Sudden policy changes, such as additional taxes or restrictions on foreigners' purchases, add to the confusion because they are not always communicated clearly.
Without comprehensive data compiled by a central authority, it is next to impossible to assess the true health of Iskandar's property market. There is a dire need for more public and timely data on the market situation.
WHAT little is known now seems to point to a looming oversupply of homes in Iskandar.
As at the fourth quarter of last year, there were 118,191 homes under construction in Johor state, where Iskandar is located, and another 168,371 planned, according to the Malaysian government.
To put this in perspective, Singapore - which has a population of 5.3 million, compared with Johor's 3.5 million - had about 67,000 homes under construction and another 6,000 planned, as at the first quarter of this year.
The massive upcoming supply in Iskandar is a result of hefty investments in the property sector in recent years.
Of the RM131.6 billion (S$51.5 billion) in committed investments Iskandar attracted between 2006 and December last year, a quarter went to residential property developments - surpassing the combined total of investments in the retail, industrial, education, finance, creative, emerging technologies, health-care and logistics sectors. Another 36 per cent came from manufacturing, and the remaining from the government and utilities.
This year, there have been even more property investments.
Country Garden, which last year launched 9,000 units in Danga Bay at one go, is developing a 2,000ha island off Tuas that will be nearly three times the size of Ang Mo Kio housing estate and 10 times that of Danga Bay.
Dubbed Forest City, the man-made island is to be a tourist destination with luxury homes. It will take 30 years to build.
Guangzhou R&F Properties is also at work on a massive integrated development that is said to be almost as big as the entire residential zoning area of the Kuala Lumpur city centre.
This R&F Princess Cove project will include about 3,000 apartments in 15 blocks in its first phase, to be completed in 2017, but Malaysia's The Star newspaper reported that the developer could launch as many as 30,000 homes in all.
Another 80ha of Iskandar land have been snapped up by other China players, including Shanghai-based Greenland Group and Zhuoda Real Estate Group, as well as Hao Yuan Investment, which is based in Singapore but controlled by mainland shareholders.
THESE figures have left some observers predicting a glut of homes. Units being built now will be ready in about three to five years' time. But investments that create jobs may take years longer. Who will live in the homes then?
Current projects also face falling demand in the wake of property cooling measures introduced by the Malaysian government last year. The curbs include property gains taxes as well as minimum purchase amounts and stamp duties for foreign buyers.
"Developers who expected to sell out by now still haven't," says property agent Ryan Khoo. "Country Garden Danga Bay is one. It has hovered at about 60, 70 per cent since August last year."
He adds: "Sales have definitely dropped since the introduction of the cooling measures and because there are a lot more choices on the market, property buyers have become very cautious."
Newer projects have also taken a hit. UEM Sunrise's Almas Suites, for example, saw an initial take-up rate of just 15 per cent, according to reports last December. By the end of June, sales reached 25 per cent, UEM Sunrise says.
A report by Maybank analyst Wong Wei Sum in January highlighted fears of oversupply.
"The primary concern here is that these developers could deluge the market with a massive supply of high-rise mixed-development projects... if there is no synchronised planning and control by the authorities," he says.
Mr Getty Goh, director of property research firm Ascendant Assets, notes that condominium sales in Johor Baru fell 37 per cent from the last quarter of last year to the first quarter of this year.
"All you need to do is to drive around Iskandar Malaysia and you can see that there are many units still vacant," he says.
The seemingly disproportionate tilt of investments towards property rather than business activity, apart from manufacturing, also raises the question of whether there will be enough rental demand from incoming workers to fill up the tens of thousands of homes that will be completed over the next few years.
"You'll have to search really hard to find the answer as to where all the occupants, whether Singaporeans, Malaysians or expatriates, are going to come from," says Mr Colin Tan, the director of research and consultancy at Suntec Real Estate Consultants.
Still, some investors believe Iskandar continues to hold promise.
Real estate agent Germaine Ng, who owns a condo unit in Iskandar that she is considering renting out, says: "Rental demand could come not just from expatriates working in Johor but also those working in Singapore who would like more space and the lifestyle in Iskandar."
Although the market is a tad quieter these days, she says home buyers are still keen on Iskandar, as "prices here are stabilising and still attractive because of the weak ringgit. For about $400,000, you can get a semi-detached house."
Not all property buyers in Iskandar are speculators looking for a quick profit, she adds.
Those seeking a weekend or retirement home are unlikely to dump their properties if the market heads south, minimising the risk of a downward market spiral.
Some segments of the market - such as landed property - may also be less at risk of oversupply, says investor Mohd Mokhtar Mohd Amin, who bought a landed home in Leisure Farm last year.
"There might be an oversupply of condos in Iskandar now but if someone is looking to rent a resort-style landed home like the ones in Leisure Farm, their choices would be limited," he says.
The information gap
BUT what would really ease investors' fears is a more accurate picture, based on hard data.
Unlike in Singapore, property developers in Iskandar are not required to disclose sales or rental updates. Often, they simply refuse to reveal how many units they have sold at their launches, so it can be hard to estimate the success of their projects.
Even macroeconomic data is difficult to come by. The Iskandar Regional Development Authority releases quarterly figures on investment in the region but not data on job creation or population growth. All analysts have to go on is an estimate that Iskandar's population, now at 1.6 million, will rise to three million by 2025.
In such a market, there is little to prevent property players from making promises that might not be sustainable - and would-be buyers from being led astray.
It is not uncommon, for example, to see advertisements for Iskandar condos offering guaranteed rental returns of 10 per cent to 15 per cent over two years.
But critics have pointed out that once this guaranteed period is over, there is no knowing whether the units being advertised can attract such high yields in the open market.
Without regular and comprehensive updates from a central authority, even the most educated estimate about the health of the Iskandar property market remains just a guess.
In its ambitions to develop Iskandar into a world-class city and financial centre, it might be timely now for the Malaysian authorities to consider issuing such updates on a regular basis.
This would not only help investors make more informed decisions but also create a more transparent and level playing field, maintaining investor confidence.