The idea that property development in Iskandar would satisfy spillover demand from Singapore was tested to its limit last year.
Despite the weakened Malaysian ringgit, which provided a lower entry cost for investors, there was not a notable increase in sales to foreigners, say developers and analysts. Upfront price discounts of up to 20 per cent by some developers also failed to move units. Some property firms have had to re-strategise product offerings, while others deferred new launches.
Iskandar's housing market continues to struggle, as seen by falling numbers of transactions and project launches last year.
Only about a dozen highrise residential projects were launched last year, compared with 24 in 2014 and 49 in 2013 - making 34,364 units in total - noted Savills.
Sales of condominiums and apartments for the first three quarters of last year fell 23 per cent year on year to 1,368 units, according to most recent figures from the National Property Information Centre (Napic).
Savills Malaysia executive chairman Christopher Boyd told The Straits Times that the fewer launches last year could be due to developers exercising restraint and self-regulation. Some developers could also be facing difficulty in securing financing.
The slowdown was first felt in mid-2014 after reports surfaced in the media on oversupply concerns and rising property prices. The implementation of cooling measures, the goods and services tax, and the turbulent political scene in Malaysia inevitably hit market confidence.
Aggressive marketing of huge developments by Chinese developers has also stoked fears of a glut.
Most investors have adopted a wait-and-see approach, amid the general economic slowdown and instability of the ringgit, said Mr Wee Soon Chit, executive director of Malaysian property consultancy Landserve.
Leading Malaysian developer UEM Sunrise has not been spared. For the first nine months of last year, it posted total property development sales of RM1.18 billion (S$398 million). Before the cooling measures were unveiled in October 2013, sales was recorded at RM2.1 billion for the same period.
UEM Sunrise managing director and chief executive Anwar Syahrin Abdul Ajib told The Straits Times: "Many developers have opted to scale down or defer new launches. We also took the same approach, especially in 2014, when we concentrated mainly on existing projects (East Ledang, Almas, Nusa Idaman)."
Prospects of oversupply amid news of planned mega projects like the 1,386ha Forest City also dampened sentiment last year.
Mr Boyd noted that the construction of 29,230 units has yet to start. According to Napic, the total incoming supply of condos and serviced apartments was 69,732 units, as at the third quarter of last year.
Mr Wee attributed the delay in construction to poor buyer response: "During the present bad time, developers normally open their units for registration of interest, with a minimal booking fee. No sale and purchase agreements signed. Hence, developers are not obliged to start construction yet."
UEM Sunrise, the master developer of Nusajaya - one of the five flagship zones of Iskandar - said it will launch only products that fit market needs. For now, its focus will be on landed property and "affordable" highrise developments.
Mr Anwar expects the secondary market to remain flattish in the near term, but tips strong interest for resale landed homes priced up to RM500,000 and located within 20km of Johor's central business district.
Having hit the 10-year mark since its development plan was first unveiled, Iskandar still lacks proper industrialisation, where more business activity would help to generate demand for property. Currently, people are just buying houses there to use as second homes, while the current market condition is made worse by recent reports of massive congestions at the Causeway.
Still, property consultants and developers remain confident about the region. Mr Boyd said: "There will always be a mismatch between supply and demand. When a massive area like Iskandar is masterplanned, it follows that large areas will be designated for residential development and then taken up by developers.
"We are very encouraged by the massive infrastructure improvements in Iskandar, as well as the investment that has gone into job-creating industries. This, and the logic of the location, guarantees substantial future demand for housing.
"Sure, some developers jumped the gun, but it is only a matter of time before the market takes off again, and, at some time in the future, house prices in Iskandar could easily become the highest in the country."
The Johor Baru-Singapore Rapid Transit System Link could be the single biggest game changer on the horizon, Mr Boyd added.
About 26 per cent of property buyers in Nusajaya were foreigners, as at Sept 30 last year - 73 per cent of them Singaporeans, said Mr Anwar.
Country Garden Holdings said 25 per cent of its 6,000 units at Danga Bay were sold to Singaporeans.
The Chinese developer remains undaunted by the slowdown.
Its spokesman told The Straits Times: "We do not wait for the customers. Our philosophy is that we will create the market and the customers will arrive."
Joyce Lim and Rennie Whang