City&Country: The Edge/Raine & Horne International Zaki+Partners Penang housing property monitor (3Q 2010)

Penang market moving sideways

The Penang residential property market is moving sideways, with prices expected to reach a plateau soon. The market may face an “interesting tipping point where prices may slip or hold steady” in 4Q2010, says Raine & Horne International Zaki + Partners director Michael Geh.

Many investor and speculator-held properties are being issued with certificates of occupancy  and are coming onto the secondary market, he observes when presenting The Edge/Raine & Horne International Zaki + Partners Penang Housing Property Monitor for 3Q2010.

The speculators seek at least a RM50,000 to RM100,000 short-time capital gain, he adds. “They are not interested in renting out their units or moving in. When as many as 200 such units are released at the same time, the market softens.”

While more transactions were recorded in 3Q2010 compared with the previous quarters, Geh says transactions may slow down with buyers finding current property prices too high. Still, he believes that from now until early next year, prices may stabilise or even dip.

There also seem to be more genuine buyers in the market now compared with active speculators in the earlier part of the year, he says.

The monitor shows that the prices of landed homes and high-rises in most areas rose in 3Q2010. Those of standard 3-bedroom apartments with built-ups of less than 900 sq ft in Batu Ferringhi, for example, saw the most significant increase, rising 19% q-o-q to RM250,000 in 3Q2010. Among landed homes, the prices of 1-storey terraced houses in Seberang Perai Utara gained 17% q-o-q to RM140,000 in 3Q2010 while those of 2-storey terraced houses in Pulau Tikus rose 12% q-o-q to RM700,000 in 3Q2010.

Meanwhile, the rents of terraced homes rose strongly in 3Q2010. For example, those of standard 2-storey terraced homes in Sungai Ara — with built-ups of 1,300 to 1,800 sq ft — increased 33% q-o-q to RM1,200 in 3Q2010.

The rents of 1-storey terraced homes in Sungai Ara and Tanjung Bungah — with built-ups of 1,200 to 1,600 sq ft — jumped 28% q-o-q to RM900 in 3Q2010.

Geh says the Skim Rumah Pertama (First Home Scheme) announced in Budget 2011 to assist first-time homebuyers and Bank Negara Malaysia’s measures to curb property speculation by reducing the margin of finance on the purchase of a third property indicate that the government is aware of an over-speculative market and fears a property bubble, albeit only in certain areas (including Penang).

“Strategies by developers, which tend to favour speculative activity to push project sales, are causing much concern as property prices go beyond market fundamentals. This will inevitably be an unhealthy prelude to overheating in the property market. So now is the time to cool down,” he adds.

In Skim Rumah Pertama, first-time homebuyers with a household income of less than RM3,000 are allowed to obtain a 100% loan if they buy a house valued at RM220,000 or less.

However, Geh believes the ceiling price of homes in this scheme should be at least RM350,000.
“Even with that figure, choices are limited to aged [more than seven-year-old buildings after the certificate of occupancy was issued] high-rise apartments with built-ups of 700 to 1,000 sq ft, with one car park, located in the southern region, where demand is weak compared with other locations,” he says, adding that RM300,000 to RM350,000 should be the actual definition of affordable housing on the island. It should be RM200,000 to RM250,000 on the mainland, he says.

Citing the Penang International Property Expo held in late September, Geh says 90% of the newly launched properties were priced higher than RM350,000. These were mostly in preferred housing areas such as Batu Maung, Tanjung Bungah and Sungai Ara.

“The recently launched Elit [email protected] City in Bayan Baru by Hunza Properties Bhd and Pinang Laguna Water Park Condo by Landmark Strategy Sdn Bhd in Seberang Jaya are among the choices for a property under RM400,000.”

Geh adds that YTL Land & Development Bhd is preparing to launch its luxury apartment project in Lebuh Farquhar on a joint-venture basis with the Penang Development Corporation.

On Nov 23, Mah Sing Group Bhd announced  its acquisition of a 61-acre freehold tract in Batu Ferringhi for RM157.3 million. It plans a resort-style development with a gross development value of RM800 million on it.

Geh believes the local authorities should consider reviewing development guidelines, particularly for hillslope developments, and density suppression guidelines in the inner city of George Town.

“For the inner city, there is a general 5-storey restriction on developments. The whole state of Penang has height and slope restrictions, to be approved on an ad hoc basis. Eco-nature developments in Penang should be considered as there is limited developable land left. The inner city heritage guidelines, for example, are too draconian in nature and there is an over-emphasis on aesthetics, not on economic feasibility.

“Density suppression will decimate the city’s economic values. I believe a city has to grow or die — it doesn’t stand still. The inner city needs more commercial activities and residential population to be alive and density suppression will not benefit the city,” he says.

As for hillslope developments, Geh says housing projects should meet not just local hillslope development guidelines, but also the  standards in places like Hong Kong where building on hillslopes is common.

Geh cites Ivory Group’s Moonlight Bay as one of the island’s first successful hillslope projects, with its retaining wall system meeting both US and European safety standards. Each stage of the construction was monitored and certified by three teams of independent engineers.

This article appeared in City & Country, the property pullout of The Edge Malaysia, Issue 834, Nov 29-Dec 5, 2010

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