The lure of waterfront homes in Penang

GEORGE TOWN (Nov 1): YTL Land & Development Bhd has yet to launch Shorefront Residences, its luxury project in Penang. Yet, within the first week that the project was open for registration through its website, the developer received more than 1,000 sign-ups. "We have already received enquiries from Singaporeans," says Datuk Yeoh Seok Kian, executive director of YTL Land & Development.

The high level of interest from Singaporeans "was expected", says Yeoh, given their "familiarity with and affinity for Penang", which have translated into property investments on the island. "It's especially more so now that Penang has established itself as the most-sought-after property market in Malaysia, as evidenced from its staggering growth in property offerings and prices," says Yeoh.

Every apartment at Shorefront Residences gets direct sea views.Shorefront Residences is located in George Town, next to the historic Eastern & Oriental (E&O) Hotel in Penang and fronting the sea. It is expected to be launched by year-end, but anticipation is running high. "It is YTL's first project in Penang and widely expected to set a new benchmark in the luxury segment," says Jason Teoh, director of property consulting firm Henry Butcher Malaysia.

The freehold Shorefront Residences is a six-storey development with just 75 duplex apartments. There are only two units on each level, with sizes ranging from 3,000 to 4,300 sq ft each. Every apartment has private lift access, with some units enjoying private gardens and pools. The design architect is Singapore-based RT+Q, which has designed many private homes and condominiums in Singapore as well as Malaysia.

The development was designed to maximise the sea views from every unit, be it from the outdoor lanai or private garden, explains Yeoh. The swimming pool, including private pools, and water features are designed as infinity pools "to carry through a seamless continuation of the sea and the property", he adds.

The pricing of Shorefront Residences has yet to be confirmed. However, market speculation is that it's likely to be benchmarked against similar properties in the luxury segment, such as Selangor Dredging Bhd's maiden residential project in Penang, the 138-unit By the Sea, located in the Batu Ferringhi area in the north of Penang island. By the Sea had a soft launch in September, and average selling price is RM1,200 psf (S$484). To date, five units at By the Sea have been sold.

The interest in Penang property can be seen from the turnout at the Penang Property Showcase in Singapore in September organised by Malaysia Property Inc (MPI). A straw poll at the seminar also showed that quite a number of Singaporeans had purchased properties in Penang recently.

In the face of rising inflation, investors are looking to preserve their capital by investing in something that will appreciate over time, says Datuk Lee Kah Choon, chairman of the executive committee of InvestPenang and director of Penang Development Corp (PDC), who was in Singapore for the Penang Property Showcase. "And that's why for the last few years, there has been a steady stream of investors coming to Penang," he adds.

Investors tend to adopt a value-for-money approach when considering Malaysian property vis-à-vis Singapore real estate. "The most luxurious property in Penang today is priced at RM1,200 to RM1,500 psf, which is equivalent to S$600 psf," says Lee. "What can you buy in Singapore for that price? Something located in the suburbs. So, there's a big gap between Penang and Singapore prices today."

And that's attracting Singaporean buyers. A Singaporean investor who requests anonymity says he likes Malaysian property and has been actively investing there for the last 2½ years. In that span of time, he has purchased five properties, three of which are condo units in Penang. "I'm a sucker for panoramic ocean views, and in Penang, you can get views far superior to Sentosa Cove or Keppel Bay for the price of an HDB flat," he says. He likes freehold condos with large units, mainly four-bedroom apartments or penthouses in the prime locations.

According to the Singaporean investor, the capital gains on his Malaysian portfolio amount to just under 50% to date. There have been many offers from buyers, he says, but he has rejected all of them. "I'm sort of a collector. So, I just buy them to keep and stay in whenever my family and I visit." He intends to double his portfolio in Malaysia, with Kuala Lumpur being "a high priority".

Penang is very popular with foreign investors. "Although in absolute terms, Selangor is ahead, in terms of FDI [foreign direct investment], we're still No 1," says PDC's Lee. "The government is keen on making Penang a location of choice for tourists and investors," he adds. "Overall, Malaysia is doing relatively well within the Asean region."

Penang's economy is based on services such as banking, logistics and manufacturing. Total investments into the state amounted to RM12.2 billion last year, which topped the charts in Malaysia for highest recorded inflow of investments.

"Singaporeans have been the largest investors in Malaysia," says Kumar Tharmalingam, CEO of MPI. "It's quite common for Singapore to be a base for many purchasers, including foreigners, and Malaysians working in Singapore. There's also been a surge in interest in Malaysian property among mainland China investors. They are looking at opportunities outside their country, and [Malaysia] is one of their investment options."

The top foreign buyers of Penang real estate are Singaporeans, followed by Indonesians, Britons and what Henry Butcher's Teoh calls "the Penang diaspora from all over the world". Purchases by foreigners make up only about 2% of total property transactions in Malaysia, including Penang, notes Teoh.

However, the "Penang diaspora" — people from Penang but now living and working elsewhere, for instance, in major cities such as London, New York, Paris, Singapore and Shanghai — contribute to a significant number of overseas buyers. "They come back to Penang quite regularly, during special occasions such as Chinese New Year, Christmas or Qingming, and that's when they buy property," says Teoh. "So, the best time for developers to launch properties for sale is during these festive seasons."

According to Teoh, some of the Penang diaspora buy a property in Penang as a retirement option, while others who have made money overseas are looking to buy something for their parents to upgrade their lifestyle. "When they convert their overseas currency, be it US dollar, pound sterling or Singapore dollar, into ringgit, they can buy a lot in Penang," adds Teoh.

Even during the 2008/09 global financial crisis, the Malaysian property market proved to be relatively resilient, notes Henry Butcher's Teoh. "Although GDP growth was in negative territory, the property sector wasn't affected at all," he says. "In 2010, we saw a historic high of RM1 billion worth of property transactions in Malaysia, including Penang. And based on transactions in 1H2011, we expect to see another 20% growth this year." — The Edge Singapore

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