Perking up with attractive packages

The property market in Penang seems to be perking up a little as a few developers have decided to take action to spur sales in light of the slowdown. For example, developers, such as S P Setia Bhd, Gamuda Land Bhd and Sime Darby Properties Sdn Bhd, have come up with attractive homebuyer packages such as schemes which allow you to pay 5% now, pay nothing during construction, or that guarantee buy-backs and others.

There were also a few new property launches in the new year compared with 2H2008, when there were no launches at all.

“The last quarter of 2008 was the worst for the property market here, but the situation is picking up beginning this year, with new launches in the island and developers coming up with interesting packages for buyers. These special packages with several banks provide a total solution for homebuyers,” Michael Geh, Raine & Horne International Zaki + Partners director, tells City & Country.

In 4Q2008, there was a correction in property prices while transaction activities were sluggish in 2H2008.

Geh says residential property prices in both the primary and secondary markets are being revised, with an expected fall of at least 10%, especially in speculative areas such as Bayan Lepas, Bukit Gambier and Sungai Dua (southwest district) as well as Gurney Drive and Batu Feringghi (northeast district).

“What we are seeing now are purchasers, especially first-time home buyers, hunting for lower prices in prime areas. Speculators are also exiting the market. It’s a rich’s man market now where cash is king,” Geh says in presenting The Edge/Raine & Horne International Zaki + Partners Penang Housing Property Monitor for 4Q2008.

Factors affecting the property market include the generous supply of apartments/condominiums and market sentiment, with buyers adopting a wait-and-see attitude, he adds. Projects which are seeing a slowdown in construction include D’Piazza by X-Scan Penang Sdn Bhd, comprising 706 condominium units within four blocks in Bayan Baru, and Gurney Paragon by Hunza Properties Bhd. The Spring Condominium by IJM Properties Sdn Bhd is completed and is pending certificate of occupancy. There was a drop of about 61% in the number of completed apartment units in 3Q2008, compared with 2,046 units completed in 2Q2008 and 806 in 3Q2008.

Property prices could fall by about 10% this year due to rising unemployment, with tighter financing policies weakening consumer’s purchasing power, according to James Wong, president of the  Association of Valuers and Property Consultants in Private Practice Malaysia. He has reportedly said that Penang real estate demand could be battered in anticipation of rising unemployment as manufacturing firms slashed jobs to reduce cost.

Geh agrees there might be a fall in demand, adding that all factories and plants are looking into cost-cutting measures. “More creative measures, such as shorter working hours and contract work (instead of permanent work), will be implemented; it’s not just about laying people off,” he says.

According to the 4Q2008 housing monitor data, while most property prices in the secondary market have remained unchanged since 3Q2008, standard 3-bedroom flats of between 700 and 750 sq ft in Bandar Baru Air Itam, Paya Terubong, Relau, Greenlane and Sungai Dua saw a dip ranging from 3.6% to 8%. The data shows the first decline since 2001.

The lowest drop in pricing since end-2004 for a standard 3-bedroom apartment (900 sq ft)  in Batu Ferringhi, transacted in 4Q2008, was 11.5% — it was sold for RM320,000, compared with RM355,000 for a similar unit in 3Q2008.

Rents, on the other hand, recorded varied transactions in 4Q2008. For 1-storey terraced houses with built-ups of between 1,200 and 1,600 sq ft, there was an increase of 11.5% in rents to RM680 in Bandar Bayan Baru and 15.4% to RM750 in Sungai Dua. However, a drop of 12% in rents was seen for 2-storey detached houses in Island Glades, which slipped to RM2,200 compared with RM2,500 in 3Q2008.  Two-storey detached houses in Green Lane also recorded 12% lower rents to RM2,200. Rents for standard 3-bedroom apartments in Island Glades dropped by 13%, or to RM1,000 in 4Q2008, while similar properties in Tanjung Tokong saw a 10% drop to RM1,300. The last time rents dipped for the same properties was in 2006.

Geh says commercial properties have also experienced a dip in prices and low occupancy rates as new businesses stalled and business expansion is put on hold. A ground floor unit in Queensbay Mall,  for example, sized between 350 and 600 sq ft, was transacted in 2007 for between RM2,450 and RM2,700 psf but a similar unit there was sold in 2008 for RM2,200 psf.

Another example of low occupancy, he says, is Pan Palace Plaza by Bukit Gambier Land Sdn Bhd in Sungai Dua, comprising retail and office lots within a 10-storey building with over 200 car parks on the lower ground. “It is less than 10% occupied and in November/December last year, the owners came together and agreed to rent or sell the vacant units for only 99 sen for the first six months followed by 99 sen psf for the following months,” he says. Currently, the ground floor is tenanted by Sunrise Lip Sin Supermarket.

On a more positive note, Geh says total visitor arrivals to Penang rose 4.2% to an estimated 3.46 million last year. “The increase confirms the renewed interest in Penang as a tourism destination,” he adds. Greater tourism activity will spur tourism-related property projects. Geh says four projects — Royale Bintang Hotel in Lebuh Downing by Boustead Holdings Sdn Bhd, Rice Miller Hotel in Weld Quay by Asia Global Business Sdn Bhd, the extension of E&O Hotel and Low Yat Group’s 23-storey hotel comprising 399 rooms in Jalan Sultan Ahmad Shah — were approved before George Town’s successful listing on Unesco’s World Heritage List, and have been given the go-ahead by the local authorities.

Construction will begin soon for the 23-storey hotel with an expected built-up area of 62,000 sq ft, while the five-star Rice Miller Hotel is expected to be completed by 2012. Rice Miller Hotel is part of the RM500 million Pier commercial plaza project undertaken by the developer. Construction of the Rice Miller Hotel and the Pier project is expected to start in the next six months. Boustead’s 12-storey Royale Bintang, costing RM110 million, will have 300 bedrooms and a built-up of 250,000 sq ft. Construction of the hotel has started and is scheduled for completion at the end of this year.

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This article appeared in City & Country, the property pullout of The Edge Malaysia, Issue 744, March 2-8, 2009.


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