Prices yet to bottom out

Residential property prices on the secondary market in Penang generally stood firm in 1Q2009 despite the current market slowdown, although there were some minor adjustments in prices for certain types of properties in selected areas.

Raine & Horne International Zaki + Partners director Michael Geh says the property market here has yet to bottom out, but believes it may occur in the next few months.

“The residential owner-occupier property market has not dipped much. However, property investors and speculators, who hedged on both condominiums and landed properties during the peak of the property market, are putting them on the market now and these will experience a dip in prices,” he says.

Presenting The Edge/Raine & Horne International Zaki + Partners Penang Housing Property Monitor for January to March 2009, Geh says 1Q2009 saw a lower number of property transactions on the island while rents were generally firm. However, there are still challenges for the residential market.

“There will be job security issues and because Penang’s economy is about 50% industry-driven, the large dip in Malaysian export figures will not be very encouraging. Adding to that, international travellers may put off their travel plans due to the new flu epidemic and this may in turn affect the island’s hospitality and travel services sector.”

There is a slower take-up rate in Seberang Perai Utara — in areas such as Kepala Batas and Bertam — which is causing the overall house price index to drop in the region, Geh says. Sampling for the monitor indicates a dip for standard 2-storey terraced houses of sizes between 1,300 and 1,800 sq ft, priced from RM290,000 in 4Q2008 to RM280,000 in 1Q2009, or a 3.4% drop.

While most property prices remained unchanged since 4Q2008, standard 3-bedroom flats of between 700 and 750 sq ft in Bandar Baru Air Itam, Paya Terubong and Greenlane saw a slight decrease between 2.9% and 4%. In Bandar Baru Air Itam, there was a 4% dip to RM110,000 from RM115,000 in 4Q2008. Prices of standard 3-bedroom apartments bigger than 900 sq ft (excluding luxury properties) in Tanjung Tokong and Tanjung Bungah saw slight dips of 3.6% and 3.7% respectively.

While prices of most 2-storey detached houses larger than 6,500 sq ft in locations such as Pulau Tikus, Island Glades, Tanjung Bungah and Minden Heights remained unchanged, the same property in Tanjung Tokong saw a 3% dip, from RM1.65 million to RM1.6 million.

The 1Q2009 housing monitor data shows that standard 2-storey terraced houses in Sungai Ara, with sizes ranging from 1,300  to 1,800 sq ft, were transacted at higher prices. In 4Q2008, a transaction was done at RM580,000 and in 1Q2009, a unit was sold at RM590,000.

As for the rent market, the most significant drop in rent for 1Q2009 was for standard 3-bedroom flats in Paya Terubong, sized between 700 and 750 sq ft. Compared with 4Q2008, rent for 1Q2009 dropped 5% to RM380.

Geh says condominiums with high occupancy rates, such as Sunny Ville and Desa Air Mas within Sungai Dua/Batu Uban, are performing well in terms of rent, as a majority of these properties are tenanted to foreign students from nearby Universiti Sains Malaysia.

“Our financial institutions are still very aggressive in providing loans to homebuyers and this is the most important element as to why property prices in the country will not plummet much,” he says.

Developers, he adds, will continue to launch, albeit on a smaller scale. “Developers will continue to find solutions for their buyers, offering assistance in mortgages and attractive packages,” says Geh.

Southbay Penang by Mah Sing Group Bhd is expected to be launched next month. The 54-acre development, with a GDV of RM518 million, will consist of 284 super-link homes priced from RM795,000 and 76 bungalows tagged from RM3.7 million.

The second phase of Lip Sin Group’s Taman Seri Mewah in Batu Maung was launched in March. Comprising 48 two-storey terraced houses, with a GDV of RM29 million, they were priced between RM570,000 and RM750,000.

The build-then-sell concept development has been 40% sold. Buyers were mainly first-time homebuyers and condominium/apartment upgrades, who bought for their own occupancy.

Few speculators purchased units at Taman Seri Mewah, says Geh, adding that recent transactions of its first phase saw an appreciation of 50% to 60%, from between RM320,000 and RM380,000 during its launch to between RM530,000 and RM600,000.

Geh says there is room for capital appreciation in the future, depending on how fast the economy recovers from the current slowdown.

1-World, a phase of The One project by Ideal Group in Bayan Baru, which was launched in end-March, offers 288 executive suites (akin to small office home office) which have been fully sold. The leasehold development, priced from RM239,000, or an average of RM210 psf, have built-ups of between 1,160 and 1,560 sq ft.

“Penangites love to invest in property and often buy a few units per family. If they have invested in a great location with great potential, they will do well. However, if they have speculated on higher priced properties, we may observe a dip in prices in the next quarter,” says Geh.

He adds that it is a good time to purchase landbank for future investments, and this is especially true for those who have holding power. “Land prices could potentially go up twice or more, depending on the investment strategy. An example would be vacant land in Sungai Dua which fetched RM10 psf in 1989, RM30 in 1999 and as high as RM90 in 2009,” he says.

Geh says there are also property players who acquire vacant land, prepare the layout and conceptual plan, and then sell it to contractors or developers at a higher price. He believes investors today are more keen on smaller-scale projects to avoid cash-flow worries.Some developers have showed keen interest in acquiring land on the island in 1Q2009, he adds.

According to Geh, it is feasible to acquire development lands in the south-west region such as Bayan Baru, Bayan Lepas and Batu Maung, as prices there are relatively cheaper compared to those within the north-east region such as Georgetown, Tanjung Bungah and Batu Feringghi. For example, he says, beachfront land in Batu Feringghi would cost RM150 psf, while land in Teluk Kumbar in the south, would cost about RM35 to RM40 psf.

This article appeared in City & Country, the property pullout of The Edge Malaysia, Issue 756, May 25 – 31, 2009.