Property: ‘Confidence remains shaky despite recovery’

Tanjung Tokong, Tanjung Bungah, Batu Ferringhi, Pulau Tikus and Teluk Kumbar — these will remain Penang’s hot property spots this year, says Raine & Horne International Zaki + Partners director Michael Geh when presenting The Edge/Raine & Horne International Zaki + Partners Penang Housing Property Monitor for 4Q2009.

While more first-time homeowners and those looking to upgrade their homes are expected to purchase properties this year, Geh tells City & Country there will not be an unexpected jump in transactions as confidence remains shaky due to economic uncertainties despite having seen some recovery.

The number of transactions for residential properties in Penang rose 5.4% y-o-y in 2009, with some 16,435 units worth RM3.7 billion transacted. There were more transactions in 4Q2009 than in the previous quarters combined.

“In 4Q2009, it was easier to obtain credit facilities and some financial institutions ‘spoilt’ property buyers/investors as well as partnered bullish developers. This resulted in investors snapping up multiple units despite the higher property launch prices,” says Geh.

He says there were over 14 new property launches in Penang in 4Q2009, with IJM Land Bhd’s luxury condominium project The Light Point being one of the more successful launches. As reported in on Dec 22 last year, the 88-unit condominium — the developer’s second at its iconic waterfront project, The Light — achieved 70% sales during its launch on Dec 19.

Meanwhile, one of the more interesting transactions in 4Q2009 was Mah Sing Bhd’s 3.38-acre development land acquisition in Pykett Avenue in George Town for RM38.7 million, or RM262 psf. According to reports, the developer plans to develop a high-end condo with an estimated gross development value of RM280 million. The project is expected to commence in 2H2010.

Geh observes that since the beginning of 2010, banks and financial institutions have taken a more cautionary stance towards property investment loans.

“For example, there is no longer the common practice of offering zero entry cost packages anymore, nor as many 95% off-plan financing purchase schemes as before,” he says, adding that banks also raised mortgage rates after Nov 1. However, he says, banks are still offering very competitive loan packages.

“In my opinion, the introduction of the 5% real property gains tax (RPGT) applicable for properties sold within five years is fair. It stifles the rampant residential property transactions by speculators buying a number of properties and selling them soon after for a hefty profit, which if left unchecked might lead to a property bubble where the next homebuyer would have to fork out RM50,000 to RM100,000 extra for his home,” he explains.

Geh says the introduction of a RM500,000 cap on the property purchase price for foreigners (effective Jan 1, 2010) might affect developers in Penang, citing condos on the island that cost RM280,000 and above.

“On the one hand, it is good as it makes housing affordable for Penangites who have felt the heat of rising prices of affordable housing. On the other, foreigners may put off their purchase decision and rent first. They may decide to wait and see if the government will make changes to lower the limit in the near future,” he says.

While new launches did well in 2H2009, feedback from buyers reveals that many first-time property buyers found the launch price/product to be beyond their means. “So they shifted their focus to secondary-market properties, which they find more affordable.”

Prices of secondary market properties sampled in 4Q2009 saw a slight rise of between 0.18% and 3.8%. Standard 3-bedroom flats, with built-ups of 700 to 750 sq ft, in Sungai Dua and Lip Sin Garden have increased by 3.8%, or RM5,000 to RM135,000. Standard 3-bedroom apartments with built-ups of more than 900 sq ft in Tanjung Bungah recorded an increase of 3.7%, or RM10,000 to RM280,000.

Interestingly, the rental market was rather active at the end of last year. Geh says the demand for rented properties increased in the last quarter, which prompted a rise in rents.

The highest increase in rents recorded among the properties sampled were for the 3-bedroom apartments in Island Park/Glades, which rose 10%, or RM100 to RM1,100. Similar properties in Batu Uban also recorded an 8.3% increase in rents, to RM1,300.

Standard 2-storey terraced houses in Pulau Tikus, with built-ups of 1,300 to 1,800 sq ft, rose 7.7% to RM1,400. Meanwhile, 2-storey semi-detached houses with built-ups of 3,000 to 4,000 sq ft recorded an 8.3% rent increase, to RM1,300.

Rents for 2-storey bungalows in Tanjung Bungah increased by 5.8%, or RM300 to RM5,500, while Tanjung Tokong and Pulau Tikus saw increases of 5.7% and 6% respectively.

This article appeared in City & Country, the property pullout of The Edge Malaysia, Issue 793, Feb 15-21, 2010.

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