Secondary residential market continues to thrive

THE secondary residential property market in Penang continues to thrive and indications are prices will continue to rise. Although speculative property players have been more restrained in their purchase decisions lately following the cooling measures taken by the government, such as tighter lending policies and the implementation of the maximum loan-to-value (LTV) ratio of 70% for third house financing, the market is attracting more owner-occupiers.

Newly-completed condominium units have seen a significant price appreciation on the secondary market. IJM Land Bhd's The Light Linear condominium, for example, recently saw transactions in the range of RM850,000 to RM950,000 for the higher level and corner units. The developer price for such units was between RM450,000 and RM600,000 about three years ago, says Raine & Horne International Zaki + Partners director Michael Geh when presenting The Edge/Raine & Horne International Zaki + Partners Penang Housing Property Monitor for 3Q2012.

New homes launched on Penang island are also seeing more genuine homebuyers shopping for their dream home or for upgrading. Among the launches that took place in 3Q was for a development by Heng Lee Group called Sandilands in Jelutong. The development comprises 403 residential and 12 commercial units, with the homes priced from RM520 psf or RM696,000. The project has seen a 65% take-up rate so far.

There is also a condominium project called One Imperial in Sungai Ara by Ideal Property Development Sdn Bhd, which consists of five blocks offering 768 units priced from RM380 psf. The units, with sizes between 1,050 and 1,300 sq ft, are 70% taken up so far.

Another condominium development that was launched during the quarter was D'Zone by IOI Properties Bhd in Teluk Kumbar. The 96 units, with built-ups of 1,500 to 2,840 sq ft, are priced between RM570,000 and RM1.39 million and have seen a take-up rate of 50%.

Geh expects the property market in Penang to be even more active in the coming months with the year-end holidays attracting Penangites who live elsewhere to come home for their vacation.

"The end of the year traditionally means a large number of Penangites who are either working overseas or in other states will come back to the island. When they come home, they often go round looking to see if there are any homes they can purchase for themselves or for their family members," he explains.

The property market in Penang was highly speculative a year ago, Geh says. "The word 'investment' was greatly overused then. Today, after four quarters of Bank Negara Malaysia's credit contraction regime for personal credit cards and housing loans assessment policy, purchases are mainly by genuine homebuyers and are less speculative."

However, the measures have not dampened residential property prices, which are still at their peak. "The secondary market is more active because of the lower entry price for older homes compared with the new launches on the primary market. However, lower loan margins and lower valuations do hamper the sales process. We expect this to remain status quo until after the upcoming general election," he says.

In July, the minimum limit for foreign purchases of property in Penang was increased from RM500,000 to RM1 million for all properties in the state and RM2 million for landed properties on Penang island.

Geh says the state government's decision to increase the ceiling price for foreign property purchasers was a political move and would not deter foreigners from buying properties in Penang. "It may confuse some international purchasers, but high net worth international purchasers can and will continue to make their purchases."

The 3Q housing property monitor showed that prices generally remained unchanged from the previous quarter except for 2-storey bungalows in Minden Heights, which saw a 5.5% increase from RM1.8 million in 2Q to RM1.9 million in 3Q. Standard 3-bedroom flats in Sungai Dua and Lip Sin Garden also saw a 5% hike from RM190,000 to RM200,000 in 3Q, while 3-bedroom apartments in Batu Ferringhi recorded a 4% increase from the previous quarter, from RM250,000 to RM260,000.

Rents rising
Meanwhile, following a period of stagnant growth, housing rents are on the rise, as indicated in the monitor, as a number of areas sampled showed positive rental growth in 3Q. The highest increase in housing rents for 1-storey terraced homes was 11% in Tanjung Bungah where rents rose from RM900 to RM1,000 per month. Rents for standard 2-storey terraced houses and 2-storey bungalows in Green Lane increased 9% from RM1,100 to RM1,200 and from RM2,300 to RM2,500 respectively, while over in Minden Heights, 2-storey semi-detached houses recorded an 8% hike in rents in 3Q from RM1,300 to RM1,400 per month.

With an apparent slowdown in industrial production in the country, Geh says it may indirectly impact the property market. "In Penang, the industrial sector contributes over 50% to gross domestic product (GDP). Therefore, any industrial slowdown will surely affect the property market negatively, especially in the condo sector." He adds that the condominium market, especially those under construction, has attracted more speculative investors and thus may be more affected by changes in the overall economy and consumer sentiment.

However, Geh expects the landed homes market to remain strong. Current property hot spots in Penang include the beach tourism destination of Batu Ferringhi, Teluk Kumbar, Relau and Balik Pulau as well as other areas near and between the two Penang bridges.

He also says future developments in Penang island will be focused on the southwest district like Batu Maung, Teluk Bahang and Balik Pulau for their proximity to the second Penang bridge. Property prices are on the rise in those areas, he adds.

Commenting on land transactions in 3Q, Geh says a 47-acre durian orchard off Pekan Balik Pulau and Jalan Tun Sardon was recently sold to Mutiara 11 Sdn Bhd for RM12 million. A few 2-storey pre-war shophouses (Numbers 30 to 48) along Nagore Road were sold to Worthy Heritage Sdn Bhd in July for RM8.8 million.

This story first appeared in The Edge weekly edition of Nov 26-Dec 2, 2012.