Builders are upbeat about the prospects of Penang's real estate. A combination of factors - including dwindling land, George Town's World Heritage site status, and the success of the MM2H programme - has kept property prices on an uptrend and pulled in foreign investors. Interest has now spilled over to the mainland, boosted by the ongoing construction of the Second Penang Bridge. Can the momentum be sustained?
While the rest of the country was facing a slowdown during the 2008/2009 global economic crisis, Penang's property market was somewhat insulated from the effects of the downturn.
Though some of the players initially adopted a wait-and-see attitude then, this did not last long as many went on to launch projects after a short respite.
The inscription of George Town as a Unesco World Heritage Site in 2008 rekindled interest among developers, both in Penang and other parts of Malaysia, who want a slice of the state's property sector cake.
Not many landed property projects are being launched on the island as development land is running out. Developers are instead building condos, which have attracted buyers from around the world.
Those keen on owning landed properties are now setting their sights on the mainland.
The ongoing construction of the second bridge connecting Batu Kawan on the mainland to Batu Maung on the island has also spurred interest, especially in the Seberang Perai Selatan district where land prices have doubled over the past two years.
With better connectivity — with a second bridge coming up as well as the existing ferry services — some homeowners on the island are disposing of their homes in exchange for more affordable landed properties on the mainland, at less than half the price.
Meanwhile, buoyed by the impressive response to launches under the Malaysia My Second Home (MM2H) programme, developers on the island are embarking on roadshows abroad to sell their products.
According to Raine and Horne International, Zaki + Partners' Michael Geh, the state's property market performed marginally better in 2009 than in 2008, with the number of transactions inching up 1.8%. Some 22,724 transactions worth RM6.53 billion were recorded last year; however, the value of total transactions in 2008 was higher by 10.2%.
Residential property took the lion’s share with 72.3% of total market share.
In 2009, 16,436 transactions of residential property worth RM3.719 billion were recorded, marginally higher than the 16,284 transactions worth RM3.718 billion in 2008.
Geh says generally, residential property prices in Penang have been on an upward trend, with prices appreciating by up to 13%.
“Demand for the limited number of terraced houses was firm while MM2H residents prefer apartments and condominiums in Tanjung Tokong and Tanjung Bungah,” Geh says.
He adds that though Penang is a small state with scarce land resources, continued reinvestments in the industrial sector by multinational companies have had a positive impact on the take-up of property launches.
“Penang, being a cultural melting pot, is becoming a happening place that attracts visitors who may want to own homes here.
“International buyers are coming through the MM2H programme. And, being a hub of eco and medical tourism, Penang has also attracted foreigners from North Sumatera, Southern Thailand and Europe to buy a second holiday home here.”
“Penangites who have migrated to other states to work also have the urge to invest in a property in their home state. Market trends indicate that property prices in Penang have remained steady in spite of the global recession. This is because with scarce land, quality property products are difficult to come by and demand remains high as Penang is considered by most investors as a holiday island,” Geh explains.
One project that has found overwhelming support from MM2H buyers is Ivory Properties Group's RM190 million Moonlight Bay in Batu Ferringhi. Rated a five-star luxury housing development and inspired by European-Meditterranean seaside towns, Moonlight Bay sits on a hillock and enjoys sweeping views of the sea.
Ivory Group's managing director Low Eng Hock says the project has been mostly taken up by MM2H buyers who appreciate luxury living amidst greenery with five-star amenities and facilities, including state-of-the-art security.
The four-storey villas and condo villas, with prices ranging from RM2.7 million to RM4.58 million, have attracted buyers from the US, Britain, Italy, Hong Kong, Taiwan, Middle East, Singapore and Indonesia.
Ivory Group has another luxury project along the same tourist belt, 10 Island Resort, which is also popular with MM2H buyers.
Low says the long-term investments by MM2H participants augurs well for the economy of Penang and would also boost its status as an international city.
Another reason why Penang property is much sought after is that air connectivity has increased tremendously over the past two years with the popularity of low-fare airlines like AirAsia, Tiger Airways and Jetstar.
Geh says Penang property is popular with Singapore investors due to the relatively lower prices compared with real estate in the island republic. Singaporeans count among the top property investors in Penang.
Developers are also going overseas to market their products. For example, 30% of the purchasers of Bolton Bhd’s Surin condominium in Tanjung Bungah are foreigners. The project sits on 3.4 acres of freehold land and has a gross development value (GDV) of RM201 million.
Bolton executive director Chan Wing Kwong says Tower B was launched in July 2008 and is 100% taken up. Tower A was launched on June 19, 2010, and is 50% sold.
“Buyers are mostly locals, with about 30% foreigners, mostly from Singapore, with some from Japan. The project will also be marketed to potential buyers in China via an appointed agent,” he says.
According to Teoh Poh Huat of Henry Butcher Malaysia (Penang), the Penang property market has witnessed an interesting phenomenon in recent times. “The Unesco World Heritage status has put Penang on the world map and many foreigners who are not familiar with it have now made it one of their holiday destinations.
“Some of the tourists who visited Penang went home with fond memories of the many unique experiences that can only be found here. It is not unusual to find some of them putting in money for a potential second home in Penang.
“Henry Butcher Malaysia (Penang) has played host to some of these investors. Having a second home in Penang is a growing trend for many of them as a getaway from the harsh winter season, for example in Europe,” Teoh says.
“Middle Eastern investors are also making their mark in Penang as they come here to stay during the hot summer months. It has become a noticeable trend for tourists to become property investors. Apart from homes, pre-war heritage properties have now also seen renewed and keen interest,” he adds.
Apart from that, real estate investors from Singapore (comprising resident foreigners, Singaporeans and Malaysians) and Medan, Indonesia, are also becoming more significant, thanks to greater air connectivity and aggressive promotion by the state.
“Medan residents find Penang a compelling place for tourism, business, medical consultation and education. These motivating reasons translate into possible property purchases. In fact, a major local developer that has focused its marketing strategy on the North Sumatra market is reporting significant sales,” Teoh notes.
He says Penang’s real estate market can now be benchmarked against some of the best schemes in Kuala Lumpur and even Singapore. Astute foreign real estate investors have complimented Penang’s progress in offering some of the most attractive product designs but at prices which are only a fraction of those in their home countries.
Of late, says Teoh, prices of some of the better known developments in Penang have increased to levels close to those of popular addresses in KL. Whilst Penang’s property price index is above the national average, it is still a notch below that of the Klang Valley's.
Real Estate Housing Developers Association Penang branch chairman, Datuk Jerry Chan, says with the land shortage on the island, landed property prices will keep going up.
“Even with reclamation, the pressure of land for development is very great and the experience that we see in island cities around the world is that the sky is the limit. For strata title and high-rise properties, it is still a question of supply and if supply is not sudden and very great, we will see a natural progression of prices, but definitely it will not come down.
“The only caveat is that prices do not run ahead too much of rental,” Chan says. He cautions that while an increase of between 5% to 10% annually is stable, and a 15% increase during a super boom year is acceptable, it should not carry on for seven to eight years.
“That is the only concern because if prices go up too fast, by about 15% a year, it is clearly unsustainable,” he adds.
He says there has been a surge in prices from the middle of 2009, which he attributes to the delayed effect of the 2008/2009 economic slowdown.
Chan warns that while everyone is enjoying the ride now, it cannot carry on over a long period.
“Developers with low historical costs are now making a lot of money while others coming into the market are pushing prices up due to higher entry levels.
“There is demand and buying power but whether people are buying as second, third, holiday or investment homes, that is the prerogative of the buyer,” he says.
The current low interest rates and easy financing have also attracted speculators.
As for the mainland, Chan says once the second bridge is ready by 2013, there will be another hike in pricing.
“As it is, people have gone into land speculation, and prices have moved up steadily over the past few years, and doubled in the past two years.”
He says people are finding it too expensive to own landed property on the island and may look at the mainland as an alternative. They may even have some spare cash if they dispose of what they have on the island.
Chan says new housing concepts have also caught on in the mainland, with developers now offering gated, lifestyle, landscaped, low density and higher-end housing.
Mah Sing Group Bhd prides itself as a pioneer in the gated and guarded concept of a residential area in Penang through its two landed residential projects — [email protected] Southbay and [email protected] Southbay.
The projects feature green street concepts, lush landscaping and community parks that offer the experience of living in a resort-like sanctuary.
Mah Sing Properties COO Teh Heng Chong says the response to the gated and guarded concept has been tremendous, as proved by the take-up of the homes at the 25.8-acre [email protected] Southbay. Some 70% of the 284 units of 3-storey superlink homes offered were taken up within two weeks after they were launched in mid-2009. The project is scheduled for completion by the end of this year.
“To date, the take-up rate is over 90%. We were the first to introduce gated community living in Penang,” says Teh.
He adds that [email protected] Southbay is also the first residential development in Penang to incorporate a private resort clubhouse.
On the mainland, a pioneer of the gated and guarded cocept is the Tambun Indah Group. Its signature projects like Juru Heights and Pearl Garden offer affordable and spacious homes at a fraction of the cost of those on the island.
Tambun Indah managing director Teh Kiak Seng says at least 10% of its clients are those living on the island, most of whom sell off their properties on the island and pay a fraction of the price for luxury which would be out of their reach on the island.
What does the future hold for the Penang property sector?
Penang being voted among the eight most liveable citues in Asia, on par with KL and Bangkok by ECA International, has created further excitement, especially among foreigners seekin a second home, says Henry Butcher's Teoh.
“Property investment is generally perceived to have a longer term horizon as it is not so volatile compared to stocks. Property in Penang will continue to remain a favourite choice among investors and is expected to show returns that are above the national average. It has proved to be a good hedge against inflation as returns are higher than the Consumer Price Index,” he says.
Teoh adds that seasoned real estate investors from Hong Kong and Singapore have predicted real value will increase over the next couple of years, given, among other reasons, Malaysia’s recent positioning in the top 10 list of the world’s most competitive countries.
“Confidence and sentiment have improved since the last quarter of 2009 and major developers are enjoying encouraging sales in the first half of 2010,” he adds.
“The secondary market, which has a major share of the total market, has also been observed to experience a shorter sales period compared with last year. Prices are generally on an upward trend given a relatively low interest rate regime (notwithstanding a recent increase in the BLR rate), high liquidity and greater market confidence.
“Supply of prime properties is limited as Penang’s population is young and has a high propensity for household formation thereby supporting the residential market and upgrading to better homes is sometimes a strong reason for house purchasing,” he says.
Rehda’s Chan believes Penang properties will see a gradual appreciation of 5% to 10% in the next five years for the simple reason that supply is shrinking.
“Whoever knows will hold on for better prices and seeing the price trend for landed property, there are many who are asking for next year's price today,” he adds.
Raine & Horne’s Geh, meanwhile, says this year will see several exciting property events in Penang, including the forthcoming listing on July 28 of Ivory Properties Group, the first property group to be listed this year.
Known as a turnaround specialist, Ivory has revived several abandoned projects and turned them into hot properties.
Geh says the higher interest rate regime this year will put speculators and investors in a more cautious mode, but not genuine home buyers.
This article appeared in Special Focus Property, The Edge Malaysia, Issue 815, July 19-25, 2010
TOP PICKS BY EDGEPROP
Build your own semi d / bungalow in ampang
A Gem in Tanarimba, Janda Baik, Bentong
Ukay perdana sierra hijauan ampang semi d
Taman Sri Gombak Heights/Gombak Groove @ Sri Gombak
Malaysia's Salem High Country Tanarimba Janda Baik
[270K HOT SELLING INVESTMENT PASSIVE INCOME 2R+2B]
[RENTAL GET RM 3000 READY TENANT 2020 NEW PROJECT]