Penang Property Primer (Part 1)

Picture of a temple in Penang

We all know that in Malaysia, Kuala Lumpur is the city that never sleeps. Kuala Lumpur is definitely a bustling and a modern city, but it’s about time to focus the spotlight on Penang. Penang might be the second to the smallest state in Malaysia, but it packs a mean punch when it comes to investment opportunities, economic growth, culture, and yes — charm.

The Pearl Continues To Shine

With a population of only 1.6 million, Penang is a small Malaysian state with a booming economy. Over time, the unemployment rate in this state continues to decrease, as new opportunities from two of its driving economic factors—manufacturing and tourism — surges year after year.

Let’s look into the state’s tourism sector. Looking at the numbers, it seems that Penang is getting the attention of a lot of travelers from different parts of the world. 2011 was a good year for the small state—there was a 10% increase in tourist arrivals as Penang recorded an astonishing number of tourists, more than four million in fact. This statistic goes for both local and international tourists – about half were from overseas.

Most seek the “homey” and cultural vibe of Penang, as compared to Kuala Lumpur. Visitors also come here to taste world-famous Penang cuisine—another reason why the state has been attracting more and more tourists each year.

Another driving force behind Penang’s growing economy is its manufacturing sector. More and more investment projects are pouring in every year, and foreign direct investments (mostly in the electrical and electronic vertical) choose Penang as the location to start. Data taken from the Malaysian Investment Development Authority states that within the first three quarters of 2012, the recorded investment was at RM1.7 billion; more than 70 projects approved were mostly from the electronic division. More from the Penang Institute here.

Penang Property Market

Penang’s real estate and property outlook has stabilized back in 2012.

Graph on penang property

Higher prices translated to flat transactional value despite a decline in volume

Residential properties contributed a lot to this sudden jump of transacted properties as compared to the previous year. There were also increases in terms of residential property value, up from 1.6% as compared to 2011, as well as an increase in newly-launched transacted units—up from 2,332 units versus 1,371 units back in 2011.

However, looking at the latest data release by JPPH for Q1 2013, it seems that the volume of transactions have registered a -15% decrease vs same period last year even though value-wise it was rather flat (or a marginal +3% increase) – see the chart on the right. This indicates that there is a shift to higher value properties or an upward trend in prices.

Penang is a hotspot, with its cultural heritage, tradition, and that right mix between residential and beachfront living. No doubt Penang has seen a lot of growth in the real estate investment sector. Development is becoming rampant, as many investors feel secure with the state’s potential. We will cover more about the specifics of the property market in the second installment.

Penang Hot Spots

Up-and-coming tourist spots are set to grace Penang. This only means a brighter future, as this small state has been leaning on tourism to push them forward the economic scale.

Both mainland and island Penang can take advantage of the Second Penang Bridge, which is most likely to provide a lot of opportunities in the property market in the island. Due to the unfortunate collapse, there’s high possibility that the completion of the bridge to be delayed 1.

Watch out for the localities of which properties are to stand to benefit from the Second Penang Bridge – both on the mainland and from the island.

Mainland property opportunities are also abundant. Most of these properties are moderately priced — and if it’s your lucky day, you can even stumble upon a beachfront property. Other property opportunities in the mainland that you must consider are warehouses, as Penang is a sought-after address for investment. See the second part of this article for deeper analysis of Penang property investment opportunities.

Investing In Penang? Remember These Factors

While more and more foreign investors go to Penang to seek investment opportunities, it’s always best to be aware of certain prerequisites and other information before continuing to invest elsewhere, especially overseas.

First of all, remember that there are many Penangites who work and stay in Singapore. It was estimated that around 60,000 Penangites are staying in Singapore—however, a recent survey showed how many of them would like to go back to their hometown. Call it homesickness, or whatever—but the high amount of trust among the locals to return even if the global economy isn’t too stable only shows how Penang is as a place. Should this happen, and once the demand gets higher as each year progresses, it’s probably wise to invest or purchase at present.

Be aware of the inflow of SGDs from Penangites who work in Singapore!

As with any other property investment opportunity, location remains one of the most important factors. It’s important to learn locations and see them from all angles, literally and figuratively. Do not be fooled—properties in mainland Penang doesn’t always yield high rental and capital appreciation. Some areas, mostly tourist spots, have poor physical infrastructure support, which makes it a risky option should one consider on investing.

Be wary of the macroeconomic influencers:- interest rates, DIBS schemes (we discussed this as part of a news article – click here), and particularly GST, or Good and Services Tax. This was a concern because if implemented, GST will indeed increase construction costs. Not only that—the electricity rate would be affected to, and is expected to double its rates once approved on 2016, tentatively.

Finally, GST will also pave more builders to adapt to a “Build Then Sell” (BTS) philosophy, given the fact that construction costs are most likely to increase tentatively on 2015. Also, look before you leap and consider the following: oversupply versus little demand for properties, bank interest rates, price inflation, and sociocultural issues; the curbing of DIBS, or the revision of OPR by Bank Negara.

What We Think

There is no doubt how Penang has become a developed state throughout the years. Don’t let its small size and population fool you—its economy has been showing nothing but progress. Tourism is definitely the state’s driving force, and this only gives you more reasons to consider investing in Penang.

There’s somewhat less attention on Penang in the recent years because the focus (as far as non-Klang Valley properties are concerned) have shifted to Iskandar. However, we reckon that the imminent slowdown of Iskandar will mean that the spotlight will be back on Penang.

Investment opportunities are abundant—both on the mainland and on the island. It is highly suggested that one should do an extensive research on property opportunities in order to get information that is substantial in making an investment capable of yielding higher capital appreciation and high rental income. Expats who are interested in purchasing a property in Penang should also learn and know the state’s legal procedures before proceeding.

If you’d like help buying or renting Penang properties, use our free DealMatcher service.

Penang is a charming place; both locals and travelers can attest to this. It’s never too late to invest on a property or two in Penang – we’ll delve deeper into the specifics of Penang real estate investment in Part 2 of this article.


 

  1. http://www.thestar.com.my/story.aspx?file=%2f2013%2f6%2f11%2fnation%2f20130611165126&sec=nation
About Khai Yin

When I am not writing for GoodPlace.my and helping my readers find properties though the DealMatcher service, I spend time doting on my three kids: Wenyi, Qinyi and Eian. My personal stuff, some published essays and contact details can be found at khaiyin.com

Comments

  1. I had always thought I was the crazy one. I am a Penangite who has been in Singapore for over 20 years but I have no doubts that I will be going back one day. It’s nice to know that there are a good percentage of the 60,000 Penangites in Spore who are just as crazy. However Penang property prices have skyrocketed so much that I regret not picking up something 5 years ago!

  2. Khai Yin, my first time reading your website and articles etc. Very informative website, well written and educational as well. Thank you for sharing so much. Now, for Penang Property Primer (Part 1) – the above article is 2 years old. As an Penangite, when will your Part 2 be released? Is there a link to some government websites where one can obtain the latest transacted prices for properties?

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