GoodPlace.my’s Top 5 Real Estate Predictions For Penang

 Picture of the blue mansion, penang

Penang is perhaps the most dynamic property market in Malaysia outside the Klang Valley (with the Iskandar region catching up quickly). According to government data sources, real estate transactions in Penang grew 20% and 26% in terms of volume and value from 2009 to 2011, and this trend is set to continue given the strong fundamental demand in housing, a booming economy and affordable mortgage rates. In fact, some RM6 billion worth of property transactions were recorded in 2012 in Penang alone.

So what’s in store for Penang for the rest of 2013 and beyond? Without further ado, we bring you…

GoodPlace.my’s Top 5 Real Estate Predictions For Penang

  1. New opportunities will cluster around the second Penang Bridge. Scheduled for completion in the second half of 2013, there will be opportunities around the areas on both the island and on the mainland, particularly the interconnection between the bridge and the highway.In particular, the upcoming Ideal Vision Park will benefit from this since the bridge connects up Batu Maung with Batu Kawan in the mainland.
  2. Properties affected by the master transportation plan will get a boost in capital appreciation. Look out for the proposed highways in the “Penang Transport Master Plan” (see this). In particular, watch out for the areas connected by these new roads:-
    • Undersea tunnel linking Bajan Ajam and Persiaran Gurney (6.5km)
    • Road linking Tanjung Bungah and Teluk Bahang (12km)
    • Bypass road linking Persiaran Gurney and the Lim Chong Eu expressway (4.2km)
    • Bypass road linking Air Itam and the Lim Chong Eu expressway (4.6km)
  3. Niche properties continue to show tremendous growth in capital appreciation. Pre-war real estate is perhaps strictly a Penang phenomenon; “antique” shop houses in Georgetown have been the target for Singaporeans and Hong Kong investors for about a decade now. Asking prices now are at a hefty RM1,200 PSF (comparable to upper tier of KLCC condominiums), doubling up from RM600 back in 2010.

    Chart of Penang property prices

    Penang luxury condominiums are on the rise in prices

  4. The luxury niche catches up with PSF rates reaching Klang Valley levels. Upmarket condominiums like the Infinity Beachfront and Springtide Residences are now breaching the RM800 PSF asking price, with the Regency and Skyhome fast reaching RM600 PSF. These rates are still low-ish compared to apartments in the KLCC enclave (and perhaps comparable to Mont Kiara), but given the current rate of capital appreciation we could see the RM1,000 PSF level being breached in two to three years’ time. Or perhaps branded residences will debut in Gurney Drive or Batu Ferringhi. 🙂
  5. New launches are trending towards integrated developments (similar to what we are seeing in greater Kuala Lumpur). Light Waterfront, Penang World City, Straits Quay. These are “all in one” developments which promises everything in one place; more on this later.

Bonus “No Shit, Sherlock” Prediction #6: Prices Will Continue To Rise (With An Upheaval In The Rental Market)

Penang registers a booming population, with about 35% of its population belonging to the “property buying age bracket” of 25-44. The housing demand will continue to be robust, but supply doesn’t seem to be in tandem with the rising demand which means that the price hikes will continue. Outside the Klang Valley, there’s tendency for developers to focus more on the Iskandar region, and this is understandable – there’s an inherent shortage of large tracts of land in Penang for new developments. In terms of scale and ROI, Iskandar is hard to beat.

Landed properties in Penang (in particular, terrace homes) have outpaced the others in terms of capital appreciation in 2012. We have seen some bungalows in Tanjung Tokong appreciating by some 40% in the span of three months. High rise apartments are lagging slightly behind, with some condominiums registering as little as 6% in terms of capital appreciation in the same time.

The rental market will therefore face an upheaval. Rental rates curiously stayed rather flat in 2012. However, the escalating prices driven by speculation and foreign investment may deter home buyers who would then opt to rent instead.

Integrated Developments In Penang – The Way Forward

Light Waterfront, IJMIJM’s high profile Light Waterfront project is making waves (pardon the pun). This integrated development will host a couple of hotels, a shopping district as well as some condominiums and bungalows over 100 acre of prime land. Being next to the Penang Bridge and off the Lim Chong Eu expressway, the location is arguably one of the best on the island – and that’s no exaggeration. This megaton hundred trillion project (OK, RM5 billion) will take some eight years to build.

Ivory Properties together with the Tropicana Corp are building a rather large integrated development in Bayan Mutiara (1,000 acres!) imaginatively named the Penang World City. E&O (upmarket developers behind the E&O Residences in KL city as well as Dua Residency in KLCC)’s Straits Quay is also generating some buzz. Asking prices for the serviced apartments (dubbed The Suites At Waterside) have also breached the RM1,000 PSF level – which positions it right at the top tier of Penang properties.

The 87-acre Southbay City development by Mah Sing in Batu Maung is also set to capitalize on the opening of the second bridge with a hotel coupled with retail, offices and residential suites. There are also plans in Sungai Ara by Ideal Property (the developers of the Ideal Vision Park) and also some condominiums to be built by SP Setia.

All In All…

We are pretty optimistic about Penang; the current bull run will set to continue with the slew of infrastructure projects coupled by healthy demand stimulated by the growing economy and population growth. However, as with the rest of Malaysia, the disparity between income and property prices will continue to widen unless supply is ramped up to cope with demand (which is rather unlikely as more developers are focused southwards on the Iskandar region). This spells trouble for the genuine home buyer. 🙁

bad-luck-brian-penang-property

For the seasoned investor who is considering Penang will do well by selectively looking at properties within these considerations:-

  1. Upcoming areas boosted by the upcoming highways and the second bridge
  2. Landed properties for capital appreciation
  3. High rise apartments to be rented out to take advantage of the upcoming upheaval of the rental market
  4. Niche opportunities in the form of pre-war shophouses; although it might be advisable to wait for the “price wars” to cede to a somewhat manageable level. Watch out for Penangites bearing Singaporean dollars as we have mentioned in Part 1 of this guide.
  5. Integrated developments which are poised to be the future of Penang 🙂

What else you need to know?

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