As the Penang property scene heats up, we turn to Mr. Tan Hun Beng, General Manager of Sunway Grand Sdn Bhd, a longtime developer of prestigious townships such as Sunway Tunas in Bayan Baru for his views on the latest in the property scene ahead of the Chinese New Year on the island.
iProperty: Let us in on Sunway Grand’s background and presence in Penang.
Tan Hun Beng (Sunway Grand): We have been around in Penang for nearly two decades as we begun with the development of Sunway Hotel, Georgetown on New Lane about 17 years ago. Ever since then we have been actively developing new residential and commercial projects, among them Sunway Tunas, where we are now, Sunway Bukit Gambier and Sunway Mutiara for residential and Sunway Prima for commerce.
iP: How has the response been for your current projects?
SG: We have one commercial project that is ongoing called Sunway Perdana on the mainland. It is 80% near completion and vacant possession will be by April 2012. This project is totally sold out, so I have to say to investors, if they wish to invest with us, they may have to wait for our next launch.
We have three residential projects ongoing at the moment, namely, Merica, Aspera and Cassia. For Merica in Sungai Ara, which comprises 98 units three-storey Terrace and Semi-Ds, the last phase Semi-D will see us launching our show unit on the Christmas weekend. As this is the last phase with only 12 units of Semi-Ds available, the launch of our show unit is a good chance to start buying.
Aspera in Sungai Batu has fully sold-out and this is testament to the good response in the Penang market for homes as there is a scarcity of land, rarity of landed property and a definite zero-sum game in Penang as this island will naturally have limits on land availability in future. Also, it can be said that there are no abandoned landed property developments on Penang island no matter how much the prices have gone up, as once you miss the opportunity it will be gone forever.
Finally, Cassia in Batu Maung is our latest area of focus as we have launched Phase One out of four phases, which are the three-storey terraces. We plan for a launch in the middle of next year, but already there is a 70% take up rate as of now. So we are looking at a very optimistic full take-up rate by Cassia’s launch.
iP: What are the new offerings that we can expect for 2012?
SG: In the pipeline is a new development for a shop-office in BM town and boy, was it tough to acquire that particular land bank in BM. We began acquiring in late 2009 and was only successful with a few plots but today we have over 50 acres of land separated by a main road, Jalan Muthu Palaniappan, which is along the road to Jusco. We are developing the smaller lot of commercial blocks first as we are still applying for the permit which should be done by this quarter. Right across Jalan Muthu Palaniappan is the remainder of our land bank which will be used to develop the residential zone, which would be up by end 2012.
Another interesting project that we have is in Sg. Ara right behind the present Regency Heights. It is slated for a high-end development and will likely comprise of Zero-Lot bungalows, bungalows and luxury condominiums. This project is near approval to proceed and we will begin work with soil treatment, terrain monitoring and management and ground breaking works very soon.
iP: What can we expect in terms of new landbank acquisition in Penang for the coming years?
SG: We are continuing our efforts to acquire more land with the State Government as Penang’s State Government has three major highways and a tunnel project that is already tabled at the State Senate. We are hoping to bid for one of these projects and obtain a land swap deal as what IJM got when they developed The Light and improved the state’s infrastructure by building the Tun Dr Lim Chong Eu Expressway (formerly known as the Jelutong Expressway) for the State Government.
As our sister company, Sunway Construction is involved in one of the MRT developments in the Klang Valley, we hope to leverage on our sister company’s expertise to provide the state of Penang with infrastructure and amenities that locals and tourists can really rely on and of course help the state maintain its competitive edge with both local and foreign investors. In fact, where our sister company’s activities are concerned, Sunway Construction is already the main contractor for LegoLand in the Southern Growth Corridor of Iskandar in Johor.
If you ask me where are the land banks of the State Government, I am not sure myself as the state’s holdings in prime areas are quite limited. It is true that while Penang may have a wealth of other resources, but even the Chief Minister has mentioned that it is one of the poorest states in Malaysia in terms of land banks available for development. As you have raised a very pertinent point, Georgetown’s unique status as a UNESCO World Heritage Site also means that most developments will only be able to be developed outside the heritage zone.
iP: As there is a heavy level of interest in Penang properties, how do you foresee the Penang property market outlook in 2012?
SG: As we are gearing up for Chinese New Year, and next year is the Year of the Dragon, many people see it as an auspicious year ahead. While the Eurozone debt crisis and fears of a double-dip economy in the US fuel the global market gloom, we here in Malaysia are safely buffered from its effect as we are still in the window period where a surplus economy is still the order of the day. So to those who speculate that the property market is headed for uncertain times ahead or even possibly a market slowdown, to me it is just fear or rumour mongering among those who are afraid of a fresh contagion or those fearing a market downturn.
In Penang we have a faithful standard that Penang’s properties will always go up. In fact, it is a well-known fact that properties in Penang appreciate by 100% of its initial selling price in 10 years. This translates to gross increase of 10% p.a. but after factoring in inflation and other maintenance cost, we are looking at a benchmark compounded rate of 6-7% p.a. In Penang, it is still a very interesting market as the population growth of Penang is projected to hit 1.6 million from 1.1 million currently in the near future. Hence, residential offerings are among the basic needs of this population that still needs to be met.
iP: What are your thoughts on the sky high prices that buyers complain that accompany the sky high new buildings on the island?
SG: While talks regarding a property market bubble that is about to burst has been going on for years, I find it totally unfounded as the property prices is not beyond sensible pricing and while there is a strong investment trend in Penang properties, it is not as influential as the more developed markets of Singapore, Hong Kong and Taiwan. Therefore all speculation about a property bubble about to burst is just one of those talks that are again, fueled by speculation.
In the luxury market, cost concerns are actually compounded by the rising prices of construction materials that are part of the reason why prices of properties are on the uptrend. Another reason that many buyers do not see is the hidden cost of developing the land. As developers, a lot of money goes into getting the land ready for the development. These include the cost of earth stabilization, retaining structure and foundation works.
iP: Are there any trends that emerge from the middle-income wage earners with respect to the increasing house prices in Penang.
SG: For the middle-income segment we are trying to work hand-in-hand with the Penang State Government in developing affordable and quality homes for all as this is our social responsibility as well. That said, it is a challenging prospect as the cost and land price sometimes does not justify the development for the middle-income gap. This is the reason why we see a diffusion of buyers to the suburban areas of the island where there is a variety of developments from both landed and condominium to choose from. In fact, the secondary market away from the prime areas of Gurney Drive, Tanjung Tokong and Pulau Tikus on the island all serve as good residential areas for the middle-income segment.