HOW DID THE PROPERTY MARKET PERFORM?
Property prices in Penang remained stable despite the drop of total value of transaction which recorded at RM11,702 million in 2015 compared to RM13,770 million in 2014, a decline of 15%. In terms of the total volume of transactions, 2015 saw a drop of about 4,000 transactions compared to 25,555 units recorded in 2014.
The residential market continued to be the most active sub-sector during 2015 capturing 71% of the total volume of property transactions, an increase from 68% registered in 2014. The commercial sub-sector increased to 10% compared to 8% last year and the development land remained status quo at 7%. The total value of property transactions in the residential sub-sector in 2015 registered lower at RM6,173 million, an 18.55% drop compared to RM7,579 million in 2014 while the development land sector also saw a decline in value from RM2,752 million in 2014 to RM1,941 million in 2015. The commercial sub-sector however saw a slight increase to RM2,070 million in 2015.
DECLINE IN VOLUME AND VALUE OF TRANSACTIONS IN 2015
From the chart above, we can see that in summary, the volume of residential transactions shot up 52% in 2011 and subsequently declined 21% in 2012 and another 21% drop in 2013. The volume dropped 16% in 2015. Similarly in 2011, the value hiked up 40%, dropped slightly and increased very marginally of 5% in 2013 and hiked further in 2014. Subsequently, 2015 saw a drop of 15% in value.
Our research revealed that the CAGR for property transaction per unit from 2006 to 2015 is about 8.4%
Penang Island has an existing residential supply of 217,467 units which comprises 42,781 units of landed houses and 174,686 units of stratified properties. The future supply of landed and stratified properties recorded at 11,391 units and 55,445 units respectively
RESIDENTIAL SECTOR IS STILL THE BEST PERFORMING MARKET
In 2011, the volume of residential transactions went up 40% to 30,674 units but subsequently declined to 15,291 units in 2015. This was attributed to the softening of the property market beginning 2014 as a result of the various factors including slowdown in the sales of new launches, bleak household sentiments and low consumer confidence. Value of residential transactions was stable throughout the last four years but declined 19% in 2015. The outcome of our research unveil that the overall CAGR for residential properties are about 9.6%.
It is interesting to note further that we have also analyzed the CAGR for each category of prices tabulated as follows:
This result showed that capital appreciation performed better for property prices between RM500,000 to RM1,000,000 as well as RM1,000,000 and above which transacted at even higher prices when ownership changes.
TERRACED HOUSES HAS THE HIGHEST GROWTH RATE
Terraced houses recorded a CAGR of 6.9% while CAGR for high-rise was 6.5%. The growth rate of detached houses performed better at 3.7% while semi-detached houses at 3.4%.
WHICH CATEGORY OF HOUSE PRICES HAVE THE MOST SUPPLY?
As at Q2 2016, Penang State has a total existing residential stock of 402,494 units comprising 217,467 units on Penang Island and 185,027 units in Seberang Perai. The planned supply was recorded at 52,854 units with almost 38% located on Penang Island and remaining 62% in Seberang Perai.
Incoming supply was registered at 88,072 units with 46,686 units and 41,386 units located on Penang Island and Seberang Perai respectively. About 48% of the total existing residential stock is priced below RM250,000 followed by 29% with prices between RM250,001 and RM500,000 and 16% with prices between RM500,001 and RM1,000,000. Only 7% of the existing houses is priced above RM1,000,000.
30% FLEXIBILITY RULING ALLOWS ANYONE TO BUY AFFORDABLE HOUSING UNIT.
Penang State Government’s initiative to provide a “roof under one’s head” is commendable with constant review of updating the criteria to qualify for purchase of affordable housing. For affordable housing applications, the applicant and spouse must not own any property in any state in Malaysia. However, a person who already owns a property can also purchase a unit of affordable housing provided the market value is higher than the existing property that he already owned. The State had also applied flexibility by releasing 30% of the total affordable housing units to Penang-born buyers regardless of whether one had already owned a property. Nevertheless, for non Penang-born buyers who are under the talented and skilled category, applicant must undertake to reside in Penang for a minimum of 5 years from the date of handover of keys.
In addition to the Shared-Ownership Scheme (where the State funds 30% interest-free), Penang had also introduced Rent-to-Own scheme in 2014 to help buyers who cannot afford buying their first home. This scheme allows the buyers to rent their home at only RM100 per month for 15 years with service charge at RM15 per month. In addition, each unit will also be equipped with household items. The ongoing affordable housing developments undertaken by private developers on Penang Island are as follows:
• Tri-Pinnacle by Aspen Group
• Ramah Pavilion by M Summit Group
• One Foresta by Ideal Property Group
• I-Santorini by Ideal Property Group
• Granito by BSG Group
DEMAND FOR OFFICE SPACE IS STABLE
The demand for office market in Penang is generally stable. However, there is a lack of suitable Grade A or even Grade B office buildings in Penang. Typically Grade A specification includes office buildings which are brand new or have recently been redeveloped or thoroughly been refurbished within the last 15 years. It must also be highly visible, although may not be significant. The supply of office space as at Q2 2016 in Penang recorded at 8.8 million sq. ft. of which 7.2 million sq. ft. is on Penang Island and 1.6 million sq. ft. in Seberang Perai.
On Penang Island, Georgetown has the largest supply of office space with a total of 5.7 million sq. ft. followed by Bayan Baru/Sg. Nibong/ Gelugor with 0.9 million sq. ft. of space. The remaining 0.6 million sq. ft. of space is located at Greenlane, Jelutong and Tanjong Tokong. The monthly rentals of prime office space on Penang Island are between RM3 to RM4 per sq. ft. depending on the exact location, size and facilities provided.
RETAIL MARKET WORSEN?
There is only a marginal increase of retail space in shopping complexes on Penang Island in Q2 2016. There is no new supply completed in Seberang Perai. The total retail space recorded at 11.42 million sq. ft. on Penang Island and at 6.9 million sq. ft. in Seberang Perai. A total of 11 malls with 7.6 million sq. ft. of retail space is expected to be completed in the next 5 years. Occupancy rates stood at about 85% and 50% on Penang Island and in Seberang Perai respectively in 2015. Generally, retail market in Penang has seen a drop in consumer spending affected by the overall economy, weakening Ringgit and the rising inflation. The weakening Ringgit should however attract foreign tourists to spend more. Food & Beverage sub-sector seems to be performing better as more innovative cafes and modern restaurants open its door to the public. Monthly rentals of retail space on the ground and lower ground floors of prime malls on Penang Island are presently recorded between RM20 and RM40 per sq. ft. while upper floors are recorded at between RM10 and RM18 per sq. ft. depending on the exact location and size of the retail outlets.
INDUSTRIAL MARKET REMAIN STABLE
There is an existing 1,490 industrial units on Penang Island comprising 855 units located at the SouthWest District and 635 units at the NorthEast District. Future supply of industrial units at the SouthWest and North-East District recorded at 72 units and 68 units respectively. The services and manufacturing contributes almost equally to Penang’s GDP at over 48%.
Penang’s largest trading partners are US, Japan and Singapore. In Malaysia, Penang leads in the areas of shared services outsourcing (SSO), medical tourism and medical devices. According to Malaysian Investment Development Authority (MIDA), Penang contributed nearly 20% of Malaysia’s overall Foreign Direct Investment (FDI) inflows in 2015, the highest among Malaysian states. There will be more than 3,000 jobs cut when Seagate Technology and Western Digital Corporation leave Penang for Thailand beginning August 2016. Amid the bad news, the good news shine through recently when Bosch, a leading global supplier of technology and services announced that it will be investing RM140 million to re-model its multimedia plant in Bayan Lepas, Penang.
With the signing of the Trans-Pacific Partnership Agreement (TPPA) which involves 12-Pacific Rim countries including Malaysia, Penang will continue to receive large amount of FDIs. As Penang is exportoriented, the TPPA is expected to benefit larger international corporations while smaller companies will face stiffer competition. The TPPA will also have an impact on the rise of imports from the members of the TPPA. It is also worth-noted that more investment interest, particularly from Singapore will generate more opportunities for properties and tourism related businesses. On Medical Tourism, the cost of importing “state-of-the-art” technology would propel Penang to become a high-tech medical city.
WHAT IS THE PENANG REAL ESTATE MARKET OUTLOOK FOR 2016?
• The real estate market outlook seems rather uncertain.
• Weak market sentiment in primary & secondary market are expected to gain momentum leading to poorer performance this year.
• Better quality lending policies have resulted in higher loan rejections.
• The volume of transactions are expected to decline further.
• However, demand is still strong for project with catalytic components such as well-planned business and transit-oriented developments that provide connectivity and easy accessibility.
• Bank Negara’s recent cut in the OPR resulted in the lowered interest rate will help reduce the loan burden for businesses and consumers.
• Prevailing buyers’ market have influenced sellers to accept more reasonable prices.
• Fewer speculative activities.
• Buyers have more choices due to the increased supply of secondary properties for sale.
• More emphasis on affordable housing.
• Investors and home buyers are careful in their selection of properties. Properties at the right location in wellconnected areas with good infrastructure and public transports are the factors influencing their property purchases.
• Buyers are also more selective and feel more comfortable buying from developers with good track records.
• Developers are offering good incentives and special sales packages to attract potential buyers.
• Young Malaysian workforce will underpin demand for property purchases. Healthy fundamentals due to Penang diaspora, young population demographics, shrinking average household size, low unemployment rate, sustainable local & foreign investments will continue to support the local market.
This article was first published in the iProperty.com Malaysia October 2016 Magazine. Get your copy from selected news stands or view the magazine online for free at www.iproperty.com.my/magazine. Better yet, order a discounted subscription by putting in your details in the form below!