The areas which saw the highest number of property transactions were Bukit Mertajam (899) and Butterworth (691), while the top two residential projects/neighbourhoods were Bandar Tasek Mutiara (74) and Widuri Apartment (69).
Kaygarn Tan, Property Investment Coach and Founder of Freemind Works shares that there have been rising interest in residential properties located on the mainland in the past few years, especially in the following areas – Bukit Mertajam, Butterworth and Seberang Jaya.
The reason for the higher transactions in projects such as Bandar Tasek Mutiara in Simpang Empat, a small town in the district of South Seberang Perai is of the increasing popularity of gated and guarded landed properties on the mainland. Many Penangites that are staying in high-rise properties on the Penang Island are now looking to upgrade from their existing condominium/apartment to live in landed homes instead.
Growing Appeal of the Mainland
The drawing factor being that landed properties on the mainland are much more affordable as compared to their island counterpart, where a typical double storey terrace house would have a price tag exceeding the RM 1 million mark.
According to Kaygarn, the increasing number of cars commuting in and out of Penang Island during peak hours clearly shows the population’s migration trend to the mainland.
Touching on why more Penangites are drawn towards gated and guarded neighbourhoods, Kaygarn said that not only are the developments/ townships well-planned, they come with recreational facilities and offer better security as well. This is on top of improvements to infrastructure and connectivity on the mainland. The Second Penang Bridge which was completed in 2014, has markedly improved the commute between Penang island and Seberang Perai (mainland).
Bandar Tasek Mutiara, (also known as Pearl City) is now rising in popularity among homebuyers as it enjoys fantastic accessibility. The township is just 5 minutes from the North-South Highway via Bukit Tambun Interchange. This link also leads to the Penang Second Bridge and the Penang Science Park.
Investors too are keen on properties in Bandar Tasek Mutiara as it boasts a strategic and central location. It borders Bukit Mertajam town to the north; Junjung town to the east; Sungai Bakap town to the south, and Batu Kawan to the west. Bandar Tasek Mutiara is also the closest township to Batu Kawan, an up and coming township development which is being meticulously planned as a hub for leisure and entertainment, medical, education, tourism and technology.
As for Widuri Apartment, Kaygarn explains that itspricing which falls within the affordable range for the majority of the locals makes it very appealing. The project is also located in a residential hot spot area along Jalan Raja Uda and there are ample amenities nearby such as the Sunway Carnival Mall, Prai Megamall, Convent Secondary School, St Mark Secondary School and Central Park as well as numerous eateries. The development is attractive to property investors as well as it has a high occupancy rate and there is a very good tenant demand from locals.
Miichael Yeoh, CEO and Founder of GM Training Academy PLT says that the figures above which show top property sales coming from the mainland are of no surprise as the prices of homes there are considerably cheaper than the ones on the island. For instance, one can get a landed property at Bandar Tasik Mutiara for less than RM300,000 whereas a unit at Widuri Apartment will cost a buyer less than RM200,000. These prices are affordable to the mass market – the bulk of local buyers can only afford properties worth around RM400,000. Hence, Miichael believes that these purchasers are mostly owner-occupiers instead of investors.
Residential Hotspots on the Island
For Penang Island, on the other hand, Kaygarn says that there are a higher number of transactions in areas such as Ayer Hitam, Bayan Lepas and Jelutong as these locations have always been residential/economic hotspots. A suburb located roughly 25 minutes away from Georgetown, Air Itam is a favourite among families as it provides a peaceful and tranquil living environment. Amenities and facilities are aplenty too – there are many schools, hypermarkets, temples, churches, clinics, gas stations and restaurants in the area.
Meanwhile, the Penang Free Trade Zone in Bayan Lepas is the main labour market in Penang and is home to numerous multinational factories. Thus, there is a high demand for condominiums from local workers and expatriates especially around the Golden Triangle in Relau, which is nearby Bayan Lepas.
Drawing on his experience as a local banker for the past 20 years, Miichael notes that Bukit Mertajam tops the list as the locals in the area have more buying power and there are also new developments coming up in the area. These include residential, commercial and industrial properties.
Miichael feels that Penang Island will still be the prime area among property investors as properties there enjoy higher capital appreciation, even though rental returns may not be as attractive. However, it should be noted that mainland properties are now appreciating at a faster rate with the ongoing and upcoming projects there. The current rental rate average is roughly 2% per annum.
Exciting Developments on the Way
Highlighting a few upcoming developments that will affect the property market in Penang in the near future, Kaygarn said that the Penang Master Transport Plan (PMTP) would be a big game-changer.
The huge infrastructure project which will be carried out in the next 10-20 years will definitely have a significant impact on the state’s economy and property market. The most exciting project would be the LRT network; where the first line will link the Penang International Airport to Komtar. This will definitely give a boost to nearby township and projects in and around the LRT stations.
Under the same plan, there will also be a new highway connecting townships to ease traffic congestion. There is a possibility for a ‘third link’ or the 7.2km undersea tunnel, which will be built to link Gurney Drive on the Penang island and Bagan Ajam on the mainland. The road projects outlined in the same plan comprises a 4.2km bypass from Gurney Drive to Lebuhraya Tun Dr. Lim Chong Eu; a 4.6km bypass between Lebuhraya Tun Dr. Lim Chong Eu and Bandar Baru Air Itam as well as a 12km paired-road from Jalan Tanjung Bungah to Teluk Bahang. The improved and increased connectivity will definitely help spur the property market in Penang.
Another notable development to look out for is the Batu Kawan township development – there are numerous of mixed development projects being undertaken by well known and established property developers such as Aspen Group and EcoWorld. There will also be other boom factors such as the Penang Designer Village, scheduled to be completed by end of this year and the IKEA & IKANO stores by 2018.
Besides that, universities and colleges will also come in the picture – the establishment of Hull University and KDU University College, which will supplement the existing campus on Penang Island.
According to Kaygarn, Penang is also a popular investment destination for the electronics industry. However, due to the scarcity of land on the island, the state government has come up with the Batu Kawan Industrial Park to cater to the demand. Kaygarn shares that companies such as San Disk, Honda, Vitrox and Haemonitics are now operating out of Batu Kawan and moving forward, the Penang state have planned for a Business Processing Outstanding hub to be located in Batu Kawan. With such developments, there will definitely be an increase in demand for properties in Batu Kawan in the near future.
Sharing his thoughts on up and coming areas such as Balik Pulau on the island and Batu Kawan on the mainland, Miichael says that properties there have more affordable price tags as compared to matured areas. Most importantly, these areas are receiving catalysts for future growth in terms of infrastructure, commercial facilities and lifestyle components. Nevertheless, he stresses that these developing areas will require at least 5 years to fully develop and to enjoy a healthy growth in capital appreciation.
There were no drastic changes in the number of landed property transactions in Penang, although there was a drop in transactions in March 2016 as compared to April 2015. However, in overall, the prices of landed properties in Penang remained flat for the past one year.
Kaygarn says the current soft market presents property investors with a good opportunity to grow their property portfolio. This is especially for those who are looking to purchase landed properties on the island, which will definitely enjoy capital appreciation in the medium to long run.
Prices of landed properties on the island have skyrocketed in certain areas such as Greenlane. Miichael notes a slight drop in transactions in the chart above, but he affirms that the prices of landed properties have remained stable. This is because property sellers in Penang have the ability to hold their units until they obtain the selling price that they are looking for.
He recommends property investors to get hold of reasonably priced landed properties in good locations to enjoy future appreciation. As land is limited on the island, the only direction that property prices will move is upwards. However, potential buyers must carry out proper planning as the rental returns for properties on the island can be very low. Hence, those planning to take a home loan with high margins will find that their rental income will be insufficient to cover the monthly instalment payments.
The number of transactions for high-rise residential properties in Penang has declined across the board from April 2015 to March 2016. For instance, the number of transactions for condominiums saw a drop of 44% – in April 2015, the figure recorded was 81 as compared to only 45 transactions in March 2016.
Kaygarn explains that this is mainly due to the slowdown of the economy which translated to a soft property market. In addition, the median PSF price has been moving sideways for the past one year.
He pointed out that savvy property investors, however, will continue to invest regardless of the slow market. Kaygarn believes that any time is a good time to invest as long as it is in properties with sound fundamentals, namely promising rental returns, good tenant demand, and not for speculative purposes.
There are more opportunities present during a soft market as it is now a buyer’s market. Sellers will be more realistic with their asking prices and there are higher chances for an investor to purchase below market value properties in the current market.
Miichael commented that the huge drop in sales of non-landed properties is mainly due to Penang facing an oversupply issue. The incoming supply of properties on the island is more than the actual demand.
On top of that, buyers are taking a wait and see approach as they do not want to overcommit on the back of a soft economy. He recommends developers to come up with special packages to ease the burden of potential homebuyers as many struggle to cough up the monthly instalments.
Miichael shares that there are certain new projects and secondary properties which are still good buys, but investors will have have to hedge against the market for a few years. If they have the holding power to retain their unit for a few years, they will definitely make profits from their current investments.
DISCLAIMER: The source of Sale data is from the Valuation and Property Services department (JPPH) which officially records a property transaction once the stamp duty for the Sales and Purchase agreement is paid while the source of rent data is from agents’ listings listed at iProperty.com. Analytics are based on the data available at the date of publication and may be subject to revision as and when more data becomes available.
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!