Penang Property Market: Cautious but still bullish

Following a Penang property market bull-run in 3Q2007 with prices reaching record highs in 4Q2007, the market is now a bit cautious due to the US recession and housing subprime issue.

Nevertheless, Michael Geh, director of Raine & Horne International Zaki + Partners, says the property market in the state would remain positive in 1Q2008.

"I would say that the Penang property market would remain at a cautious high in 1Q2008, benefiting from both political and economic stability. Things should remain positive, with expectations of a general election," he says when presenting The Edge/Raine & Horne International Zaki + Partners Penang Housing Property Monitor for 4Q2007.

According to Geh, the Penang property market is still pretty bullish, although there is the general feeling of caution. Even so, he believes that it would not have much direct impact on Malaysia. "The US is having its presidential election this year. I believe it would do everything in its power to stop the recession from escalating," he explains.

Having said that, there is no doubt that Penang is one of Malaysia's frontrunners in the real estate investment market after Kuala Lumpur. "Foreign and local investors were glad with yield returns of at least 6% to 8% for residential property on the island, while commercial premises produced at least 8% to 12% yield returns based on building facilities, accommodation and location," says Geh.

"Commercial properties enjoying good rental yields are Georgetown's inner city heritage redevelopments where old shophouses are bought and refurbished under the heritage commercial category. As for residential properties, condominiums, such as Bayswater and The Cove, are enjoying good yields," he adds.

According to Geh, the property sector experienced a boom in 2007 in terms of price, rental, occupancy rate, sales and new projects, especially waterfront ones on the coastal highway, and reclamation land such as CP Land's Queensbay.

"The multi-billion-ringgit Queensbay, comprising 19 freehold parcels of mixed development on a 73-acre waterfront in Bayan Lepas, are among the new images of Penang property development. As for SP Setia Bhd's Pearl Island, a conceptual housing scheme in the southwest, sales performance for newly-launched residential or commercial schemes was a convincing 80% to 90% for selected projects"

In general, the property market in 4Q2007 was less active compared to the previous quarter, with "not much new launches recorded", says Geh. "There has also been a lot of hype on Penang Global City Centre (PGCC), but there are no launches yet. There are still arguments that the project may add to congestion, but Penang needs progress and this project will be good," he adds.

Although property market activities for 2H2007 decreased to 5,207 transactions for the principal property sub-sectors compared with 5,328 transactions in the first half, the value of transactions for the same group appreciated 15% compared with RM1,376 million in the first half.

"Low mortgage rates, higher occupancy rates, higher spending power, foreign direct investment and most of all, promotions and policies from the government to attract foreign investors, are the market indicators for a positive Penang property market," says Geh.

"As a whole, property prices of residential, commercial and even industrial types are still picking up even though prices are already fetching record highs."

In 4Q2007, landed property prices on the secondary market such as 1 and 2-storey terraced houses and 2-storey semidees appreciated as high as 6.06% and 3.29% respectively from the previous quarter.

In Tanjung Bungah, prices of 1-storey terraced houses increased to RM330,000 from RM310,000 in the previous quarter. For 2-storey terraced houses, prices shot up from RM500,000 to RM520,000 in Sungai Nibong. As for the 2-storey semidees, price appreciated the highest in Minden Heights, climbing to RM760,000 from RM735,000 in 3Q2007.

Rental rates rose in 4Q2007, increasing as much as 5.77% for 2-storey bungalows. In Minden Heights, 2-storey bungalows fetched a rental of RM2,600 compared to RM2,450 in 3Q2007.

The property pricing trend is expected to remain stable in 2008, taking into consideration the globalisation of Penang's properties, says Geh. "Foreign buyers, fund managers and corporates are coming in to mop up the supply in Penang."

An example is E & O Property Development Bhd's ambitious 1,000-acre Seri Tanjung Pinang, a seafront community comprising luxury terraces, semidees, bungalows and serviced apartments. It aims to make Penang a world-class waterfront community.

Another example is IJM's The Light, featuring 1,186 units of high-end waterfront condominiums, an office tower, four hotels, a family hall, an IT mall, a fashion mall, dining and entertainment facilities, and a seafront park on 338 acres of reclaimed land along the coastal highway. "It is set to be another landmark waterfront development, with its residential units expected to be tagged at RM350 to RM650 psf," he says.

The trend of developing luxury condominiums, which started in 3Q2007 in Penang, will continue, says Geh. "Luxury condo projects were mushrooming from the northeast to the southwest district within the region."

Located on the prestigious and established Gurney Drive is the ongoing Gurney Paragon by Hunza Properties Bhd. It comprises two blocks of high-end condominiums and a shopping mall with one million sq ft of retail space. Upon completion, the mixed development project is expected to further enhance property prices around its vicinity.

"These landmark and infrastructural projects will lure investment funds from other countries," says Geh.

Factors such as low unemployment rate, steady GDP growth as well as a balanced and equitable national economic development, point towards greater opportunities for the property development and investment market for 2008. - By The Edge Daily

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