Property speculators exiting market

Property speculators appear to be making their exit from the sluggish property market in Penang as transaction volume slows and property prices continue to weaken, says Raine & Horne International Zaki + Partners director Michael Geh. However, this is a silver lining for genuine homebuyers who get to buy at more reasonable prices.

Geh says some developers are holding back as there were no new launches in the island in 3Q2008. However, despite the slowdown, some astute property developers are viewing it as an opportunity to position themselves for when the market recovers. Geh points out that developers are already strategising for the next property boom, especially those planning hotel developments as they are now hunting for suitable land.

Presenting The Edge/Raine & Horne International Zaki + Partners Penang Housing Property Monitor for 3Q2008, Geh says there are several factors for the current softening of the market. The factors include low supply of affordable houses, withdrawal of speculators and investors from the market, increasing unemployment rate, banks exercising caution on loan approvals and economic and political uncertainties, he says, adding that, right now, potential buyers are more interested in securing their jobs rather than investing in another property.

On the other hand, says Geh, some developers see this as a window of opportunity. He cites, as an example, DNP Holdings Bhd (DNP) which is planning to launch its high-end Sentral Greens project in 1H2009 and continue with the second phase of its two other projects in Central Seberang Perai, namely, BM Utama in Bukit Minyak and Taman Seri Impian in Alma. Sentral Greens comprises 396 terraced, semi-detached and bungalow units worth RM160 million in gross development value.

Geh says it is understandable that DNP has gone ahead with its projects in Central Seberang Perai as the district has the fastest growing population in Penang.

"It is important to be selective in the type of properties to build to attract buyers who are now more choosy," says Geh. He adds that in the sub-sale residential sector, low transaction volume was recorded in 3Q2008 as prices weakened, especially in newly-completed properties bought by speculators.

Geh says one of the reasons speculators flooded the Penang property market was because of the abolishment of the Real Property Gains Tax. "Market pressure used to ensure at least 80% to 100% in price increases for newly-completed projects. Palm Palladium in Minden Place drove up prices to a benchmark RM380 psf to RM405 psf for 1,154 sq ft and 1,396 sq ft respectively, at least 60% higher than the developer's launch prices," he says. Another example is The Spring condominium by IJM Corp Bhd along Jelutong Expressway where the asking price is 30% to 40% higher than its soft-launched prices of about RM270,000 in May 2008.

Properties priced below RM150,000 are holding up, says Geh, while those between RM150,000 and RM250,000 have softened. He adds that properties costing RM250,001 to RM450,000 have dropped significantly in the market, and that transactions of properties tagged above RM450,000 are slow in secondary locations such as Butterworth, Teluk Kumbar and Balik Pulau.

According to the sampling for the Property Monitor, rents in 3Q2008 rose slightly, from RM890 to RM900, for 2-storey terraced houses in Sungai Nibong, while 1-storey terraced houses in Jelutong recorded a 4.6% increase, at RM680.

Property prices saw minimal increases: 2-storey terraced houses in Green Lane were transacted at RM570,000, 3.6% higher, and 2-storey semidees in Island Park with built-ups from 3,000 sq ft to 4,000 sq ft were sold at RM880,000, 3.4% higher. Geh says that while speculators are leaving the market, genuine homebuyers get to buy at more reasonable prices.

Property owners in Bayan Lepas, it would appear, are trying hard to dispose of their properties before the slowdown further dents their cash flow and capital appreciation, says Geh. He cites Villa Emas, Putra Place and Gold Coast in Bayan Lepas among the actively transacted apartments and condominiums. "Most of these listings come with tenancy and with a current yield return ranging from 4% to 7%," he adds.

He says sellers in Villa Emas, for example, are asking from RM263 psf to RM355 psf. Units at Putra Palace, priced from RM180,000 to RM200,000 in 2006, are now at a high of RM320,000 for a fully renovated unit. However, several of those units are still unsold after three months, says Geh.

On hillside projects in Penang, Geh says it is essential to examine the causes of landslides because in certain areas, the slopes are stable. "We should focus more on ecologically sustainable developments where the chopping of trees, for example, are not warranted. There are famous hotels in Bangkok and Sri Lanka which are built in the middle of the forest or around trees, and people are paying a lot of money to stay in such places," he says.

Geh says The Heritance Kandalama in Sri Lanka, for example, was built between two rock formations and none of the trees there were destroyed. The place is just minutes away from two Unesco World Heritage Sites, namely, a 2,000-year-old cave temple and the Sigiriya rock fortress. "This type of development should be encouraged," he adds.

On Georgetown's successful listing in the Living Cultural Heritage Category of Innercity of George Town, Geh adds that it is a "double-edged sword". "It puts George Town on the world stage and attracts additional tourist arrivals in the immediate term, and boosts the heritage building market values and desirability factor in the long term (5-10 years).

"On the other hand, it causes a negative impact on privately-owned pre-war house owners, among others. Once inscribed into the Unesco listing, the physical progress of the building and undeveloped plots come under Unesco Guidelines and not the George Town City Council Guidelines," he says. Geh adds that the requirements are not available for members of the public: "The guidelines should be published and made public for us to comprehend." - By Rosalynn Poh (The Edge Daily)

No comments