Waterfront property lure

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The state of Penang has two main regions: the island and the mainland, linked by the Penang Bridge, the Penang Second Bridge and by a short ferry ride. The island is divided into two main districts: Northeast Penang which spans from Batu Feringghi and Tanjung Bungah to the north and Bukit Jambul and Relau to the south; and Southwest Penang, which covers Sungai Nibong, Bandar Bayan Baru, Bayan Lepas, and all parts of the west coast.

The non-landed residential property landscape in each of these districts is distinct from one another. “Most of the upmarket and luxury condominiums on the island are located in the Northeast region, whereas the more mid-market ones are in the Southwest region,” says C H Williams Talhar and Wong Sdn Bhd director, Peh Seng Yee.

Based on TheEdgeProperty.com’s analysis of transactions, the average transacted price of non-landed residences on the island has steadily increased since 2013. The average transacted price in Northeast Penang hit a new high of RM432 psf in 1Q2015 on the back of new completions. This represents an 18.7% y-o-y appreciation from RM364 psf in 1Q2014, following a 10% y-o-y growth in the preceding year.

Meanwhile, in Southwest Penang, the average transacted price of non-landed homes hit a new high of RM408 psf in 1Q2015. This represents a whopping 29.4% y-o-y appreciation from RM315 psf in 1Q2014, following a mere 5.6% y-o-y growth in the preceding year.

Today, mid-market, non-landed units are typically transacted for RM450 psf onwards while the upmarket ones can go up to RM1,300 psf, says Peh.

Prices of apartments and condominium units have generally been rising, particularly in the past five years, taking the cue from the many new projects with better specification than previous ones in recent years, Peh adds.

According to Landserve Penang executive director, Ooi Choon Seong, prices of new launches have been increasing at a conservative estimate of 10-15% annually. “Depending on the furnishings and location, the figure may be even higher than that,” he says.

According to TheEdgeProperty.com’s analysis, on an average psf price basis, the most expensive condominiums are also among the newest. In Northeast Penang, they are led by Quayside Seafront Resort Condominiums (RM979 psf) followed by Suites at Straits Quay (RM906 psf). These luxury properties are part of the Seri Tanjung Pinang township developed by Eastern and Oriental Bhd. Both are located along the waterfront, and offer expansive views over the sea. The Suites @ Straits Quay has the added convenience of being located atop Straits Quay Mall.

Over at Southwest Penang, the most expensive condominiums are found within the Bayan Indah enclave. They are led by Putra Place (RM660 psf), Gold Coast Resort Condominium (RM575 psf), Villa Emas (RM556 psf) and Putra Marine Resort Condominium (RM533 psf). These upmarket seafront properties were completed by Techware Enterprise Sdn Bhd between 1999 and 2006. One reason these projects have retained their value could be due to their location close to the upcoming Penang World City in Bayan Mutiara that is being jointly developed by Ivory Properties Group and Tropicana Bhd.

According to Reapfield Properties head of sales, Sam Kam, the sea view offered by Penang projects is their main draw. “This has attracted expatriates looking for holiday or retirement homes under the Malaysia My Second Home programme. Anyone would rather wake up to a calm and relaxing view than a noisy and hectic one,” he says.

However, the experts agree that homebuyers in Penang are mostly still locals. “Expatriates buying homes in Penang have been relatively small in number, and thus, the local property market has not changed much over the years,” says Peh.

Catalysing the island

Landserve’s Ooi notes that development is more rapid in Northeast Penang, but believes things will pick up soon in the Southwest, which has several major catalysts in the form of infrastructure projects. “Although the Penang Second Bridge has opened, it is still taking some time for the developments there to pick up. This is because there is still traffic congestion day in and day out near the bridge,” he offers.

One of the area’s future catalysts is a RM1.3 billion joint venture between Penang Development Corporation (PDC), and Temasek and the Economic Development Innovation Singapore (EDIS), says Ooi. The project involves the development of a BPO (Business Process Outsourcing) Prime Project on a 6.8 acre land parcel in Bayan Baru.

The project will boost the rental market given that the increase in the number of workers in the area will prompt the need for housing, he notes. Among the other developers here are Mah Sing Group Bhd, which is developing Southbay City, and S P Setia Bhd which has undertaken the redevelopment of the former Penang International Sports Arena (Pisa), now called Subterranean Penang International Convention and Exhibition Centre (Spice).

This will be an integrated business hub with a convention centre, indoor stadium, aquatic club and business hotel. In Bayan Lepas, Ideal Property Group will embark on the Ideal Vision Park mixed-use development in Sungai Ara. Ooi says Spice is expected to draw more traffic to the Southwest. There is also the RM10 billion Penang World City in Bayan Mutiara.

Elsewhere, in the Northeast, numerous integrated schemes, land reclamation and transport projects have been proposed. Over at Tanjung Tokong, Eastern and Oriental Bhd is set to begin reclamation works on Phase 2 of its Seri Tanjung Pinang township.

Another major on-going project in the Northeast is The Light Waterfront by IJM Land Bhd in Gelugor, which has a gross development value (GDV) of RM6.5 billion.

According to Peh, due to the scarcity in land on Penang island, reclamation has to take place. “In order to create a major landbank, reclamation of land has been and is being conducted along the eastern foreshore of Penang island. As such, waterfront developments have been established and the trend will continue with more ongoing reclamation works,” he says.

He notes that the market has generally been receptive to waterfront developments that offer unobstructed sea views, as observed from encouraging sales of these products.

In terms of price growth, analysis by the TheEdgeProperty.com shows that in the 12 months to 1Q2015, average prices of most projects in Northeast Penang have either held steady or appreciated. The highest growth figures can be observed among mid-cost apartments due to their lower base prices.

They are led by Taman Air Itam Flat (+49.6% to RM350 psf), Pangsapuri Pelangi in George Town (+47.4% to RM253 psf), Villa Kejora in Relau (+45.2% to RM412 psf) and Puncak Erskine in Tanjung Tokong (+45.2% to RM213 psf).

In Southwest Penang, the highest average price growth was at Saujana Permai Flats (+32.6%) and Saujana Damai Apartments (+31.8%). Prices at these neighbouring projects in Taman Tunas Damai in Bayan Lepas may have been influenced by the upcoming Ideal Vision Park project across the road. The 25-acre mixed-use development will include up to 1,945 new condominium units.

Indicative annual rental yields based on asking rentals as at June, 2015, ranged between 2.4% and 6.5% in the Northeast, led by Puncak Erskine (6.5%), an apartment on the hillside of Tanjung Tokong. In the Southwest, rental yields ranged between and 2.6% to 5.5%, led by Summerton Condominiums in Pantai Jerejak, Bayan Indah.

Ooi says the rental market has weakened in the past two years but this may change in the current economic situation. “Cooling measures by the central bank combined with escalating property prices mean that renting has become an option for those who cannot afford to buy property. The state government has also been more involved in providing affordable housing for the younger generation. One such project is I-Santorini by Ideal Property Group in Tanjung Tokong. Although it is high-density with small built-ups, [units are] affordably priced below RM550,000,” he says.

Ooi says the Penang Transport Master Plan (PTMP) will bring in more developers to Penang. “Developers would be awarded land for reclamation by the state government, so we will see more developments in the future,” says Ooi. He is positive the PTMP will reduce traffic congestion and reduce commuting time.

Among the PTMP’s proposals are an integrated railway scheme that includes the Bayan Lepas LRT line from Gurney Drive to Teluk Kumbar and Batu Maung; the Ayer Itam monorail; and the Tanjung Tokong monorail. The network will connect to the mainland via the Georgetown-Butterworth LRT line. The Pan Island Link highway project from Gurney Drive to Bayan Lepas is also expected to alleviate traffic congestion.

The weakening ringgit and cooling measures mean a poor short-term outlook for the property market in 1Q2016, says Ooi.

However, Reapfield’s Kam, citing the example of Hong Kong, notes that the value of Penang properties is not likely to drop due to the scarcity of land on the island. According to Kam, buyers who can afford to buy property now but do not do so will lose out. “Penang is still developing; it may not look at all glamorous now and this may deter investors from investing. However, by the time it is fully developed, property prices may have escalated many times over from today. There may also be an oversupply of properties now such as in the southern region, but the market will pick up again, so I would really advise those who are keen to invest to do it now,” he says.

It's always handy to have an international school next door. Tap here to see rental yields for Eden Seaview in Batu Ferringhi.

Related stories:
PROPERTY SNAPSHOT 1: The rising non-landed home prices of Northeast Penang
PROPERTY SNAPSHOT 2: What's affordable in Northeast Penang?
PROPERTY SNAPSHOT 3: What are prices like in Northeast Penang?
PROPERTY SNAPSHOT 4: What's hot in Northeast Penang?
PROPERTY SNAPSHOT 1: Southwest Penang gains attention
PROPERTY SNAPSHOT 2: What’s affordable in Southwest Penang?
PROPERTY SNAPSHOT 3: What are prices like in Southwest Penang?
PROPERTY SNAPSHOT 4: What's hot in Southwest Penang?

This story first appeared in The Edge Property pullout on Jan 22, 2016, which comes with The Edge Financial Daily every Friday. Download The Edge Property here for free.