Penang is both an island and a state, one of the 13 that comprise Malaysia, and the second smallest after Perlis. But for a state of this size, Penang surely packs quite a lot of punch.
Highly urbanised and industrialised, Penang is one of Malaysia’s most economically important states. It has the third highest Human Development Index among the country’s states, the third largest economy, and the highest GDP per capita.
The island also earned the nickname Silicon Island, being the Malaysian base of many technology companies such as Agilent, Motorola, Intel, Dell, Bosch, and Seagate, among others. In 2005 it was accorded the Multimedia Super Corridor Cyber City status, the first outside Cyberjaya.
Similar to Singapore and Malacca, Penang is a former Straits Settlements of the British Empire in the 19th century. Decades of immigration from India, China, Britain and other parts of South-East Asia gave the state a unique blend of different cultures not unlike that of Singapore, which can be seen in the architecture of its bustling and colourful capital Georgetown, a UNESCO-inscribed Heritage Site. Located in the eastern portion of the island, Georgetown has been cited in an ECA International survey as Malaysia’s most liveable city, outranking popular Kuala Lumpur and just notches below Hong Kong and Singapore.
Besides being an economic powerhouse Penang is also a thriving tourist destination. Its airport, located on the island’s south-eastern section, is Malaysia’s third busiest and welcomes travellers from Bangkok, Singapore, Jakarta, Hong Kong, Taipei and Guangzhou. The state is also positioning itself as a favoured MICE (meetings, incentives, conventions and exhibitions) destination within the Asia-Pacific region, with the Penang Waterfront Convention Centre, scheduled for completion in 2017, expected to give this sector a major boost.
As with the rest of Malaysia, Penang’s property market was hit hard by the late 1990s Asian financial crisis that plunged many Asian countries into deep recession. However, prices have started to rise steadily since the end of the recession, according to Nixon Paul, managing director of Kuala Lumpur-based Carey Real Estate. Lessons were learned from the region-wide crisis: the global economic downturn four years ago was nothing more than a minor blip in the country’s overall property market.
The state’s market is doing pretty well, too, with some sectors expected to see a stable 2013. The landed property market is in fact expected to increase as supply in prime areas decreases when compared with demand, especially with the scarcity of land.
According to Datuk Jerry Chan, chairman of REHDA Penang, there are three main factors that drive the state’s property market. These are liquidity, easy and cheap credit and a bullish sentiment. He added that prices have increased because the costs of procuring new lands, and of labour and construction materials have escalated as well. ‘If you’re hoping that property prices will finally stop soaring, don’t hold your breath,’ he said.
And with property prices on the island showing little sign of slowing down, many experts advise those with smaller budgets to invest on properties in the current growth corridors on the mainland. Another area to keep an eye on is the rental market. According to analysts, this segment will be driven by young couples and professional singles who are looking to live in areas close to their workplaces. In fact, there have a been a number of new launches over the last few years offering smaller units that target childless young couples, as well as potential investors with disposable income.
According to Teoh Poh Huat, director of Penang office of international asset consultant Henry Butcher, Malaysia economic growth is expected to remain stable despite the overall gloomy global economic outlook. He added that 2012 was relatively quieter compared with 2011, because astute investors are pragmatic in their investment decisions.
‘Conventional wisdom…dictates that buying properties in choice locations in Penang are still the preferred mode for wealth creation,’ Teoh said. ‘The euphoria has abated but consumer confidence definitely remains high.’ Overall buyers are expected to remain cautious but optimistic with the market, with purchases concentrating on the traditional preferred locations and also for projects that offer high-quality specifications, according to Teoh. The market has also received a boost from the government’s initiative Malaysia My Second Home programme. Many foreigners have identified Penang as a preferred destination because of its relatively lower cost of living and the availability of top-notch healthcare facilities. However, as of the moment, foreigners only comprise less than 8% of the total residential property buyers in Penang, but this segment is expected to rise, with Penang endearing itself to the international community as a tourism, retirement and second home paradise. According to Chan of REHDA Penang, the state’s property market will see a sustainable growth of between 5% and 10% in 2013. He said property market in Penang will remain bullish amid rising demand for houses due to the increase in jobs as an impact from foreign investments as well as growing population. ‘The population projection for Penang is 2 million by 2020, therefore more houses are needed. Some 12,000 houses are expected to be built yearly until 2020,’ Chan said. In addition, the second Penang Bridge, which is scheduled to be completed in September 2013, will definitely give the market a major boost, especially the areas adjacent to the new bridge, such as Batu Maung and Bayan Lepas on the island, and the corridor from Simpang Ampat to Nibong Tebal encompassing Sungai Bakap, Valdor and Batu Kawan on the mainland.
Things to consider
According to BuyAssociation.co.uk, foreigners are legally allowed to buy properties in Malaysia (condos/apartments, landed houses, land and commercial propertiers), but there are restrictions that should be kept in mind. Foreigners are permitted to buy two houses at a cost no less than MYR150,000 (US$49,128) and are allowed to apply for finance at a rate of 60% loan-to-value.
Also note that there are some areas of the country not opened for foreign buyers. Hence, if you are considering buying your own plot of land upon which to build, it is vital you check this ahead of signing any contracts. According to iProperty.com.my, on average it takes about 4–6 months for a foreigner to transact a purchase. They are also subject to 28% tax on rental income or an effective 20–25% after allowable business expense deductions. Also, foreigners are advised to avoid leasehold properties because, although cheaper, the transaction takes longer to get completed (about 7-10 months) as state authority approvals are required. Properties from developers, on the other hand, are normally delivered 2–3 years after the launch and the developer will progressively bill the owner or the bank as the construction progresses. There are restrictions, however, in purchasing condos from developers, such as 30% of the units be reserved to Bumiputeras (who get 5% discount off the listed price). If these units are unsold, foreigners are allowed to buy these in the secondary market if the developer has procured a release from the government as long as they show proof that they are unable to sell these units. Financing is also available to foreigners. Local banks typically finance up to 70% of the property value, and there are no restrictions on the number of loans that can be applied for. However, it is important to make sure that the loan process is under process the moment the Sale & Purchase Agreement is signed. Another option for foreigners, especially retirees, is to avail of the Malaysia My Second Home programme. Intended to assist foreign retirees and to market the country is a thriving retirees’ haven, the programme has removed some of the basic obstacles for foreigners buying property in Malaysia (for more information, visit http://www.mm2h.gov.my).
What to buy
Seen as a vote of confidence, many Kuala Lumpur-based developers have for years been a constant presence in Penang’s property market. And many of them are scheduled to launch projects that are expected to flood the market with new supply.
One of which is MRCB’s 3.34-acre Batu Ferringhi Residences, on the island’s north-western touristy section. The project is comprised of 17 boutique villas and 48 condominium units located within a short distance from the island’s famous beaches, and close to many high-end hotels such as Hard Rock Hotel and Shangri-La’s Rasa Raya Resort and Spa.
Located in Batu Maung is Sunway Bhd’s Sunway Cassia (see photo below), which offer prospective buyers freehold, three-storey terraced houses, each with a floor area of more than 3,000 square feet (278 square metres). The project is approximately 4 kilometres from the yet-to-be-completed Second Penang Bridge and 5 kilometres from the airport.
Also in Batu Maung is Mah Sing Group’s Southbay City project. Modelled after notable seaside developments, such as Sydney’s Darling Harbour and London’s Canary Wharf, this freehold, integrated township boasts restaurants, residences, a shopping mall, two blocks of hotels and other commercial and recreation attractions.