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Penang: Past, present and future

May 6th, 2014 Leave a comment

Chart 1: Penang Map

THERE is always a past and present which justify and lead the incoming future. Penang is a fascinating storyteller which has been able to treasure antique flavours while developing modern high-tech manufacturing enclaves that have attracted the world’s attention.

Past memories… Treasures of the future

On July 7, 2008, a huge opportunity was offered to the Penang State, the already famous Malaysian Silicon Valley. George Town, its capital city, was inscribed as a UNESCO (United Nations Educational, Scientific and Cultural Organisation) World Heritage Site due to its unique architectural and cultural townscape without parallel anywhere else in the East and South-East Asia.

Penang has been capitalising on the attention that has been driving the surge of tourist arrivals (local and international) from below three million arrivals in early 2000 to more than six million tourists in 2012. The target for this year is to attract above 10 million tourists.

The geographic configuration of the Penang State has surely contributed to the consistent growth of diversified economic drivers which consequently include property developments. (Refer to chart 1)

Two totally different scenarios in Penang have been prevalent in the last seven years: On Penang Island, a vibrant, high standard cosmopolitan lifestyle while the other is concentrated more on industrial and manufacturing projects backed by logistics and educational initiatives.

The first aspect which is related to Penang Island, is now rated the eighth best destination for retirement in the world while the mainland has been nicknamed the Malaysian Silicon Valley. Property development and their values have been rising accordingly, generating a stable and positive market.

Present with abundant opportunities

How the two property markets of Penang Island and the Mainland have been evolving in the last few years and how they will move on can easily be seen from this comparative table which shows the past, present and future supply of residential properties in the two locations. (Refer to chart 2)

Chart 2: Supply of residential units

By looking at the estimated population growth in the two areas based on a conservative calculation and without taking into account the “seasonal” resident crowd (expatriates and retired foreigners), we can clearly see the viable potential that both these areas have.

It is interesting to note that Penang State is the only one in Malaysia offering an almost adequate amount of low-cost housing proportionate to its population. The Malaysian average is 5.5% while Penang state is at 13.15% (low cost unit over total population).

The table above offers a clear and positive estimate for developers, buyers and investors in the years to come, clearing the horizon from possible cloudy forecasts in the form of a price bubble or drop in demand. (Refer to chart 3)

Chart 3: Current and future demand

Path for future potential growth

“Follow the economic growth drivers and the infrastructure.” This is the best thing a property investor can do. What is on Penang Island is quite easily seen.

As mentioned earlier, talking about the geographic and economic configuration, Penang Island can be viewed more as a retirement and holiday paradise where tourists will flock in from international shores to relax.

Keep in mind that the ratio between tourist arrivals and receipts generated has kept on growing at a favourable pace. (Refer to chart 4)

Chart 4: Tourist arrival and receipt value

Many of these tourists are looking for a short-term stay, spanning one week to three months at most and prefer to rent a medium or small house instead of living in a hotel.

Full facilities, nice locations and scenic views will be their decision drivers together backed by shopping amenities within the vicinity.

Looking at the infrastructure, we cannot miss the recently opened second link that will generate a new wave of residential and mixed-use developments.

It is sufficient to see how the first link has, since 1985, been contributing to the explosive development of the areas surrounding the landing point on the mainland to understand the high potential of this new “growth driver”.

Land nearby Batu Kawan and Jawi has more than doubled in value over the past few months from between RM7 per sq ft and RM10 per sq ft to between RM35 and RM45 per sq ft, and several developers are now fighting to secure prime positions for their future projects. No doubt the area has a very high potential in terms of accessibility and for sure, we will see interesting initiatives there taking off from the second half of this year.

Universities and big retailers, Ikea and the University of Hull just to mention the most recent developments, have been already acquiring space there as they are aware of the future direction for population growth while the developers’ planners are working on integrated townships that will offer houses with prices ranging from RM200 per sq ft up to RM500 per sq ft in the future.

Also, the proximity to the second link on the island, Batu Maung, Bayan Lepas or Teluk Kumbar, will profit with the Second Penang Bridge which will bring about a “property stage” that was in the past, dominated by George Town and Batu Feringghi.

Property market outlook

By looking into current values of residential properties in the northern areas of Penang Island, the possible growth will be within the range of RM200 per sq ft to RM400 per sq ft during the next two to three years (with 15% to 20% capital appreciation) as we cannot forget the type of buyers or the users of dwellings here. For the same reason, the (Return On Investment) ROI that smart investors will fetch in the area are surely going to be very attractive and on an uptrend for several years to come.

Mainland-wise, I’m personally looking forward to seeing the launch prices of properties located adjacent to the Second Penang Bridge take off in the next few months.

If entry values will be, as I’m expecting, below RM300 per sq ft, there will also be very good opportunities to profit from there and again, with more international schools, universities, retailers and businesses coming in as economic drivers, capital gain and yields will be, in my view, extremely attractive.

Different locations with property values are related to the future estimates of growth and will be offered on a “first come first serve” basis.

Do not think too long, otherwise these good and unique opportunities might be missed.

Source: StarProperty.my

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  1. Siau Kia
    May 6th, 2014 at 13:25 | #1

    It’s alarming to see by 2015, island itself is adding 8500 condo/soho. This is excluding low cost house and flats. In less than 1.5 years from today, the total condo units increased by whopping 25% of existing units built over last 30 years? Amazing how can our govt allow developer so many projects. Population growth by 25% in Penang by 2015? Maybe includes all the Bangla and Indon we are not even close.

  2. Siau Kia
    May 6th, 2014 at 13:37 | #2

    Growth area in 200-400psf?? How to find in Penang for new launches, even subsale is already surpassing this price bracket. This guy must be coming from back to the future III.

    The more I read the more my underwear is vibrating. Scary outlook.

  3. Hemsley
    May 6th, 2014 at 14:34 | #3

    Growth in the range of 200-400psf, means additional 200-400psf to existing price.

  4. SioSamOng
    May 6th, 2014 at 15:03 | #4

    @Siau Kia

    Mai luan luan kong lah (don’t simply say lah). People say A PRICE INCREASE OF RM200-400psf, you say something else! Go home and sleep lah!

    His estimates may not be far fetched, considering the way our state gov do things now.

    But I guess the big question on everyone’s mind is, how is it possible to have any significant price growth based on the huge supply in the market now?? Haha…you have to READ CAREFULLY what Dr Gambero is saying, you will then find your treasure box.

  5. Siau Kia
    May 6th, 2014 at 15:59 | #5

    Siam Ong and Hemsley,

    Sorry my English not so good. Ok maybe you’re right. I’m not entirely convinced neither of his projection. Nevertheless, the tanjung Tokong gurney p tikus area will certainly see better potential comparatively to Bayan Lepas Bt Maung Sg Ara. To reach this gain means you need to have a baseline of present value of 1300psf. Try selling some units in quayside, straits quay, etc today and see if you can find a buyer at this price. I recently viewed a unit at quayside and the seller is willing to go down as low as 1.55m for a 6th floor partial seaview of 2100sf 2 bedded unit. I believe it is still avail.

  6. Buyer5
    May 6th, 2014 at 19:51 | #6

    @Ahmad
    Gila!!!!

  7. Josh
    May 6th, 2014 at 22:04 | #7

    What is demand of homes and need of houses in chart 3?

  8. james
    May 7th, 2014 at 09:23 | #8

    Hi

    Based on the statistic in chart 3, it seems to be the demand in mainland is higher than island. it shows that the affordability is always the main concern. my 2cents.

  9. IsaacTan
    IsaacTan
    May 7th, 2014 at 09:34 | #9

    Based on Chart 3, the current demand for houses were 257,716units.
    But from Chart 2, can tell that the grand total units supply by 2020 was just 241,537units.
    Was that mean demand was still more than supply? As long as the demand was higher, is that also mean price will keep going north?
    Any thoughts?

  10. SioSamOng
    May 7th, 2014 at 09:37 | #10

    @james

    I think the chart has underestimated the demand in mainland. The second bridge has made Batu Kawan homes very attractive to those who work in Bayan Lepas & Bukit Minyak. With attractive commercial services thrown in (eg. ikea, ikano, country club, luxury factory outlets, theme park etc), Batu Kawan will offer both affordability and comfort, this is unprecedented in Penang. Of course, Batu Kawan is only attractive to locals, foreigners will be drawn to the northern tip of penang island.

    And surely you are right, the local working class will always be mainly concerned with affordability. No surprise.

  11. SioSamOng
    May 7th, 2014 at 09:54 | #11

    @IsaacTan

    I wouldn’t read too much into the charts because it is highly inaccurate. Reasons :-

    (1) Chart 2 says, based on supply and demand in the year 2012, there is a shortage of 66179 units on island, BUT, on the contrary, the fact is there is no shortage from REAL demand and there are actually plenty of empty homes around the island in 2012–>2013–>2014.

    (2) The predictions of POPULATION on island and mainland up until 2020 is very questionable. With better connectivity (2 bridges) and modern amenities (Ikea, Ikano etc) available in mainland, penang residents become VERY MOBILE. Their decision of where to stay is no longer constraint by where they work, or where they can enjoy that cup of latte at a trendy cafe. So my question to the “population prediction” is, have they factored in these dynamic elements? Or did they just plot some graphs, fit them into straight lines, and conclude that those are the numbers?? You know lah, our gov servants!….:D

  12. IsaacTan
    IsaacTan
    May 7th, 2014 at 10:37 | #12

    @SioSamOng

    Thanks & totally agreed.
    I also saw so many vacant units with lights out but yet GOV still keep selling land to developer for private housing.
    Do you think Penang market will oversupply and cause the property market to collapse?
    Also do not see Penang economy has grown that much compare to the growth of private housing.

  13. Mas
    May 7th, 2014 at 11:18 | #13

    @IsaacTan

    Define collapse.

  14. Concern buyer
    May 7th, 2014 at 12:15 | #14

    @Mas
    Collapse means price drop 40% and still no one buy.

  15. Mas
    May 7th, 2014 at 13:53 | #15

    @Concern buyer

    ic. interesting definition though. hopefully the market won’t collapse. else everyone eat shxx.

  16. david
    May 7th, 2014 at 13:53 | #16

    30% I already enter lol…don’t let them rugi so much.

  17. Siau Kia
    May 7th, 2014 at 14:05 | #17

    I don’t think it will collapse la. Penang fellas got lots of holding power. Island mentality, old money, prudent in spending in general. I agree with Mas if major collapse were to take place it is bad for everyone. So don’t be so greedy asking for 30 40% drop.

    As long as everyone can still afford to eat Durian and rambutan during the yearly season, everyone is happy :)

  18. Roger
    May 8th, 2014 at 21:38 | #18

    The calculation for demand of homes is based on 3 family members with 1 house. I think most of family are staying with more than 3 family members in 1 house , so the demand of homes may not be accurate.

  19. IsaacTan
    IsaacTan
    May 9th, 2014 at 10:04 | #19

    Anyone that know what’s the median price($psf) for Tanjong Tokong area?

  20. surveyor
    May 9th, 2014 at 12:29 | #20

    @IsaacTan

    There were a total of 232 transactions in Q12014 for Tanjong Tokong. The median is RM 410psf, with 1st quartile at RM 285psf, and 3rd quartile at RM850psf.

    The 3rd quartile are mostly concentrated near the seaside, bordered by Jalan Tanjong Tokong.

  21. surveyor
    May 9th, 2014 at 16:50 | #21

    @IsaacTan

    Referring to Q12014 report

  22. surveyor
    May 9th, 2014 at 16:52 | #22

    There were a total of 232 transactions in Q12014 for Tanjong Tkng. The median is RM 410psf, with 1st quartile at RM 285psf, and 3rd quartile at RM850psf.

    The 3rd quartile are mostly concentrated near the seaside, bordered by Jalan Tanjong Tkng.

    The Median are mostly concentrated between Jalan Tanjong Tkng and Jalan Mt Erskine, while the 1st quartile are mostly inwards of Jalan Mt Erskine towards the cmetery hills.

  23. IsaacTan
    IsaacTan
    May 9th, 2014 at 17:47 | #23

    @surveyor
    Arigatou…. :)

  24. IsaacTan
    IsaacTan
    May 9th, 2014 at 18:00 | #24

    Anyone knows how’s the progress of Penang undersea tunnel?

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