Penang to see spurt in housing sales pre-GST

Property News/ 28 January 2015 Leave a comment

Michael Geh

Real estate agents see a spurt in property activity in Penang in the first quarter of this year, spurred by an urgency to get deals closed ahead of the implementation of the goods and services tax (GST) on April 1.

Raine & Horne Penang director Michael Geh said the uncertainty over the impact the consumption tax will have on property prices may lead to a flurry of investment activity in the state’s property sector.

He is of the view that many property investors will get caught in the “herd mentality” of buying properties pre-GST on concerns that property prices will rise an additional 6% under the new tax regime.

“People are psychologically affected by the GST even though it is understood that the sale and purchase of residential property is not subject to GST. However, the general view is that there would be GST impact on building material and labour costs, which inevitably give rise to higher property prices,” he told The Edge Financial Daily.

Conversely, the owner-occupier segment of the Penang housing market is likely to be sluggish given the tighter lending conditions.

“While there are many genuine homebuyers wanting to buy properties, they are not able to secure loans as housing prices have surged beyond [the average] person’s reach,” Geh said.

He noted that these homebuyers are holding out for more affordable properties built by the federal and state governments, as well as private developers.

On the developers’ front, Geh said: “Many developers in Penang are feeling the pinch [with rising costs] as they have to pay higher infrastructure development charges, conversion fees and drainage contribution.”

The Penang government increased the drainage contribution from RM15,000 to RM50,000 from January last year. This was in addition to infrastructure development charges, introduced in 2012, which were set at RM15 per sq ft for residential projects and RM21 per sq ft for commercial projects.

Geh also said Penang’s secondary residential market, which accounts for a 70% share of the property market, remains active and stable compared with the primary market.

In 2013, the state’s secondary market recorded RM5.89 billion in turnover from the sale of 14,950 units compared with the primary market, which totalled RM1.21 billion from the sale of 2,750 units.

According to the National Property Information Centre, in the first half of 2014 (1H14), the number of transactions for residential units in Penang stood at 9,023, out of the total number of transactions for all properties of 12,929. The sales value of the residential units was RM3.76 billion, which represented the largest portion of the Penang property market’s total sales value of RM7.2 billion in 1H14.

Real Estate Housing Developers’ Association (Rehda) Penang chapter chairman Datuk Jerry Chan said the drainage contribution, infrastructure development charges, a default compensation for non-provision for each low and low-medium cost housing unit and the re-zoning fee imposed in the state are the highest in the country.

He noted that Penang-based developers are finding it difficult to fork out RM120,000 for each low-cost housing unit they choose not to build in their projects on the island as well as non-Penang developers who are compelled to pay RM150,000 per unit.

“On the mainland, if a developer does not fulfil the low-cost quota, it is required to pay between RM50,000 and RM72,500. Nowhere in Malaysia are such charges imposed. Therefore, these costs get passed on to homebuyers,” Chan told a media briefing on Dec 3, 2014.

He sees property prices in Penang increasing by between 3% and 15% once the GST comes into play.

Ivory Properties Group Bhd chief executive officer Datuk Low Eng Hock told The Edge Financial Daily that the introduction of GST will definitely hit the construction sector.

“When construction cost goes up, it will also affect the price of properties in Penang since they are interrelated. For that, we are looking at about 3% to 4% increase in the state’s property prices following the implementation of GST.

“We also foresee that the property market in Penang will soften slightly this year due to difficulty for some purchasers in obtaining housing loans,” he said.

However, Low said despite land scarcity, factors such as Penang’s transformation to an international city, infrastructure upgrading and Penang being a preferred destination for retirees would neutralise the situation.

“Based on these factors and with scarcity of land on Penang island, we remain positive on the property outlook for next year and opine that properties priced between RM700 per sq ft and RM1,000 per sq ft will continue to be in demand,” he said.

Source: The Edge Markets

  1. Local
    January 29th, 2015 at 21:07 | #1

    i don’t believe you :)

  2. Foreign
    January 29th, 2015 at 23:20 | #2


    I believe him. The market has become so bad and the number of transactions have become so low that an additional few transactions in the market due to GST can cause a spurt.

  3. elle
    January 30th, 2015 at 09:38 | #3

    Of course those real estate agents would love a spurt. And with the current market conditions, a spurt is all they will get.

  4. susan
    January 31st, 2015 at 12:14 | #4

    A spurt is like the grand finale. After the spurt, it will be soft, I mean the market.

  5. Local
    January 31st, 2015 at 23:15 | #5


    from that viewpoint of yours , then i agree with you

    if they were selling 10 units per month for the past year , and it goes up to 15 units … we are talking about an increase of 50% which is wonderful ! can be considered a ‘spurt’

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