As the effects of COVID-19 pandemic are felt around the world, property is undoubtedly one of the most impacted industries in Penang. Although CMCO is now lifted, the ongoing corresponding containment measures are expected to worsen the already slow and cautious property market here.

Looking back at the first quarter of 2020, Penang property market saw the continuation of a slowing market with quarterly residential transaction volume at its 5-year low. While the HOC played a role in easing the glut in the residential property market last year, it did not raise the consumers’ confidence which is the key factor in driving the recovery of the property sector. The data from NAPIC below shows a horizontal trend in property transactions and the continuous decline in the average transacted value for Penang residential segments through 2019, with a slight increase in Q1 2020.

The disruption of COVID-19 pandemic

The MCO which lasted for 2 months and the ongoing control measures are certainly stretching the sluggish property market. Demand is disrupted and supply is expected to be delayed. Many developers are likely to miss their completion deadlines. Few new launches are to be put on hold and some have been temporarily called off. Some will be facing strong headwinds ahead, especially those selling midrange products with low-profit margins.

Investors who have been generating income from their home-stay units have lost a few months of income, and their losses are likely to continue for several more months. Commercial property owners are pressured to slash their rental in bid to keep the tenants and some co-working spaces are closing down amid the new norm of social distancing. Several hotels ceased operations due to the gloomy business outlook.

Low-middle income earners hit hardest

The pandemic has also disproportionately affected low and middle-income workers, many of whom may have faced salary cut or job instability. This would have a direct impact on the demand for property, especially in the low and medium-cost category.

The situation will contribute to a decrease in property transactions for the remaining quarters in 2020. However, with a lower ratio of transactions in low and medium-cost housing, we are likely to see an increase in the average transacted price in the second half of 2020. This should not be perceived as rising house prices.

Property price falling with incentive by the government

Following the introduction of Penjana incentives, most developers are expected to lower their prices by 10%. Not to mention some of those who are already offering huge rebates and discounts in response to the decline in sales since early 2020.

This will also have a spillover effect on the sub-sale market, competing with the sale of developers’ unsold housing stock at a lower asking price. The real property gains tax (RPGT) exemption would be another motivating factor for owners to dispose their properties before 2021 at a reduced asking price.

While Penang Government is lowering affordable housing prices by 10%, but that will not have any material impact on the market in near-term as that is only applicable to new projects. Nonetheless, affordable housing will be cheaper when this takes place.

Is now a good time to invest in property?

Although our daily lives have been disrupted, property does not lose its attractiveness for investors as it is considered a stable investment in times of crisis. This is evidenced in the search trends report below from Google, indicating the search interest for property in Penang has rebounded to pre-crisis level after the MCO is lifted.

The Penjana incentives, which include the reintroduction of Home Ownership Campaign (HOC) and the removal of 70% financing limit for the 3rd housing loan, are expected to keep the property buying momentum going over the next several months.

For those who can afford, this would be the best time to scout for the right one as the property prices are expected to be softened, and owners in the sub-sale market are likely to lower their asking price.

Buy within your means, and only for long-term or own stay. If you are buying a commercial property for rental, it is time to rethink your investment strategy with a realistic target in mind. The new norm may or may not go away. For residential property, buying affordable housing for investment is not a wise choice for now as it will only get cheaper in the foreseeable future.

– Ken Lim
(Founder, PenangPropertyTalk.com)

The list of hotel closures in Penang continues to increase with the latest casualty being the iconic Holiday Inn Resort.

Hong Kong-based Harilela Group – via Asia Garden Sdn Bhd – announced that it will close the property which it had been operating for over four decades in Batu Ferringhi by June 30.

“As you are aware, the company has carried out extensive cost management measures since Covid-19 was declared a global pandemic on March 11.

“It has had many implications around the world with the travel, hotel and leisure sectors being particularly impacted and our hotel is no different,” Asia Garden manager Jeff Yap, said in a message to the hotel’s associates sighted by the New Straits Times.

The four-star family resort has two buildings along Penang’s tourism belt, one which faces the sea and the other across the street from it and backed by the hills.

Yap said after monitoring the market and prospects of their business, the matter was further deliberated as Malaysia moved into the Recovery Movement Control Order (RMCO) phase.

“After extensive consideration, it is with regret that we advise that our hotel will cease operations from June 30,” he said.

“This has been an extremely difficult decision for our owners who have been committed to Penang for over 40 years.

“The magnitude of this crisis has proven to be overwhelming and the continuation of business is no longer a viable proposition,” Lee added.

He ended his message without giving any indication to employees on severance entitlements or benefits.

“We thank you for your service with us and we wish you well in your future undertakings and that you stay safe in this challenging period,” he noted.

Established in 1959 and wholly-owned by the Harilela family, The Harilela Group is a private company with extensive experience in hotel development and management.

On its website, the group is said to currently own and operate some 15 properties across Hong Kong, China, the Far East, Europe and the US.

One new property in Hong Kong is said to be opening this year.

Source: NST Online

A proposed affordable landed housing development at Guar Perahu in Kubang Semang. Located on a 41.85-acres land along Jalan Guar Perahu 1, next to Taman Guar Perahu and SMK Guar Perahu. It is only about 5km from Butterworth-Kulim Expressway via Kubang Semang Interchange, less than 10 minutes drive to the famous Frog Hill (resembles Jiuzhaigou in China).

This development will be developed in 2 phases, featuring a total of 296 landed houses with hawker centre and a public park.

Phase 1: 2-storey low-cost house (128 units)
Phase 2: 1-storey terrace house (168 units)

Project is still pending for approval. More details to be available upon official launch.

Project Name: (to be confirmed)
Location : Guar Perahu, Kubang Semang
Property Type : Residential
Total Unit: 296
Built-up Area: (to be confirmed)
Indicative Price: (to be confirmed)
Developer: Adroit Consulting Engineers Sdn. Bhd.

Location Map:

Penang has reduced its minimum price threshold for foreign property ownership by up to 40% to clear RM2.6bil worth of overhang units in the state.

Penang local government, housing, town and country planning committee chairman Jagdeep Singh Deo said the revised pricing was valid for one year starting yesterday.

“For stratified properties, ceiling prices will be reduced from RM1mil to RM800,000 on the island and from RM500,000 to RM400,000 on the mainland through a 20% reduction.

“Ceiling prices for landed properties on the island will be reduced from RM3mil to RM1.8mil, a reduction of 40% and from RM1mil to RM750,000 on the mainland, a reduction of 25%.

“The decision to reduce the ceiling price of unsold properties in Penang was to clear the remaining 3,043 overhang units worth RM2.6bil and to assist the property market affected by the Covid-19 pandemic,” he said at Komtar yesterday.

An overhang unit is defined as a residential unit that is unsold for more than nine months after receiving the Certificate of Completion and Compliance (CCC).

Source: TheStar.com.my

Penang government has announced a 10 percent discount for all types of affordable housing in the state for a period of one year starting from today.

State Local Government, Housing, Town and Country Planning Committee chairman Jagdeep Singh Deo said the discount package is part of the Housing Ownership Campaign Package (Penang edition) 2020.

“Under this package, the new ceiling price for affordable homes on the island are from RM135,000 to RM270,000. Previously, it ranges from RM150,000 to RM300,000.

“In Seberang Perai, the new ceiling price is from RM135,000 to RM225,000. Previously, it was from RM150,000 to RM250,000,” he told a press conference in Komtar today.

Jagdeep also emphasised that the size of the affordable housing would remain at 850sq ft per unit.

“However, if the property developers decided not to follow the new price ceiling as instructed by the state government for affordable homes and choose to remain with the old price ceiling, they are allowed to do so but under one strict condition that they must provide a bigger size of the unit to at least 900sq ft,” he said.

For the low medium-cost (LMC) housing category, Jagdeep said the state government would maintain the housing price at RM42,000 for low-cost housing and RM72,500 for low medium-cost housing.

“This is done despite other states having raised the housing price for LMC from RM60,000 to RM100,000.

“As a matter of fact, Penang has the lowest housing price for the LMC category in the country.

“All this shows that the Penang government cares for its people and wants to assist the home buyers especially those who intend to buy affordable and LMC homes,” he added.

According to Jagdeep, until June this year, there are 105,719 units of affordable homes that have been built, being built and approved to be built.

“We will work even harder to achieve our goal of building 180,000 units of affordable homes by 2030,” Jagdeep said.

He said the state government also would set a special condition for the property developers to install more public amenities in each affordable housing.

“They include recreational space, multipurpose hall, public library, gymnasium, swimming pool, children’s playground and others.

“We will also set up a condition that the rating score of QLASSIC under the Construction Industry Development Board (CIDB) must be not less than 70%.

“This is to ensure the highest quality of the construction of affordable housing although the ceiling price has been reduced,” he added.

Jagdeep also announced the state government’s decision to reduce the ceiling prices of between 20% and 40% for foreign buyers for overhang properties in Penang for a one year period.

“For stratified properties on the island and the mainland, the new ceiling prices are RM800,000 and RM400,000 respectively. The previous ceiling price was RM1 million (island) and RM500,000 (mainland).

“For landed properties on the island and the mainland, the new ceiling prices are RM1.8 million and RM750,000 respectively. The previous ceiling price was RM3 million (island) and RM1 million (mainland).

“The decision to reduce the ceiling price of unsold properties in Penang is to clear the remaining overhang units and to assist the property market that is affected by the Covid-19 pandemic.

“As of today, Penang has 3,043 unsold properties, amounting to RM2.6 billion. An overhang unit is defined as a residential unit that is unsold for more than nine months after it has received the Certificate of Completion and Compliance (CCC),” he said.

Jagdeep said although with overhang units, Penang still managed to control the amount of unsold properties from year to year compared to other states that recorded an increase every year.

Source: Buletin Mutiara