City & Country: Prices to remain stable until year-end

LOAN applications that were not approved frustrated buyers and sellers of homes in Penang during the last quarter, according to Raine & Horne International Zaki + Partners director Michael Geh.

"The government and Bank Negara Malaysia's initiatives [to curb speculation in the property market] have met their objectives as far as Penang is concerned," he says. "Speculators don't go out to play anymore and have stopped snapping up houses. Real first-time homebuyers, however, are still suffering," Geh says in presenting The Edge/Raine & Horne International Zaki + Partners Penang Housing Property Monitor for 2Q2013.

He says the banking sector should be more "gentle" to genuine first-time buyers while Bank Negara should consider granting them some concessions.

Geh admits that identifying first-time homebuyers is not a straightforward task, but says if nothing is done, they will not be able to buy their own homes.

While some have pointed to the PR1MA programme as one solution, Geh says there are no such schemes in Penang island or on the mainland yet.

Meanwhile, there is a proposal for an inner city electric tram system in George Town, supported by a bus dispersal system. Whether or not this will take off is not known as the project is still in the discussion stages. "I see a trend where you will find more pedestrian and cyclist-friendly streets," Geh says.

There is also no update on the federal government's proposed monorail for the island.

As for the Second Penang Bridge, it will be opened in October instead of September as originally scheduled due to the collapse of one of the ramps on the island in June.

Geh believes the opening of the bridge will have a positive effect on the state's housing market.

"When the second bridge is fully operational, it will lift up tremendously property prices in Butterworth, Batu Kawan and the suburbs surrounding Batu Kawan, Juru and Nibong Tebal on the mainland by as much as 30% to 40%.

A view of Penang … the opening of the second bridge may have a positive effect on the state’s housing market

"On the island, the second bridge is near to the first bridge so there won't be a big change in property prices. However, it will significantly impact new areas in Batu Maung, Teluk Kumbar, Teluk Tempoyak and areas southeast of the island as it will bring more development there," Geh explains.

Currently, that part of the island is relatively under-developed while on the Butterworth side, properties are underpriced, he notes.

On the flipside, the rental market has been thriving over the past six months. "As it is tough to buy houses, many are extending the tenancy of rented properties," Geh says. "There is also new stock in the market that can't be sold so these will be rented out. So, rents will not rise because there are many properties to choose from."

Overall, he says, property prices will remain stable for the rest of the year.

1-storey terraced houses
Prices for this property type generally rose q-o-q and y-o-y except in a few areas. Houses in Tanjung Bungah achieved a 25% increase to RM750,000 from RM600,000 in the previous quarter. Other areas that did well included Sungai Dua and Sungai Ara homes (both by 10%). The same house type in Tanjung Bungah increased 87.5% from RM400,000 in the previous year, followed by Bandar Bayan Baru at 40.63%.

"The significant rise in the price is due to the lack of supply for this type of property," says Geh. "We noted that there is no longer new incoming supply of 1-storey terraced houses on Penang Island. Most developers are building 2 and 3-storey terraced houses to maximise GDV as 1-storey terraced houses fetch a lower selling price.

"Tanjung Bungah is located between Tanjung Tokong, Seri Tanjung Pinang and Batu Ferringi, and is one of the property hot spots on the island.

"Bayan Baru is near the Bayan Lepas Industrial Zone, and is a favourite with factory workers," he says.

"Although most of the existing 1-storey terraced houses are old leasehold properties, they are more affordable than new properties. For example, in Bayan Baru, a condominium unit is priced at around RM400,000 to RM600,000, but you can own a landed property for RM450,000. Less supply and high demand is what makes the prices go up."

2-storey terraced houses
Two-storey terraced houses in Pulau Tikus achieved 15.79% price growth from the previous quarter to RM1.1 million from RM950,000. The area also led in price y-o-y, rising 29.41% from RM850,000.

"Pulau Tikus is a high-end residential area nearest to the George Town city centre," Geh says. "Most of the properties comprise of 2-storey terraced houses, 2-storey semi-detached houses and bungalows. The 2-storey terraced houses are more affordable than other property types in the area, which resulted in positive price growth."

2-storey semi-detached houses
This property type showed modest price growth from the last quarter. Compared with a year ago, however, there was a significant increase. Houses in Sungai Dua rose 18.18% from the last quarter to RM1.3 million from RM1.1 million. Y-o-y, prices grew 85.71%, from RM700,000.

The prices of homes in Island Park, Green Lane, rose 52.73% to RM1.68 million, from RM1.1 million a year ago.

"Many of the 2-storey semi-detached houses are located on the main road and have potential for commercial use, which contributed to the rise in prices," Geh says. "For example, some 2-storey semi-detached houses on Island Park, along Jalan Masjid Negeri and Jalan Delima, and along Jalan Sungai Dua in Sungai Dua, have been converted into car showrooms, furniture showrooms and offices," Geh says.

2-storey detached houses
All houses in this property type showed positive price growth. Houses in Tanjung Tokong rose the highest at 59.09% to RM3.5 million, from RM2.2 million in the last quarter. Y-o-y, prices rose 118.75% from RM1.6 million. Homes in Tanjung Bungah increased 105.88% to RM3.5 million from RM1.7 million a year ago.

"Tanjung Tokong and Tanjung Bungah are high-end residential areas located near Seri Tanjung Pinang and Gurney Drive, which offers mainly new luxury condominiums priced at a few million," Geh says. "As a result, homebuyers may opt to buy a landed villa with a similar price."

Standard 3-bedroom flats
All flats showed modest gains with those in Bandar Baru Air Itam and Paya Terubong rising 15.38% each from the last quarter to RM150,000 from RM130,000.

"These areas are congested with many low-cost and low-medium-cost flats, which do not allow much room for appreciation," Geh points out.

Y-o-y, the biggest gainers were flats in Green Lane that rose 40% to RM350,000 from RM200,000. Geh says Green Lane is doing better than other areas as most of the flats are medium cost and demand is high for this type of property.

Standard 3-bedroom condominiums
Pulau Tikus condo units achieved a price growth of 16.22% from the previous quarter while other areas registered steady growth.

"As Pulau Tikus is a high-end residential area that is nearest to the George Town city centre, the supply of affordable apartments or condo units are limited, so this area will perform well consistently," Geh says.

Previously, the property monitor had taken Cantonment Road to represent condominium prices within Pulau Tikus. However, as condo prices in Cantonment Road can start from RM800,000, they do not reflect the average price in the area.

Thus, the monitor will now look at Pulau Tikus as the area of focus rather than Cantonment Road specifically.

Prices of condos in perennial favourite Batu Ferringhi rose 40% to RM350,000 from RM250,000.

"Batu Ferringhi is a tourism hot spot where the most number of foreigners stay," says Geh. "It is also a more affordable place for high-rise sea view properties on the northern side of the island compared with Seri Tanjung Pinang and Gurney Drive."

This article first appeared in The Edge Malaysia Weekly, on October 7, 2013.