Penang expected to face a glut in high-end homes

By David Tan

28,000 of 48,000 planned new homes are high-end; 40% of middle-income earners cannot afford them

Penang is heading towards an oversupply of higher-end residential properties, which could lead to a correction of property prices.

Raine & Horne Malaysia director Michael Geh said pricing correction would happen when more high-end properties entered the market.

“The price correction is welcome as more than 76% of the urban population earn less than RM5,000 per month and definitely cannot afford to purchase their own homes in Penang,” he said.

CA Lim & Co principal Lim Chien Aun said with the entry of the planned high-end units into the market, there would be downward pressure on property prices.

“Who will purchase these units? Some 40% of the Penang middle-income population cannot afford them,” he said.

The bulk of incoming (properties undergoing construction) and planned property supply (properties with approved building plans) of residential properties in the state is beyond the means of the middle-income group.

In total, there are 55,579 units of incoming and planned supply properties which are in the high-end category.

The latest National Property Information Centre (Napic) report shows that 28,000 of the 48,076 units of incoming supply residential properties comprise higher-end properties of two and three-storey terraced, semi-detached, detached properties, service apartments and condominiums, while the remaining 20,076 units are in the lower-end category where the pricing is around RM200,000 and below.

Even in the sub-sales market, the prices are between RM500 and RM800 psf in the northeast, and RM450 and RM750 psf in the southwest, according to Raine & Horne.Some 10,024 units are on the island, of which 4,657 units are in the northeast district, where property prices range from RM800 per sq ft (psf) to RM1,200 psf, and another 5,367 units are in the southwest district.

Sky homes: Penang island is dotted with many high-rise buildings.

The remaining 17,976 units are in Seberang Prai, where property prices are between RM200 psf and RM390 psf, while the sub-sales prices range from RM150 psf to RM360 psf, depending on whether the property is a condominium or landed, according to Henry Butcher Seberang Prai.

The Napic report also says the planned supply comprises 46,610 units of residential properties, of which 27,579 are two and three-storey terrace, semidetached and detached properties, service apartments and condominiums, while the remaining 19,031 are in the lower category.

Penang Institute urban studies head Stuart Macdonald said there was an oversupply of high-end properties in Penang.

“Our analysis shows there is a greater need for properties priced between RM130,000 and RM245,000.

“The state and the federal governments are planning some 40,000 units of affordable properties priced from RM75,000 to RM380,000. However these projects will be delivered only between 2015 and 2020.

“Forty per cent of the Penang population, the middle-income category, earns between RM3,500 and RM7,100 monthly. Given the new banking loan guidelines which take into account nett income and other commitments, assuming around 20% of income is allocated for settling non-housing debts, this middle-income group may be eligible only to take mortgages of up to RM245,000 with a 10% deposit,” Macdonald said.

He said about half of the planned property supply from the private sector of 46,610 (from Napic) would come into the Penang market in the next couple of years, while the remainder would come in six to seven years. - The Star