Special Report Penang Property: Zooming in on Seberang Perai - Tapping the mainland’s potential

THE first thing that strikes you when you arrive in Batu Kawan in mainland Penang using the newly opened second bridge is how bare the area is. Plantations and trees flank most stretches of the road running through the town and there are few cars and some houses. Several cleared tracts ready for development can also be seen.

Traffic picks up and more houses and shops appear as you head further inland but it is a far cry from the bustling, congested and more developed island of Penang.

The island has been the state government’s focus for development over the past few decades and it has grown rapidly. Today, it is regarded as one of the most livable cities in the country and a popular tourist destination. Its property market has also thrived, becoming one of the most vibrant in Malaysia.

Be that as it may, the mainland, which is known as Seberang Perai, has been steadily generating a buzz with its growth potential since the announcement of the second bridge in the Ninth Malaysia Plan in 2006. The excitement has intensified with the opening of the bridge, particularly in the 6,400-acre Batu Kawan where the bridge’s exit is located.

The PDC has several high-impact projects in the works in the largely undeveloped Batu Kawan

Seberang Perai, which is split into North, Central and South, is about three times the size of the island and as at 2010, it was home to 818,197 people compared with 708,127 on the island. Some of the towns in the North are Butterworth, Kepala Batas and Bagan Dalam while Alma in Bukit Mertajam and Juru are in Central Seberang Perai. Batu Kawan, Valdor and Bukit Tambum in the South.

Central Seberang Prai is the most mature of the three districts while the South is the least, says Michael Geh, director at Raine & Horne International Zaki + Partners.

But things are changing in the South. “Developers have started buying land there, infrastructure is being developed and major projects are being built,” he says, adding that the stimulus has been the opening of the second bridge.

“The land has always been there, but prior to the bridge, there was no reason to develop it.”

Geh feels, however, that while the opening of the second bridge has spurred interest in the South, this district will take time to grow.

“I keep hearing non-Penangites talking about how exciting places like Batu Kawan are now that the second bridge is open. Such perception … will drive development … but it will not be instantaneous.”

While much work needs to be done, Seberang Perai has several factors working in its favour. The state government, via relevant agencies, has in recent years started rolling out plans to boost the growth of Batu Kawan, including high-impact projects such as the Penang Designer Village, Swedish furniture giant IKEA’s new store, a golf resort, a theme park and a university town. These, coupled with the scarcity of land and high property prices on the island, and ample undeveloped land in the mainland can make Batu Kawan an appealing and cheaper alternative for homebuyers.

Ample cheap land

The mainland has vast tracts of agricultural land for the palm oil, coconut and poultry industries, which in turn create demand for factories and houses, says Tan Chai Liang, director at Izrin & Tan Properties Sdn Bhd.

“With the opening of the second bridge, the mainland’s property market is set to grow. This is partly because development land is scarce on the island while the prices are high. Other factors are an increase in new industrial set-ups and the inflow of investment into the mainland, particularly South Seberang Perai.”

Goh Chin Heng, chief operating officer of Ivory Properties Group Bhd, notes that Seberang Perai has the longest industrial belt in the country and after taking into account the above factors, he believes more industrial players will invest in the mainland. “This will create huge demand for housing, especially in the South.”

According to Datuk Jerry Chan, Penang branch chairman of the Real Estate and Housing Developers’ Association Malaysia (Rehda) and managing director of Asas Dunia Bhd, the price of land in the mainland is about a quarter of that on the island. “The price of prime land for housing on the island ranges from RM800 to over RM1,000 psf while on the mainland, it is difficult to push prices past RM100 psf,” he says.

Geh notes that in general, land prices have increased by about 15% per year over the past five years while Tan believes the highest increase in land prices has been in South Seberang Perai. Nevertheless, land here is still inexpensive compared with that in the more established towns of Butterworth, Seberang Jaya and Bukit Mertajam.

Chan, meanwhile, opines that high prices and the scarcity of land on the island will push more developers and industrial companies towards the mainland.

“You can see far greater industrial expansion on the mainland. It’s not because people are naturally opting for the mainland. It’s because of the shortage of industrial land and land in general on the island. More factories mean more jobs and people go where the jobs are.”

From left to right: Geh: The land has always been there, but prior to the bridge, there was no reason to develop it Tan: Houses in the range of RM250,000 to RM500,000 will remain the popular choice for mainland residents Chan: What you can build on the island and Seberang Perai are two different things

Emerging growth corridors 

The areas that will benefit most from the opening of the second bridge are those closest to it, says Peh Seng Yee, director at CH Talhar Williams (WTW) Penang.

“In the South, we are looking at Batu Kawan, Bukit Tambun and areas along the old trunk road, such as Simpang Ampat, Jawi, Sungai Bakap and Nibong Tebal. These areas are the closest to the second bridge. In the North, Bertam, which has ample land, will see growth.”

Tay Tham, director of Knight Frank Penang, concurs. He adds Alma in Bukit Mertajam to the list of potential hot spots while Shanmughananthan Jeevan Muniandy, managing director of Sri Shan Realty Sdn Bhd, picks Nibong Tebal, Sungai Bakap, Valdor and Simpang Ampat because the price of land in these areas is below RM15 psf.

“The new growth corridor of Batu Kawan-Valdor will become the new property hot spot. Agricultural land with improved accessibility is likely to see its value increase manifold in the long term, but it will depend on the zoning, location, frontage, provision of infrastructure and amenities in the surrounding areas,” says Tan.

Big developers from the Klang Valley have begun to notice the mainland’s potential. Last year, Mah Sing Group Bhd acquired 76.38 acres of freehold land in Jawi for RM12.80 psf; Eco World Development Group Bhd acquired a 60-acre tract near Simpang Ampat for about RM30 psf; and IJM Land acquired a 70-acre tract in Jawi for RM56 million in 2013.

Over in Bukit Mertajam and Bukit Minyak, DNP Land Sdn Bhd (a subsidiary of Wing Tai Malaysia Bhd) has a total landbank of 270 acres with an estimated gross development value (GDV) of RM1.8 billion and Sunway Bhd has its 82-acre mixed-use development Sunway Wellesley.

Penang-based Tambun Indah Land Bhd, which developed the RM2.7 billion Pearl City in Simpang Ampat, has eight acres in Bukit Mertajam with an estimated GDV of RM63.7 million. Tambun Indah has a remaining landbank of 584.56 acres in Pearl City with a GDV of RM3.8 billion. In Valdor, Asas Dunia has a landbank of 1,000 acres.

The area that has garnered the most interest is Batu Kawan, previously an oil palm plantation owned by Batu Kawan Bhd and later acquired by the Penang government in 1990.

The Penang Development Corporation (PDC), which has been tasked with the development of Bandar Cassia in Batu Kawan,  and has its master plan to turn Bandar Cassia into an eco-city. PDC is a state government agency set up to spearhead Penang’s social-economic development.

The PDC has several high-impact projects in the works that are aimed at boosting growth in Batu Kawan. In August last year, it called for a request for proposal (RFP) to buy 190ha in its Bandar Cassia township. Of the 190ha, 87 are designated for a theme park while 60 are for a golf resort. Eco World Development Group Bhd is considered a forerunner to win the bid, which is expected to open at RM45 psf.

Two months later, PDC signed a purchase and development agreement with PE Land Sdn Bhd to construct the RM1 billion Penang Designer Village. PE Land is part of Pan Sarawak Group, which owns and operates The Spring shopping mall in Kuching, Sarawak.

The development, the land premium of which is RM37.94 psf, comprises a shopping mall offering discounted products from luxury brands, a 300-room hotel, several F&B outlets, a landscaped garden and residential units. It is due for completion in three years.

In January this year, it was announced that IKEA will set up a store in Batu Kawan. Ivory Properties Group Bhd and Aspen Vision Development Sdn Bhd have set up a special purpose vehicle — Aspen Vision Land Sdn Bhd (AVL) — to work with IKEA on planning the new township with AVL holding a 49% stake and IKEA 51%. The total cost of the 245-acre tract is RM484 million.

According to Goh Chin Heng, Ivory Properties’ chief operating officer, AVL has signed a joint-venture agreement with Ikano Pte Ltd to develop the IKEA store (100% owned by the Swedish company) on 20 acres; the IKEA mall (70% IKEA; 30% AVL) on 55 acres; and a mixed-use development (20% IKEA; 80% AVL) on 170 acres.

Just last month, Paramount Corp Bhd acquired a 30-acre tract in Bandar Cassia from the PDC for RM65.55 million. The institutional tract was transacted at RM40.50 psf and the development land at RM55 psf. The tract is slated for a university metropolis that will be anchored by Paramount’s KDU Penang and an integrated development.

Malton Bhd has 300 acres in Batu Kawan that are slated for a mixed-use development with an estimated GDV of RM3.88 billion. Phase 1, said to comprise shopoffices and superlink homes, is targeted for launch in the middle of this year.

Also in Batu Kawan, Global Oriental Bhd has a remaining landbank of 350 acres in Bandar Cassia meant for a residential development with a GDV of RM2.3 billion.

Goh says Batu Kawan will be the next satellite city in the mainland while the other upcoming hot spots are Simpang Ampat and Juru due to their close proximity to Batu Kawan.

“Batu Kawan has the potential to become something that has never happened in Penang before — a town where retail outlets, theme parks and leisure activities are all in one place on a mega scale. Another hot spot will be Alma in Bukit Mertajam and in Butterworth, you have Bagan Ajam, Sungai Puyu, Teluk Air Tawar and Sungai Dua after the proposed undersea tunnel is completed in 2025. In terms of value creation, I think buyers can expect an appreciation rate of 30% to 40% but this would be in a longer period compared with the island’s appreciation rate.”

Locations in the mainland will not be the only beneficiaries: property experts have singled out Batu Maung and Balik Pulau on the island. The second bridge starts at Batu Maung, where Mah Sing’s 88-acre Southbay township is located.

Penang-based developer MTT Properties & Development Sdn Bhd has a 300-acre township - Botanica.CT - in Balik Pulau. MTT Properties & Development is the property arm of MTT & Priority Group of Companies.

Balik Pulau, in particular, would be a good choice for those who want to live on the island, but cannot afford the prices in George Town, says Geh.

“The prices of houses in Balik Pulau are about 50% of those in George Town. Many of our buyers are young professionals working in the Free Trade Zone (FTZ) in Bayan Lepas as the distance from Balik Pulau to the FTZ is shorter than if you were living in George Town,” says Angela Teoh, group executive director of MTT.

In fact, says Geh, most people would be happy to live in Balik Pulau instead of Batu Kawan or Bukit Tambun as most prefer to stay on the island where there are more activities and amenities.

Says Teoh, “Having an address in the mainland is not the same as having an address on the island. So, if Batu Kawan is developed with a strong industrial base, I’m sure those who work there will want to live in Balik Pulau.”

A market for home occupiers

The property market in the mainland is traditionally meant for home occupiers, says Geh.

“It’s not for investment or buying a property as a second home. People will buy a home in the mainland first and a second home on the island. I don’t see a reversal of this trend in the future. The mainland will remain a home-occupier market.

“People who move from the island to the mainland are mostly those who want landed property. I personally know people who sell their apartments on the island to buy a comfortable semi-detached house in the mainland,” says Geh.

Landed homes make up the bulk of properties in the mainland as they are still the residence of choice for most Malaysians, especially where land is ample.

The 300-acre township Botanica.CT is being developed by MTT Properties & Development

“The island has more high-end products and prices of landed properties are almost more than double those in the mainland,” says Tay.

“If you were to buy a terraced house in Sungai Ara on the island, it will cost you at least RM800,000. To be able to afford that price, you will need a net income of RM10,000 and obtain a 90% loan with a 35-year tenure. How many people, especially the young, can afford that?” asks Teh Kiak Seng, managing director of Tambun Indah.

Citing Tambun Indah’s Pearl City as an example, Teh says a terraced house in a gated area costs about RM410,000 while a similar house in a non-gated area is about RM370,000.

Geh says property prices have increased over the past five years — around 5% year on year on both the primary and secondary markets. “It has been a steady rise with the secondary market accounting for most of the transactions.”

The upside in Seberang Perai is greater because of the lower land prices, which translate into cheaper houses, says Rehda’s Chan.

“However, I can’t say if the price gap between Seberang Perai and the island is narrowing as we don’t have much to compare with at the moment. What you can build on the island and Seberang Perai are two different things.”

Tan believes the price disparity between the island and the mainland will remain. “The island will become the choice residential area for the wealthy and higher-income group while the middle and lower-income group will opt for more affordable houses in the mainland.

“Affordable landed homes with security services in a modern township complete with amenities and facilities are safer bets to appreciate over time. Houses in the range of RM250,000 to RM500,000 will remain the popular choice for mainland residents.”

Tan also notes that for the price of a condominium of below 850 sq ft on the island (RM400,000 to RM500,000), buyers can own a landed home in the mainland.

According to Teh, there is already an increasing number of buyers from the island. “Last year, some 37% of our purchasers were from the island and the year before that, it was about 20%. This year, we foresee an increase to 40%. More and more people from the island are buying homes in the mainland, especially young couples and professionals because they have no choice.”

Tan and Peh believe that this trend will continue because of affordability, the potential for long-term growth and price appreciation, and the increased accessibility via the two bridges.

While Shanmughananthan agrees that this trend will continue for some time, he believes younger buyers, in particular graduates, will eventually buy properties on the island when they have more money. “The island simply has more to offer and is a more prominent address.”

Room for improvement

While the mainland has growth potential, there is still a reluctance to live there. Rehda’s Chan says much of this can be attributed to the state government’s lack of focus on the mainland.

A commercial and housing part of Butterworth

“We have the same government, but you can see how different the island and mainland are. The island is cleaner and much better developed. The same kind of effort has not been put into the mainland for a long time. So, are we going to finally see the ugly duckling turn into a swan?” he asks.

“On the island, people are complaining about the congestion and high property prices. I’d tell them, here’s an alternative, why don’t you buy a house in the mainland instead? It’s cheaper, it’s not as congested and for the same amount you pay for a small apartment on the island, you can get a nice landed property.

“If I were the government, the first thing I would do is even things out in the mainland. There is much room for improvement.”

Knight Frank’s Tay believes many Penangites on the island are reluctant to move to the mainland because of the good living environment on the island with its array of eateries and shopping centres. It’s easier to get around there and there are fewer foreign workers.

“The heavy industrial sites are mainly in the mainland, so there’s much more noise and pollution,” he says.

“The island is more vibrant and it is well known as a tourist destination. When people say they want to go to Penang, what they mean is the island. The mainland has its strengths too — less congestion and more affordable housing — but you have to create appeal and make it a more desirable place to live,” says Peh.

Geh feels that the state government should lead the charge in developing the mainland. “The government should be the catalyst to get the ball rolling, which it has started to do on its land [Batu Kawan]. Now [it should focus on] the rest of the mainland.”

Chan says the first thing the state government needs to do is to make the mainland as livable as the island.

“George Town is one of the more livable cities in the region, but what about the mainland? You should aspire to be the best, but you should strive to be the best across the board, not just in one area. If you look at Singapore, whatever they do and aim for is across the board.”

All the consultants agree that infrastructure and public transport need to be looked into.

“Infrastructure and public transport are insufficient. The mainland is a vast area with a lower population density than the island. Priority has always been on the island’s public transport due to tourism,” says Tan.

Tay concurs, noting that at present, the number of buses and taxis in the mainland is insufficient.

“The infrastructure bottleneck in Batu Kawan is a key concern as the existing trunk roads are unable to cope with the sudden influx of vehicles and need upgrading. There is also a need to have new links to Batu Kawan as well as the smaller towns of Sungai Bakap, Jawi, Simpang Ampat and Nibong Tebal to cater for increased investment and industrial activities,” says Tan.

According to the Seberang Perai Municipal Council (MPSP), based on a study before the completion of the second bridge, about 20% to 30% of the traffic from the first bridge was expected to move to the second bridge.

“As the second bridge was opened not long ago, traffic census and traffic flow patterns on the second bridge and in the vicinity of Batu Kawan have yet to be fully identified. However, based on our monitoring, an increasing number of vehicles is passing through Jalan Bukit Tambun and Bandar Cassis since the second bridge opened,” says an MPSP spokesman.

MPSP agrees that there is a need to improve the infrastructure and public transport, and several projects have been put in place towards this end in the Penang Master Plan 2013-2030. They include road widening and upgrading exercises costing more than RM1.2 billion; a bus rapid transit system from Butterworth to George Town and in the South’s corridors; and an extension of park and ride facilities.

Other than livability, infrastructure and public transport, Tan and Tam feel that there is a need to have better zoning and planning for industrial, residential and commercial developments.

“The state government should expedite the implementation of the local plan for South Seberang Perai and unveil the master zoning plan for Batu Kawan to ensure more transparent and coordinated planning and development strategies. At the end of the day, equal focus should be given to the mainland to promote balanced and sustainable development within Penang,” says Tan.

With careful planning, coordination and implementation, the mainland has a bright future and one that is a long time coming.


This article first appeared in The Edge Malaysia Weekly, on April 21 - 27, 2014.