Special Report Penang Property: Zooming in on Seberang Perai - From oil palm estate to new hot spot

FORMERLY known as Batu Kawan, this old oil palm estate used to belong to its namesake, Batu Kawan Bhd (BKB), before the state government gazetted the land under the Land Acquisition Act 1960 in 1990. Following a lengthy legal tussle, BKB was awarded RM15,000 per acre instead of the earlier RM8,167 per acre. BKB’s attempts to raise the  compensation to RM40,000 per acre was thrown out by the Federal Court in 2001 on the grounds that RM15,000 per acre was enough compensation for agriculture land with “remote potentiality” for development.

Fast forward 13 years later and this is clearly not the case. While the place remains largely swathed in oil palm trees with a few homes visible at the fringe, massive changes are in store.  These homes are part of the 3,000 units built by the Penang Development Corporation (PDC), the master developer, mostly for those affected by land acquisition and development, in addition to an international stadium, seafood restaurant, school, reservoir and the Batu Musang jetty.

For starters, PDC has earmarked 6,400 acres in Batu Kawan for a township called Bandar Cassia and has drawn up a master plan. “The development components of Bandar Cassia are housing, commercial, leisure and tourism, institutional, golf resort, theme park medical, educational centre, hotels, parks and all the infrastructure, amenities and facilities required by the investors, workers and residents under this live, work and play concept,” PDC general manager Datuk Rosli Jaafar tells City & Country.

Residential and industrial precincts will coexist. The biggest catalyst of this development is the second Penang bridge, or the Sultan Abdul Halim Mu’adzam Shah Bridge, which was opened in March. It connects Bandar Cassia with Batu Maung on the island.

“With the second Penang Bridge in place, PDC strongly believes that Bandar Cassia will grow by leaps and bounds, and the township can be  developed within 15 years,” says Rosli.

“The development of Bandar Cassia started in 1990, immediately after PDC completed the land acquisition exercise. Since then, the master plan has been updated and aligned to respond to the economic environment and changing demand.”

Due to the two rivers that separate the township from the mainland, water features are an important aspect of the development, which is obvious in the master plan. “Another important principle adopted when PDC designed Bandar Cassia is the preservation of natural features such as mangroves, hill areas and rivers,” Rosli says.

“PDC will work with the investors and businesses to enhance the value of these natural products to achieve a sustainable and balanced development. This is to ensure that these areas are developed with minimal intervention and with adequate and effective mitigation measures.”

In terms of accessibility, Bandar Cassia is a 30-minute drive along the North-South Expressway and Batu Kawan Expressway to Penang Port. It only takes 45 minutes to drive to George Town via the first Penang bridge, while the Bayan Lepas International Airport on the island is only 30 minutes away via the second Penang bridge. In addition, at the northwestern tip of the township is the Batu Musang jetty, which is used by ferries servicing Pulau Aman.

Investment catalysts

Some of the significant developments in Bandar Cassia include IKEA, Penang Designer Village, University of Hull, KDU University College and Penang International Technology Park. Also in the pipeline are an international theme park and a golf resort, while other recreational elements to enhance livability include a sports complex, water sports centre, mangrove park and wellness and spa village.

According to Rosli, KDU University College and University of Hull plan to set up schools of engineering, accountancy, law, business studies and logistics in Bandar Cassia.

“PDC is working closely with investPenang to promote the Batu Kawan Industrial Park in order to attract high-technology and skills-intensive industries to the area. Besides the industrial park, the other development components that can create more job opportunities for the people in Bandar Cassia are commercial, institutional, education and tourism,” he says.

“Penangites have waited for many years for IKEA to open for business. Penang is now proud that it has chosen Batu Kawan as its new base in the northern region. IKEA’s presence is a boost for PDC in its efforts to make Batu Kawan a more attractive place for all to live, learn, work and play.

“Another important project in the pipeline is the premium shopping centre Penang Designer Village, which will be another booster. All these will offer lots of business and leisure activities to the locals, besides attracting tourists from neighbouring states and foreign countries.”

He says PDC is expecting 250,000 people to live in Bandar Cassia. In view of this, some 50,000 homes will be built to cater for all strata of society. They include 11,800 units of affordable housing — 3,372 low-medium cost apartments and 8,428 medium-cost apartments — to be built over 15 years. According to PDC, affordable homes are priced at RM250,000 on the mainland. PDC plans to launch the first phase, comprising 149 low-medium cost apartments and 371  medium-cost apartments, this month.

For residential properties, the average density is around 50 units per acre. To cater for the targeted population, PDC aims to have up to 170 million sq ft of commercial space with an average plot ratio of 3:1 in Bandar Cassia.

“The provision of the infrastructure, amenities and public facilities is based on a population of 250,000 and 170 million sq ft of commercial floor space,” he says.

Besides residential and commercial properties, Bandar Cassia will also feature the 831-acre Batu Kawan Industrial Park (BKIP) in the south. According to Rosli, earthworks for east BKIP (436 acres) have been completed while that for west BKIP (395 acres) is being carried out.

“With a view to promote local small and medium-sized enterprises, phase one of the SME Village will be located in the BKIP,” he says.

Phase one comprises four semi-detached factory buildings, 40 terraced factory buildings and 27 factory lots. The factory buildings are under construction. Phase two, which comprises a service centre, will commence construction soon.

As Bandar Cassia is considered a greenfield site, the ground must be raised above the flooding level before development. The township will be divided into catchments with different development platform levels and land earmarked for monsoon drains to prevent floods.

PDC is now building a number of roads to improve connectivity inside and outside Bandar Cassia. The Bandar Cassia Highway will linked to the second Penang bridge via a cloverleaf flyover within the township. PDC is also building Persiaran Cassia 2 and Lingkaran Cassia Selatan, to the west of BKIP. Up for completion in the second quarter of the year are Persiaran Cassia Selatan 3 and Lingkaran Cassia Selatan.

Besides roads, Bandar Cassia will also provide footpaths and bicycle lanes as well as public transport to connect to centres of activity such as workplaces, parks, service centres  and other neighbourhoods, says Rosli.

“To enhance the connectivity of people, PDC will encourage friendly linkages of buildings through verandahs, linear parks and footpaths. In the design of roads, pedestrians and cyclists will be separated from motor vehicles.”

Bandar Cassia is currently served by 900mm water mains and a reserve reservoir with a 10 million gallon capacity.

Electricity supply to the industrial areas is currently at 33kV, but this can be upgraded to 132kV if required by the industry or development. Rosli says Tenaga Nasional Bhd has begun work on the main intake substation on a 21-acre site, which will be connected to the national grid.  This substation will supply power to Bandar Cassia at 275kV.

The township will have at least four sewage treatment plants, which will be built in modules, with an ultimate capacity of 100,000 population equivalent.


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

Special Report Penang Property: Zooming in on Seberang Perai - Developers betting on growth prospects

ABUNDANT and more affordable land as well as a large population have attracted more developers to invest in Seberang Perai. There are also more job opportunities in the mainland now as industrial businesses shift their operations there. More young adults have also moved from the island to the mainland as property prices are more affordable there.

As several major projects are set to take off in Bandar Cassia in Batu Kawan, those involved in Seberang Perai’s real estate market are expected to reap the rewards of their investments.

Developers from outside Penang have made inroads into the mainland. They include Sunway Bhd, Mah Sing Group Bhd, IJM Land Bhd, Eco World Development Group Bhd, Malton Bhd, DNP Land Sdn Bhd and Global Oriental Bhd. Meanwhile, the local players include Ivory Properties Group Bhd, Tambun Indah Land Bhd, Tah Wah Group Sdn Bhd and Asas Dunia Sdn Bhd.

According to Ivory Properties chief operating officer Goh Chin Heng, the second Penang bridge turned the mainland into a “different ball game”. He says the mainland has the longest industrial belt in the country and industrial investors are keen to invest there, shoring up demand for housing.

“With a two-car lane and a motorcycle lane on the second bridge, it will definitely bring Penang island closer to Batu Kawan, just like the case of Hong Kong Island and Tsim Sha Tsui,” he says.

Top: DNP Land’s BM Impiana township will also feature an AEON shopping mall that  is scheduled to open in June Bottom: DNP Land’s Jesselton Hills in Bukit Mertajam

Going forward, he expects Batu Kawan to be the new satellite city on the mainland, while Simpang Ampat and Juru will be the new hot spots thanks to the second Penang bridge and new catalyst projects.

“Batu Kawan has the potential to become another growth area, with retail outlets, themed shopping and leisure activities on a mega scale in one area. In the Bukit Mertajam area, Alma Town will be the popular hot spot while Butterworth, Bagan Ajam, Sungai Puyu, Teluk Air Tawar and Sungai Dua will benefit from the undersea tunnel, which is expected to be completed in 2025. In terms of value creation, homebuyers may see a 30% to 40% appreciation but this would be in a longer period compared with the island’s appreciation rate.”

Goh says the island will feature more stratified properties while landed properties will still be preferred on the mainland. Luxury condominiums on the island are priced at RM1,200 to RM1,500 psf, while affordable units are from RM600 to RM800 psf. Meanwhile, affordable condos on the mainland are priced from RM300 to RM350 psf.

“If we make a general comparison of the island and the mainland, the price of similar products of the former is 2.5 to 3 times higher than the latter. Generally, we expect the gap between the two to narrow, especially in the Batu Kawan area as it transforms into a well-planned township.”

According to Goh, the group’s key projects on the island are City Residence, City Mall, Mount Erskine, Penang Times Square and Island Resort. “We have also started the first phase of Penang World City and the remaining phases are in the planning stage.”

On the mainland, it will soon be completing the third and last phase of Aston Villa at Bukit Mertajam. Over at Bandar Cassia, the group and IKEA will be developing an IKEA store and mall on a 245-acre parcel at a cost of RM484 million.

“The main focus of the state government should be to plan and develop the infrastructure, such as the roads and drainage, well. We are glad to see that the state government is welcoming more investors to set up their businesses on the mainland, and we believe that the state will work more closely with the local planning authority to support development approvals.

“Apart from that, the state and relevant authorities should work together on solid waste solution planning as we are expecting a significant growth in the population on the mainland in the near future. The state should also continue playing its role in the development of affordable housing.”

Another company that has made inroads into the state is Mah Sing, with its acquisition of a 76.38-acre tract in Jawi, near the toll of the second Penang bridge. The land will be developed into Southbay East, a township with affordable homes to cater for the middle class. Named after the more upscale Southbay City mixed-use development in Batu Maung on the island, the township has an estimated gross development value (GDV) of RM400 million. It will comprise linked homes, linked semi-detached homes, townhouses and shops. Its first phase will likely feature terraced houses priced at about RM500,000 each, a price point that analysts feel is acceptable for the area. Southbay East will be a gated-and-guarded community with clubhouse facilities.

Notably, this is Mah Sing’s first project on the mainland and its sixth in Penang. The group had acquired the land for RM12.80 psf, which is deemed reasonable compared with similar acquisitions nearby, namely IJM Land’s acquisition of a 70-acre tract at Pekan Sungai Jawi for RM18.50 psf.

IJM Land is planning to develop a small township there, with a preliminary GDV of RM300 million to RM350 million. It already has a township on the mainland, namely Pematang Sanctuary. This upscale freehold 100-acre township mainly comprises 2-storey semi-dees and 2-storey bungalows. Prices range from RM520,000 to more than RM772,000, which translates into a GDV of about RM200 million.

Meanwhile, Eco World has a new freehold project in Bukit Tambun on the mainland. Called EcoTrees, the 58.18-acre development is located near the second link and next to the North-South Expressway. According to a spokesperson, it will have landed and strata properties, with a small mall comprising shops and offices. The first phase is targeted to be launched in 2015.

Meanwhile, DNP Land, a subsidiary of Wing Tai Malaysia Bhd, has projects coming up in Alma, Bukit Mertajam. They are the Mahkota mixed-use development, Sentinelle Ville gated-and-guarded landed luxury homes and Jesselton Hills gated-and-guarded high-end landed homes.

Mahkota will comprise 360 units of serviced apartments with built-ups of 1,156 sq ft onwards and a row of 3-storey shopoffices. The project will come up directly opposite AEON Jusco, which is scheduled to open in June. Meanwhile, Sentinelle Ville will comprise 66 units of 3-storey semi-dees with private lifts. The land areas will be from 34ft by 85ft onwards, while built-ups will be around 3,609 sq ft. Construction has just begun.

Left to right: Goh: If we make a general comparison of the island and the mainland, the price of similar products of the former is 2.5 to 3 times higher than the latter Tan: If there is a multi-national company that is coming to Penang, I can assure you that they would not set up their factory on the island

Jesselton Hills will be a 120-acre development with 800 units of 2-storey and 2½-storey semi-dees, bungalows and 2-storey superlink homes. There will be 136 units of semi-dees with built-ups of 2,478 to 2,960 sq ft and land areas of 36ft by 72ft and 39ft by 79ft onwards. Meanwhile, the 198 superlinks will have built-ups of 2,408 sq ft and land areas of 23ft by 75ft.

“You can see a paradigm shift where the population  is moving to this side and the job market [is growing]. If there is a multi-national company that is coming to Penang, I can assure you that they would not set up their factory on the island. [On the contrary], you can see the foreign directi investment really come into the area [Bukit Mertajam, which is on the mainland],” says DNP Land’s senior general manager of property division northern region K C Tan.

“Why did we choose Bukit Mertajam? Mainly because it’s an industrial park and they have done very well here. Many multi-national companies are also coming here.

“The emergence of Batu Kawan definitely inspires a lot of confidence,” he says.

Malton, on the other hand, has entered into a joint venture with landowner Batu Kawan Bhd to develop a 300-acre parcel in Batu Kawan. According to a research note by RHB Research Institute Sdn Bhd, the parcel had a potential GDV of RM3.88 billion as at June last year. The launch of phase one is scheduled for mid-2014 and will comprise shopoffices and superlink homes with a GDV of RM440 million.

Meanwhile, Sunway is developing Sunway Wellesley, an 82-acre freehold development in Bukit Mertajam. Unveiled in April last year, the first phase comprises 31 units of 3-storey shopoffices and has been fully sold. Meanwhile, phase two comprises 154 units of 3-storey townhouses, 60 units of 3-storey semi-dees, and 11 units of 3-storey shopoffices.

According to RHB Research Institute in a note dated Aug 19, 2013, Global Oriental owns 350 acres of undeveloped land in the Bandar Cassia township. The tract has an estimated GDV of RM2.3 billion. One of the more recent launches in the township is Callisia 2, which comprises terraced houses with built-ups of 22ft by 67ft. The houses are priced at RM359,000 and have been fully sold. The research report also notes that the next phase will comprise terraced houses, superlinks and semi-dees in a gated-and-guarded precinct. Indicative pricing is at RM500,000, RM555,000 and RM750,000 respectively. The note also says that Global Oriental plans to build a retail mall once Bandar Cassia’s population grows further.

Top: Bukit Tambun Bottom: Tambun Indah Land’s flagship Pearl City in Simpang Ampat

Tah Wah Group has a 130.5-acre parcel on the mainland, primarily in Bukit Mertajam, Kubang Ulu, Bagan Ajam and Kepala Batas. Meanwhile, it has launched 854 units of 3-storey terraced houses, 3-storey semi-dees, 3-storey bungalows, condos, and 2-storey and 3-storey shopoffices over the past two years. These are located in its Orange Villa, Orange Villa 2, Orange Selayang, Orange Garden and Orange Regency developments.

Tambun Indah Land, meanwhile, has ongoing projects in 101.26 acres of land in Butterworth, its flagship Pearl City in Simpang Ampat, Bukit Mertajam, and Jelutong on the island. They are Carissa Villas, Pearl Indah 3, Pearl Residence, Pearl Impian, phase one of Pearl Avenue, Capri Park, BM Residence, Straits Garden, Camellia Park and Permai Residence. Its cumulative GDV is RM971.6 million.

Its remaining projects worth RM3.8 billion are mostly in Pearl City, with the rest in Bukit Mertajam. They are Taman Bukit Residence, phase 2 of Pearl Avenue, Pearl Harmoni, Pearl Tropika, other phases of Pearl City, and Rain Tree Park 1 and 2.

According to a RHB Research Institute note on March 6, terraced houses in Pearl City have seen their values increase by 10% annually over the past six years, while semi-dees and bungalows have appreciated by 5% to 10% on average.

“This is a good indication of demand for affordable housing. We believe the house price in South Seberang Perai will continue to hold up, given the higher entry cost [namely, land cost borne] by other developers,” it said.

According to RHB Research Institute, Tambun Indah Land is eyeing 40% of buyers from Penang Island this year, up from 28% in 2009. Notably, there are also more buyers from Kedah, northern Perak and Kuala Lumpur, who have most likely been drawn by the growing job market in Penang.


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

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.

Special Report Penang Property: Zooming in on Seberang Perai - My Space: Bridge to growth

TO say that the opening of the Second Penang Bridge has injected new life into the real estate potential of Seberang Perai is an understatement.

While the ordinary property investor is still debating to what extent the area’s prospects will be boosted by the enhanced accessibility, Seberang Perai has been on the radar of astute property developers since the second bridge project was announced back in 2006.  

Naturally, interest from developers grew when work started, and it intensified with the completion of the bridge coupled with indications of the Penang government’s commitment to develop the mainland. The bridge, spanning 24km and costing RM4.5 billion, was opened to the public on March 1.

As it stands now, the landscape in the mainland is a far cry from the hustle and bustle of Penang island. A good portion of it is covered in plantations and vegetation, reminiscent of how a stretch of Jalan Damansara in Kuala Lumpur — between Bandar Utama and the junction with Jalan Kepong — used to be like in the early 1980s. A recent trip to the mainland shows that the area is still primarily agricultural, even in Batu Kawan, where one end of the second bridge sits.

Meanwhile, established and high-profile developers based outside Penang have been flocking to the mainland. So, one can expect the unveiling of interesting and creative development concepts that will spice up the market there.

Generally speaking, land prices in the mainland, although they have moved up in recent years, can still be cheaper by more than half that on the island. This would make homes in the mainland a lot more affordable and attractive, thanks to the second bridge.

Those who cannot afford to own a home on the island can now look at the mainland as an alternative. At the same time, property owners on the island looking to cash out can relocate to the mainland with a hefty bank balance to boot.

However, not everyone on the island would be willing to make the mainland their home despite the enhanced accessibility.

The appeal of the island — apart from having all the amenities city dwellers would want — lies in a unique blend of heritage, art and culture, and food. The island’s attractions have been drawing tourists in increasing numbers, both from within and outside the country, especially in recent years. Many KLites are known to own weekend homes on the island.

On the part of the state government, efforts to promote Penang island are ongoing, such as featuring Penang in a popular Chinese serials screened on Astro Wah Lai Toi.

A growing expatriate community and rising tourist arrivals, meanwhile, have led to the mushrooming of boutique hotels, quaint cafes and eateries. Some of these have, in turn, become attractions on their own.

Will such activities migrate to the mainland to take advantage of the significantly cheaper real estate costs? I don’t think so.

Here’s why. Interestingly, the value of an address is tied to how sexy it is deemed to be. A loose measure of that would be how popular the preferred address is. The location factor is important as are accessibility, amenities and the profile of residents.

Take Damansara Utama in Selangor. For a very long time, real estate values in the development remained inferior to those of its neighbour Bandar Utama, just beside it, and Taman Tun Dr Ismail, located across the road.

It has only been in the last 10 years or so, thanks to a surge in demand for landed homes, that prices in Damansara Utama have managed to narrow the gap with those of its neighbouring developments.

Property prices on Penang island, which is more established in the eyes of investors, will stay ahead of prices in the mainland. Considering the development game plan unveiled thus far by the state government, one can expect more excitement on the real estate scene, both on the island as well as the mainland.


Au Foong Yee is managing director of The Edge Communications Sdn Bhd 


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

How property is priced by the market

IN a system where income levels, savings, costs, population density, demand, supply, rents, property sizes, property condition, property usage and preferences are so different, how does a property acquire “a” price that is acceptable to a buyer and subsequently acceptable to the market?

Why does a property sell at RM1.6mil when almost everyone living there can at best afford only RM800,000 or sell at RM800-RM1,000 per sq ft when up to a short while ago the maximum was only RM350 per sq ft?

Can 350 new properties in a scheme sell at the same price as one single latest transaction of an existing property in the vicinity? Can 10 developers sell 350 new properties each based on the abovesaid one single latest transaction?

Let’s take a look over the last 30 years at how properties had been priced in the market. Subang Jaya would make a good starting point.

In 1980 when I first started working, I noted that the latest phase of the new single and double-storey terrace houses in Subang Jaya were priced at between RM90,000 and RM140,000 per unit respectively, up from their previous pricing of between RM60,000 and RM90,000 in 1979. The 1980 pricing echoed the newly revised housing loan amounts of Division 2 and Division 1 government officers. All the launched units were quickly sold with the new and huge demand. In the subsequent phases, the pricing followed the momentum of the earlier fully sold sale prices with additional premiums for time, newer design and specifications and variations in the floor and land areas.

Then in the 1990s in the condominium city of Mont’Kiara, I noted the new condominiums were priced based on the price range of the existing two-storey terrace houses in Sri Hartamas/Desa Hartamas which were no longer being built due to land shortage and high land prices. The new condominiums provided an ideal alternative for the affluent younger Malaysians who were seeking a lifestyle change. The prices were also influenced by foreign buyers who preferred a new property with security and property management services at prices and rents which they could afford.

When the number and type of foreign buyers and tenants increased, the developer started to build larger units which were priced based on the price range of semi-detached and detached houses in the neighbourhood. This was well accepted by the market as it was based on actual demand for new, secure and well managed properties by foreigners especially since there were two international schools in the vicinity.

I also noted that in pricing the newly-launched terrace houses in the mid-1990s in Bandar Utama, the prices were 10% to 20% lower than the last transacted prices of existing comparable houses in the same neighbourhood such as TTDI, Damansara Jaya and Damansara Utama. Here the rationale was that the price of the newly-launched house should reflect a discount compared to an existing property, to take into consideration the 2-year waiting period during which interest has to be paid to the bank and rents have to be paid to stay in the current accommodation. It is interesting to note that this rationale is no longer followed by developers and their marketing gurus who now price the newly-launched schemes at higher prices than the highest sale price of an equivalent existing house. The basis being, “why not” when everybody wants to invest in properties and loans are easy and cheap.

Pricing trend

Another pricing trend noted was the continuous rise in the prices of shopoffices in Bangsar and Desa Hartamas, etc. Here the price rise was directly influenced by the rentals paid for the ground floor retail units which were in high demand by food and beverage outlets. This trend continues in all the new smaller shopping complexes as well, where the food and brewerage (F&B) outlets form the largest composition of tenants. The reason they can pay higher rents is because there are a large number of people/small entrepreneurs who find this sector the easiest to enter or invest in, as the payback period is only a short 3 years and there are no barriers to entry.

The other occupiers of the shopoffices and small shopping complexes have no choice but to cough up the same rent as the F&B outlets, as they set the “tone” for the rent in that particular row of shops. As the rents rise, so will the prices as they are directly related.

Similarly, properties in areas which can be converted to a different use where new demand is being created such as showrooms, bridal studios, etc can afford a higher rent. Prices rise due to the higher rents paid. Then by way of the much misused comparison method of valuation, other properties in the vicinity also rise in price, irrespective of their current use, rent and turnover.

I note that in highly popular areas where supply of a particular type of preferred property is limited, like in Damansara Heights/Bangsar etc, the number of transactions per year is very limited as no one really wants to sell since there are no other similar alternatives to move into. Then when out of the blue, a unit here is advertised for sale (usually because the owner is migrating or just wants to test the market) a “special purchaser” will come along and easily pay 20% to 30% above the last transacted price to secure the unit. This is repeated in the next sale when the second “special purchaser” pays another 20% to 30% above the last special purchaser price.

After two such transactions, the price paid by the “special purchaser” becomes the market price and extends to all other properties which are considered comparable, such that the price is now beyond the capacity of the people who have always lived or traded in that vicinity.

The price here is based more on the price which someone living or trading elsewhere is prepared to pay. This is what is happening in Singapore, London, etc. where foreign purchasers set the price. In Malaysia this is happening in Iskandar, KLCC and Penang.

Prices are also directly influenced in the following manner. Say a typical terrace house in a locality measuring 20’ by 60’ and 20 to 30 years old, is fetching prices in the range of RM350,000 per unit. A new scheme comes up in the area where the new unit measures 24’ x 80” and is of modern quality. Here the two properties are not comparable in terms of size and quality. The new unit is priced at say twice the price of the older smaller unit (based on cost, floor area and land area) and sets a new price benchmark for that locality. Then in a matter of time, all the existing properties in the vicinity (particularly all those that have been renovated) try to adopt a similar selling price per sq ft as the new property, using the location, location, location theory, never mind that upon purchasing the older property, the new buyer has to spend a hefty sum to make it livable to modern standards.

Then there is the effect of the policies of the lending institutions on the price. The policies of the lending institution in respect of loan tenure, interest rates and the loan to value ratio directly influence the pricing of a property. During a period of high confidence, sellers can quote high prices just to test the market, but as long as the purchase of the property can be financed, the buyer is prepared to pay the higher asking price as the loan is spread over 20 to 35 years and almost 90% to 100% of the purchase price can be financed.

And all it takes is for one property to be sold and financed at the newly tested price and the new price level will then be tested even higher with the next lending institution. This is particularly true for new types of properties which the buyer and lending institution cannot compare with an existing property.

The above real examples clearly indicate how properties have been priced by the market. It is noted that despite property being a long-term investment and outlay, the market’s pricing mechanism is very short term and dynamic particularly when moving upwards. The prices being set by the market in the short term may not always equate with sustainable market values. It is a strong probability that if one blindly follows the pricing set by the market during a very short-term dynamic cycle, life can become one of endless and needless debt. - The Star

> P.B. Nehru is the managing director of City Valuers and Consultants Sdn Bhd

E&O bullish about Seri Tanjung Pinang project

EASTERN & Oriental Bhd’s unit Tanjung Pinang Development Sdn Bhd can look forward to getting the go-ahead from the Penang government for its Seri Tanjung Pinang (STP) phase two project if it complies to all the technical and regulatory requirements for the project.

In an interview at the Chief Minister’s office in Komtar recently, Penang Chief Minister Lim Guan Eng says as long as the developer complies with the conditions and requirements, the state government will grant approval.

Under a concession agreement signed in 1990 by the previous state government and the company awarded the concession to undertake the reclamation and development of the land in Tanjung Tokong in the north-east coast of Penang, there are a number of terms and conditions for the project’s approval.

“If the terms and conditions are fulfilled by the developer, the state government will have to respect the sanctity of the agreement, otherwise it will have to pay compensation to the developer for non-compliance,” Lim says.

On April 10, the Department of Environment, Ministry of Natural Resources and Environment (DOE) granted a conditional approval for the detailed environmental impact assessment study and conceptual masterplan for the proposed STP phase two.

The proposed reclamation for STP phase two involves 760 acres of man-made islands and 131 acres of the Gurney Drive foreshore that will be handed over to the state government for infrastructure development of a new expressway, a new Gurney Drive Promenade and a parallel linear park for public recreational purposes.

Given that the state’s approval is still pending and the tender process yet to commence, analysts say the proposed reclamation work for the 891 acres of the STP phase two is expected to begin only early next year.

Reclamation works are expected to take two years and the first launch assumed to commence towards the end of the reclamation works, possibly in the second half of 2016.

Responding to queries from StarBizWeek, E&O managing director Datuk Terry Tham says E&O is now proceeding to make the necessary applications as required by the relevant authorities in respect of the proposed STP phase two development plans.

Tham gave the assurance that E&O will continue to give full compliance to all regulatory requirements, as it has done with the first phase of STP.

“Going forward, E&O is fulfilling its rights and obligations as set out in the concession agreement for the reclamation of STP phase two.

“The proposed STP phase two is of significant size, hence the conditions set out by the DOE are to ensure that the project is carried out in an environmentally responsible manner, consistent with the prevailing regulatory framework,” Tham points out.

The DEIA approval is conditional upon the following terms:

·It is applicable only to the proposed reclamation of 760 acres of man-made islands and 131 acres of the Gurney Drive foreshore, and dredging activities at the “flushing channel”;

·The provisions of the Environmental Quality Act, 1974, must always be complied with;

·The proposed STP phase two must be in line with the project concept stated in the DEIA and is subject to the approval of separate environmental impact assessments by DOE for activities prescribed under the Environmental QualityOrder (Prescribed Activities) (Environmental Impact Assessment) 1987;

·The necessary approvals from the state government and relevant government departments must be obtained before the proposed STP phase two is implemented;

·The DEIA approval conditions and recommendations of the DEIA consultant must be incorporated as conditions of tender documents and contractual agreements, to be fulfilled by any contractor/subcontractor involved in the implementation of the proposed STP phase two;

·The DEIA conditional approval is valid for two years from the date of issuance; and

·All works to be undertaken in the proposed STP phase two must further comply with specific work-related requirements and specifications as set out, including reporting obligations under the relevant laws and regulations.

New lease of life

Tham says that in addition to the 60 acres on STP phase two that will be reclaimed and surrendered to the state government, E&O is also reclaiming 131 acres along Gurney Drive to be handed over to the state.

“This land is for the state government to use for the benefit of the people of Penang. A linear park along Gurney Drive has been proposed as part of the 131 acres,” he says.

E&O is not the first developer involved in the reclamation and development of the land.

The project’s history can be traced back to 1980’s, when it started off as a joint venture between Permaijana Ribu (M) Sdn Bhd (owned by UEM Bhd, Penang Bumiputera Foundation and Magma Bhd) and Koperasi Gabungan Negeri Pulau Pinang and Penang Development Corp.

The original project proponent faced a challenging start and reclamation works were twice abandoned due largely to the Asian financial crisis.

In 1992, Tanjung Pinang Development Sdn Bhd was granted the concession to undertake the project. The reclamation of Seri Tanjung Pinang phase 1 commenced in 1997 (not by E&O). Within the same year, works were suspended due to the Asian financial crisis. In 1999, reclamation resumed only to halt again in 2000. The project was left idle for the next three years.

E&O came on board in 2003 to revive the existing but abandoned project, and Tanjung Pinang Development became a subsidiary of E&O. The project is now known as the masterplanned seafront development Seri Tanjung Pinang by E&O.

Reclamation for STP phase one comprising 239 acres was completed in 2005, and within the same year the first homes were launched. To-date, about 2,500 housing units have been completed at Seri Tanjung Pinang worth an estimated gross development value (GDV) of RM4bil.

In 2011, the Penang government granted in-principal approval to reclaim the proposed STP phase two. The second phase is expected to generate some RM25bil in GDV.

The project had been incorporated as part of the National Physical Plan 2007-2020 as well as the Penang State Structure Plan 2020.

During the interview with the Chief Minister on Penang’s development, Lim gave the assurance that the state government will ensure a holistic and balanced development model for the state, and one that is not too commercial.

“For example, we will preserve landmark historical and heritage sites, like the Penang Esplanade, and will not allow the development of this landmark historical site for commercial purposes,” Lim says.

The founder of Penang, Captain Francis Light, a former Royal Navy midshipman and trader, who founded Penang in 1786, had landed on a point somewhere at the Esplanade. The Esplanade, which can be regarded as the growth centre from which Georgetown developed and expanded, is today an important venue for many of Penang’s important events, including the Merdeka Parade on August 31.

The state’s efforts to preserve the heritage, cultural and historical sites will be in line with the 2008 inscription of the inner city of Georgetown as a Unesco World Heritage Site.

With the right concerted efforts between the state and industry players to ensure a proper balance between the built and unbuilt environment for Penang, and an integration of the old world charms with new neighbourhoods like Seri Tanjung Pinang, Penang will be assured of a place among the handful of well-regarded liveable international cities of the world. - The Star

No surprises in property report

PROPERTY experts say the findings of the Property Market Report 2013, released last week by the National Property Information Centre, came as no surprise, with the various cooling measures having their intended effect of curbing speculation and excessive price growth.

Less certain is whether demand will recover in earnest during the second half of this year, in what some expect to be a “pre-GST boom”.

CEO-Agency of property consultancy PPC International Sdn Bhd Siva Shanker tells StarBizWeek that he sees buyers making a beeline to snap up property in the two quarters prior to April 2015, when the GST takes effect at an initial rate of 6%.

Shanker, who is also president of the Malaysian Institute of Estate Agents, does not believe Malaysia will follow the example of Australia, where prices soared and then tumbled pre- and post-GST back in 2000.

“In Malaysia, what goes up does not come down. I think our property prices will rise ahead of GST and find their level there,” he says.

According to the Property Market Report 2013, volumes shrank 10.9% to 381,130 transactions but their value rose a marginal 6.7% to RM152.37bil from RM142.84bil in 2012, indicating that prices gained strength despite a raft of measures designed to rein in speculation, including a ban on interest-bearing schemes and a higher real property gains tax.

“Most people say 2014 and 2015 will be tough years for the property market. A slowdown usually lasts for two years.

“But looking at the report, my view is that 2013 and 2014 are the slowdown years. I expect the market to normalise in 2015 and make a full recovery in 2016 and 2017,” Shanker remarks.

“This year’s volumes will probably be flat, but prices are not likely to go down.”

As in the past, the report showed that the residential market dominated close to two-thirds of all transactions.

Approvals for housing loans, however, fell sharply compared with an expansion the year before. Total loans disbursed for the purchase of residential properties rose to RM74.4bil from RM64.1bil.

The report says construction activity stayed solid, backed by high-rise and high-end properties in the Klang Valley, Penang and Johor. The shop and industrial segments also saw higher starts and building plan approvals in 2013.

The occupancy rate for retail and office space remained firm, buoyed by a moderate increase in new supply, as well as fewer starts and new planned supply.

But the market showed evidence of softening across the board. All sectors posted reductions in transaction activity, led by commercial and industrial properties.

Most states fared worse save for Johor and Perlis, which recorded high single-digit improvements.

Five states experienced double-digit contraction in activity, with Putrajaya, KL and Kelantan topping the list.

According to the report, residential properties saw improved sales of new launches and more housing starts and completions, which helped pare down the number of “overhang” properties.

The all house price index jumped to 192.9 points against 172.8 points the year before. Average prices rose 10% to RM266,304 from RM241,591.

In terms of volume, most states posted a downturn except for Johor, which expanded 16.6%.

In value terms, all major states saw growth except for Kuala Lumpur, which declined by 9.7%. Johor was most improved with 63.2% growth, while Selangor recorded 2.8% growth and Pulau Pinang, zero growth.

Houses priced between RM250,000 and RM500,000 were the most popular, capturing 27.3% of all transactions, while demand for those in the low-cost RM100,000-RM200,000 category weakened.

Terraced houses made up the largest share of residential transactions, with Selangor, Johor and Perak contributing to more than half of the market share, followed by condominium and apartment units, most of them being transactions in Selangor and Kuala Lumpur.

The number of new launches fell last year after three straight years of growth to 48,290 units from 57,162 units in 2012, even as their take-up receded to 45.1% against 47.7%.

Kuala Lumpur, Selangor and Perak topped the list of new launches, commanding 57.4% of the national total.

From a price standpoint, the Kuala Lumpur market continued to be resilient. The report reveals that single-storey terraced homes at Bukit Bandaraya and Lucky Garden, both in Bangsar, saw 25.3% and 11.4% growth, respectively, pushing the value of a unit to upwards of RM1mil.

Spurred by the MRT factor, homes in Taman Bukit Anggerik and Salak South Garden posted 17.2% and 17.8% growth, while double-storey terraced units in Kepong’s Desa Park City ranged between RM1.31mil and RM2.48mil.

The report highlights that select condominiums in Kuala Lumpur, such as Bangsar Puteri, OBD Garden Tower and Casa Vista experienced growth of over 20%.

A downtrend was seen in Mont’Kiara Damai and Tijani 2, however, as prices tumbled by 5.7% and 12.4%, respectively.

Home prices also stayed firm in Selangor, but Johor’s landed residential segment jumped by double-digits in certain areas, particularly Johor Baru.

Condominium pricing in Johor Baru remained competitive, with the highest transacted price being RM500,000 per unit in Taman Pelangi. On average, units were priced between RM150,000 and RM350,000.

Up north in Pulau Pinang, residential properties were stable as the limited number of terraced houses on the island boosted demand for the Timur Laut and Barat Daya districts.

While Iskandar Malaysia was clearly a boon for Johor, CH Williams, Talhar & Wong managing director Foo Gee Jen says he is concerned if that performance is sustainable.

The veteran property consultant also expects a pre-GST rush for property.

“Buyers are concerned that prices will go up. If you are looking at a piece of property, now is the time to lock in your purchase,” he quips.

In Foo’s estimation, residential property could experience an 8%-10% jump in price after GST, and the landed segment a stronger 10%-15%.

“There is no oversupply in landed homes, but I can’t say the same for condominiums, especially the Soho (small office home office) or Sovo (small office versatile office) types.”

Kim Realty CEO Vincent Ng tells StarBizWeek that demand in the primary market remains firm and will likely continue apace unless interest rates go up.

“The primary market may gain traction in the second half as developers have been holding back on launches. Those with unsold stock will want to unload them before GST,” he points out.

“I don’t think prices will be cut drastically, but developers will make it attractive for buyers.”

Nonetheless, Ng acknowledges that the banks have tightened the screws on mortgages, leading to a mass of loan rejections.

“From what I understand, 30%-50% of the people who have put in deposits have had their loan applications denied for various reasons,” says Ng.

“The damage has already been done. More cooling measures will kill the market,” says another property agent. - The Star