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.”
The last few years have seen young professionals struggle to own property. Now with rising house prices and a shorter home loan repayment period, some say it has become an impossible struggle.
WANTING and actually being able to afford your own place are two very different things.
With the oversupply of high-end condominiums shadowing the property market, fresh graduates and young professionals may have to either send out an SOS to their parents for cash or live at home because having “my own space” just got a little tougher.
Fresh graduate K.T.S. Chua, 23, who recently took out a RM30,000 personal loan to start a hotdog business, is relieved at narrowly missing the July new personal loan cap ruling but the shorter home loan repayment period has dampened the budding entrepreneur’s plan for a bachelor pad.
He currently lives at home with his parents and two brothers.
“I was looking to get a place of my own; unfortunately, the new ruling will gravely affect my plans to purchase a home. Without the new cap, it is already so hard for me to buy property and I will have to put it on hold.
“Needless to say, I am really concerned about the higher monthly repayments and qualifying for the housing loan,” he sighs.
Most of his friends who have just started working are “fuming” over the new ruling, the Penangite shares.
Unless you are from a rich family, plans of owning a home will have to be put on the back burner, they feel.
“Those from wealthy families can ask their parents to support them in purchasing a house. But I think it’s safe to say that many more fresh graduates will be staying with their parents until they are more stable and able to move out on their own,” he says.
At the end of the day, he cites high property prices as the biggest problem, not the new ruling.
He laments how property prices keep increasing but the salaries of the fresh graduates and even those who have been working for years have not.
Lecturer Cheryl Withaneachi, 30, agrees.
The Teluk Intan lass, who currently lives in Petaling Jaya, says the new ruling makes it difficult even for professionals to consider buying a house.
On top of rising house prices, the situation becomes practically impossible, as though housing is only meant for the urban rich these days, she grumbles.
She says that with higher repayments, it would be more practical for her to continue renting despite having “seriously considered” putting the monthly rental towards purchasing a house.
Cheryl started working almost eight years ago and is currently renting a house for RM1,500 – not inclusive of utilities which, she says, is pretty high.
“Many of my friends who are around my age cannot afford a house and this is not only due to the ruling of late but the exorbitant house and apartment prices.
“I dread to think how fresh graduates or those who do not earn very much cope,” she says, adding that fresh graduates who are based in the same location as their parents will definitely opt to stay in the family home due to the increasing living costs of transportation and housing.
“The rest of us who are not from the city have no choice but to struggle.
“The only way to buy a house is if it is jointly bought. So if you are married, the combined funds allow for more flexibility to purchase your first home but in my case (being single), it is a whole different ball game,” she says, before calling on the government to look into house prices, instead of car prices, as a person can live without the latter.
“Paying through our nose for accommodation without actually owning the property is painful,” she adds.
Single mother Fatimah Zakaria, 34, is also feeling the heat,
The frustrated civil servant, who currently lives with her adorable six-year-old daughter in Shah Alam, has been scouting around for a place in Selangor for some time now but it keeps getting harder due to high prices “that just keep rising”.
“And we are not talking about the bank’s interest rates yet,” she stresses.
“With increasingly expensive properties, fluctuating interest rates from banks plus the reduction of loan years, I doubt anyone can actually afford any sort of property.
“I see many young married couples struggling to pay their instalments while trying to maintain a decent lifestyle. If they are having a hard time paying the banks, what about us single mothers?”
With utility bills, food, oil, car loan and a never-ending list of other household expenses to be paid for on a single income, Fatimah does not see how she can ever realise her dream of owning a home.
Previously, property buyers could take loans for up to 45 years, while personal loans could be paid back over a period of up to 25 years.
Under the new Bank Negara Malaysia rules, property loans are capped at 35 years while personal loans are limited to 10 years to help reduce household debt in the country.
The central bank is acting because Malaysia’s household-debt-to-Gross Domestic Product (GDP) ratio at 83% is the highest in emerging Asia.
The stricter lending guidelines also saw Bank Negara prohibiting the offering of pre-approved personal financing products.
These new measures to tackle household debt will also be extended to all financial institutions and credit cooperatives regulated by Bank Negara, the Malaysia Co-operative Societies Commission, Malaysia Building Society Bhd and Aeon Credit Service (M) Bhd.
All these institutions will also need to follow responsible lending limits.
New borrowers, especially those with lower incomes, can only take on debt amounting to 60% of their monthly take home pay.
The new limits will not however affect loan applications made before July 5.
National Housebuyers Association (HBA) honorary secretary-general Chang Kim Loong says house buyers who need loan tenures that are longer than 35 years are buying something that is far beyond their current income levels.
“In fact, most banks only give housing loans up to 30 years. Previously, only selected banks gave loans of up to 45 years (second-generation loans).
“HBA is against the second-generation loans as the second generation is born into debt,” he says, stressing that house buyers should always get something that is within their means.
To be deemed “affordable”, a study by Harvard University and the World Bank lists three main criteria: any single loan repayment should not exceed a third of the borrower’s income; all combined loan repayments should not exceed half of the borrower’s income; and the price of the house ideally should be three times the borrower’s annual household income, he shares.
“For example, if both the borrower and the spouse each earns RM5,000, a month, the household income is RM10,000 a month or RM120,000 a year.
“The value of the house that the household should be looking at purchasing should at most be RM360,000,” he explains.
He predicts that fresh graduates will have to continue staying with their parents until both the parents and the child (borrower) have saved enough money for a larger down payment or for the parents to withdraw their own EPF funds to help.
“For a housing loan of RM450,000 (average condo price of RM500,000 less 10% downpayment) for 30 years, the monthly repayment is already RM2,175 which is 72% of the fresh graduate’s income,” he calculates.
Chang also calls for a revision of the Perumahan Rakyat 1Malaysia (PR1MA) prices, which the HBA believes are just too expensive. The HBA had suggested a price of between RM150,000 and RM300,000.
“PR1MA has just raised the ceiling price of their properties to RM450,000 and the maximum household income eligibility to RM7,500.
“It would not be unusual for banks to reject PR1MA applicants for housing loans as many of them would be buying far beyond their income eligibility,” he argues.
Malaysian Employers Federation (MEF) executive director Shamsuddin Bardan tells young employees to “take your time”.
“Don’t rush to commit to a long-term financial obligation.
“Perhaps you may need to wait a little longer before making arrangements to get your first place.
“Instead of rushing to buy a home, wait until you are able to earn a higher salary so that the downpayment and monthly payments become more affordable,” he advises.
While calling for a review of the housing loan cap, he, however, lauds the new personal loan limit as a way to teach the younger generation to spend within their means.
Industry players believe the new Bank Negara measures would have a limited impact on the property market because the older generation of Malaysians had already bought into the property cycle.
They say the latest caps would mainly affect the younger generation.
According to the Global Property Guide (www.globalpropertyguide.com) – a site for residential property investors – the Malaysian housing market remains strong, though house price rises are slowing mainly due to stricter lending guidelines.
Quoting the Valuation and Property Services Department (JPPH), it reported last year that house prices in the country had continued to rise, albeit at a slower pace.
Average house prices are RM497,535 in Kuala Lumpur, followed by Sabah and Selangor, with average prices of RM382,414 and RM372,499 respectively.
Meanwhile, CIMB Research, in a report, says supply growth in residential properties in Malaysia in 2012 was only 1.6%, the lowest in 10 years.
“We believe the cause of strong price increases in recent years is mainly due to supply constraints as opposed to excessive demand.
“In fact, any move by the authorities to curb speculation may have the unintended effect of slowing down supply growth, which would in turn exacerbate price increases over the longer term,” the research house says.
The HBA hopes that the new Bank Negara measures will reduce some speculation in the property market which may result in lower property prices.
Chang, however, thinks much more needs to be done to reduce speculation in the property market, such as bringing back the Real Property Gains Tax, imposing higher stamp duty for buyers of multiple properties and a further reduction of Loan to Value ratio. – The Star
The world financial market has been lurching from one crisis to another. How much will Penang be affected? Where is our property market heading in 2013?
Yes, most probably, Penang’s property market will come to be affected by the global crisis. That is the simple answer to the question most people are asking; but it should be resilient enough to bounce back.
In general terms, 2013 will see some sectors of the market stabilising while others like the landed property market will continue to increase as supply in prime areas decreases when compared with demand, especially with the scarcity of land.
Rehda Penang chairman Datuk Jerry Chan says: “Liquidity, easy and cheap credit and a bullish sentiment for Penang properties are the main factors (for rising property prices). Costs have escalated because of escalating land prices, compliance costs and rising labour and material costs.” If you’re hoping that property prices will finally stop soaring, don’t hold your breath.
The upcoming general election is a major factor in the property market. However, expect a stable, if cautious, property market, at least until the end of the election. “There is expected to be a period of uncertainty following the election,” Chan says, “but subsidy reductions and withdrawals following the election will push inflation upwards at a faster rate, thereby giving a boost to property prices.
“Launches, approvals and commencements have been held back pending the election,” he adds. “After the election, I expect a continued demand for landed property on the island and further price increases on the mainland.”
Royal Institution of Surveyors Malaysia (Northern Branch) chairperson Muzlini Said notes, however, that historically elections have not affected the property market.
The second Penang Bridge, scheduled to be completed in September 2013, will also have an impact on the property market. The current growth areas will be Batu Maung and Bayan Lepas on the island, and the corridor from Simpang Ampat to Nibong Tebal encompassing Sungai Bakap, Valdor and Batu Kawan on the mainland. Prices in Bukit Mertajam and Simpang Ampat have seen good capital returns in the past few years and will continue to increase with the launch of the bridge.
Are the current prices sustainable? “With electricity doubling in 2016,” says Chan, “can the price of anything go down? With Penang developers tasked and burdened with low cost and low-medium cost requirements even as overall costs and land prices rise, the subsidy burden can only get heavier and heavier.”
With property prices on the island showing little sign of slowing down, I would recommend those with smaller budgets to begin looking at the current growth corridors on the mainland and invest in these areas. Of course, if the federal government, regardless of the elections, expedites all the infrastructure improvements Penang needs, this would more easily allow people to choose to purchase their homes further afield and not restrict themselves to urban areas.
The recent promise of a monorail for Penang is welcome news but this should not be an election carrot. This should be part of the federal government’s obligation to provide Penang with state-of-the-art infrastructure improvements with no strings attached in order for the state to continue to grow.
One area to keep an eye on is the rental market. This market will be driven over the next few years by young couples or single workers looking to live close to their workplace. A number of new launches recently have been small units, targeted at young couples with no children as well as investors with disposable income and willing to take a risk on the property market.
Boon Siew Group recently launched its Katana development along Jalan Tanjung Tokong with good sales being reported at prices ranging from RM1,400 per sq ft upwards for 715sq ft units. The same goes for the Sandilands development on the edge of George Town, which is selling at prices of more than RM500 per sq ft for units around 1,300sq ft.
Although the market is bullish for now, Muzlini believes that there should be some caution over what is being developed and marketed, especially the condominium market, where in the past super condos have been developed. “I would say there is an oversupply situation in the property market,” she states.
Many launches are now of smaller units ranging between 1,500sq ft and 2,500sq ft, which are more saleable since recent changes in the planning rules have allowed smaller units to be built.
With such good responses on new launches, one can predict the Penang property market will continue to grow, especially if developers pay attention and respond to the market, and develop the products that people really want. – Mark Siew, PPC International