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