Secondary market may slow down


Prices of homes on the secondary market in Penang are expected to see slower growth as more newly completed homes come on to the market.

“We expect prices for older properties to remain stable in the remaining months of the year due to competition coming from newly completed homes that offer the latest designs with green features, gated and guarded concepts, three-tier security systems and quality and stylish finishing,” Raine & Horne International Zaki + Partners director Michael Geh tells City & Country when presenting The Edge/Raine & Horne International Zaki + Partners Penang Housing Property Monitor for 3Q2011.

Asking prices of houses on the sub-sale market in good locations such as Sungai Ara have generally risen in tandem with prices of newly completed houses with similar land sizes and built-ups, which are coming on the market at prices that are 30% to 40% higher.

Based on sampling in 3Q, 1-storey terraced homes in areas such as Green Lane, Jelutong, Sungai Ara, Tanjung Bungah and Seberang Perai Tengah showed price movements from the previous quarter. For instance, homes in Sungai Ara recorded a 10% hike in property prices, or RM40,000, to RM450,000 compared with RM410,000 in 2Q. Similar homes in Seberang Perai Tengah saw a 15% increase from RM130,000 in 2Q to RM150,000 in 3Q. However, Seberang Perai Selatan homes saw a 12% drop in 3Q to RM110,000.

Geh says the property price movements in the areas mentioned was a spillover effect of the higher asking prices for similar properties in newly completed projects in Green Lane, Bayan Baru, Batu Maung and Tanjung Tokong.

He says a new wave of newly completed projects are coming on the market soon and this could result in more competitive property prices and rents.

“It is also time to see whether speculative investors will continue servicing their loans and keep their properties or start disposing of them,” he adds, referring to projects sold with developer interest-bearing schemes. 

Prices of standard three-bedroom flats in Sungai Dua and Lip Sin Garden, with built-ups of 700 to 750 sq ft, have seen a 6% increase from RM160,000 in 2Q to RM170,000 in 3Q. Similar units in Relau, however, saw only a slight increase of 0.7%, or RM10,000, to RM170,000 in 3Q. Meanwhile, 2-storey detached homes in Island Park and Sungai Nibong, with built-ups of 3,000 to 4,000 sq ft, have recorded price increases of 5.5% and 2% in 3Q to RM950,000 and RM900,000 respectively.
As for the rental market, Geh expects rents for middle to high-end condos to see more movement in 4Q. Based on the data presented, rents in 3Q remained unchanged from 2Q.

Meanwhile, new launches or developer direct markets are expected to continue outshining the secondary market as “there is less hassle buying from developers compared with buying from the secondary market where prospective buyers have to source for property valuers and lawyers, and then seek financing”.

“Traditionally, the first and last quarters of the year are high-activity seasons for developers in Penang. Developers are taking their last shot before Chinese New Year. During the holiday season, Penangites return to the island and some of them do look for property to buy. The developers makes it easy for people to purchase new properties with support from bankers and lawyers readily available,” Geh explains.

He believes that with the second Penang bridge, which is expected to be completed by end 2013, asking prices for properties will generally increase by at least 20% to 30%. “However, the 24km bridge may be congested within a couple of years. More vehicles flooding into the island causes traffic chaos, which in my opinion, will affect the already congested Scotland Road, Green Lane and Lebuhraya Bayan Lepas areas. We may then see a slight adjustment in both prices and rents in these areas. The second bridge also provides Penangites the option to stay on the mainland with easy access to the island. Besides, mainland houses are more affordable with more spacious built-ups and/or land areas compared with those on the island,” he says.

The development potential of Penang island’s southwest portion is growing as more property developers are eyeing projects and land near Queensbay Mall. Asia Green Development Sdn Bhd has reportedly bought a 40ha tract for a serviced apartment project in the Queensbay area at RM420 psf from CP Land Sdn Bhd.

In July, Ivory Properties Group Bhd officially announced that it had won the bid at RM240 psf for the 103 acres (68-acre existing land and 35 acres to be reclaimed) in Bayan Mutiara, which is located between the existing Penang bridge and Queensbay Mall. A joint-venture agreement between Dijaya Corp Bhd and Ivory Properties Group was signed on Nov 11 to develop mixed-use residential and commercial properties with a gross development value of RM10 billion on the site.

There was also a landmark transaction of RM657 million in 2010 by CP Group and CapitalMalls Asia to acquire Queensbay Mall, which is one of the most crowded and active malls on the island.
Geh says E&O Property Development Bhd will be launching the second phase of its Quayside Condo within its Seri Tanjong Pinang development in Tanjung Tokong. A total of 549 condominiums, with built-ups of 1,000 to 3,000 sq ft, will be up for sale and priced at RM1,000 to RM1,400 psf. Apart from that, Shorefront, a development by YTL Bhd, has been recently approved and Geh believes it will provide an exciting inner-city low-density world-class residential development in George Town.

Also, there has been talk that vacant prime land on the island in areas such as Gurney Drive and Kelawai Road have been offered for sale at a record price of about RM1,000 psf.

Geh says other hot spots are Batu Ferringhi, Balik Pulau and areas near and between the old and new bridges.

There have also been recent reports of tourism projects worth over RM860 million comprising six hotels in George Town and a water theme park in Teluk Bahang, which are expected to be operational by 2014.

“These developments will positively impact the economy of the state with more recreational activities for local, domestic and international guests. Currently, there is a lack of recreational facilities available in the state. Hotels impact the tourism market by providing a competitive environment to the market and releasing investment grade property products for longer holding terms,” Geh opines.

According to recent news, among the latest hospitality projects approved by the Penang Municipal Council are IGB Corp Bhd’s St Giles Hotel and Cititel Express, and NT Industrial Park (M) Sdn Bhd’s five-star boutique hotel, with a combined gross development value of over RM225 million.

This article appeared in City & Country, the property pullout of The Edge Malaysia, Issue 888, Dec 5-11, 2011