Good demand on Penang property

THE Star regional operations manager (north) Chung Chok Yin and Henry Butcher Malaysia (Penang) Sdn Bhd director Dr Teoh Poh Huat met up with developers at the Star Northern Hub in Bayan Lepas to ascertain the impact of a slower GDP forecast for 2011, rising interest rates, and escalating property prices amidst global challenges on the direction of the Penang property market.

The panellists included DNP Land Sdn Bhd (northern region) general manager K.C. Tan, IJM Properties Sdn Bhd general manager (north) Toh Chin Leong, Ivory Properties Group Bhd deputy chairman and executive director Datuk Seri Nazir Ariff, Lone Pine Group of Companies general manager Mabel Ooi, SP Setia Bhd (north) general manager S. Rajoo, Mah Sing Group Bhd general manager (northern region) Low Eng Hooi, Sunway City Bhd general manager Tan Hun Beng, and Real Estate Housing Developers’ Association (Rehda) (Penang) chairman Datuk Jerry Chan.

The roundtable talk on July 5 was a prelude to the ninth Star Property Fair 2011 in Penang that will be held at Gurney Plaza and the adjoining G Hotel from July 21 to 24.

The fair is organised by The Star in collaboration with Henry Butcher Malaysia (Penang) Sdn Bhd.

The following are excerpts of the discussion:

Q: How do you perceive the property market outlook in Penang for 2011 and next year?

Chan: The outlook is stable. Landed properties with unique concepts will see appreciation. The demand is still there. However, house buyers will be more discerning in their decision making when it comes to the high-end high rise developments.

Q: Should steps be taken to ensure Malaysian owners still retain ownership of heritage properties in the core and buffer heritage zone?

Nazir: That’s going to be difficult. That is disturbing the market. How many foreign people own heritage properties now? Some might have foreign names but they may be locals.

Q: Will the property market in Penang experience phenomenal growth as it did last year?

Rajoo: As long as there is expansion, there is going to be ample job opportunities. More people will enter the job market and they will need homes. We expect a good year.

Toh: There is fear that if you don’t buy property now, you can never afford it again in the future. The interest rate is increasing, and the price of oil, materials, land, and compliance costs are going up also. These are driving people to keep buying houses now, as property can hedge inflation.

K.C. Tan: The mainland and island are now better connected in terms of distance, and accessibility will improve with the completion of the second bridge. We can expect a shift in the property market towards Batu Kawan, especially when the second bridge and the Electrified Double Track Project (EDTP) connecting Ipoh and Padang Besar are completed.

Chan: There is a lot of confidence towards Penang, with locals and foreigners wanting to invest, both in production and in property. Penang has the right ingredients. The demand will be consistent and the supply will not outstrip demand.

Q: The trend appears to be less focused on super-condominium lifestyle living, according to a recent report. What do you feel about this?

Ooi: That is what we hear from the locals, that the trend is to go for smaller units. I would say there is still a demand for big units, as there are buyers attracted by unique concepts and ideas. Purchasers of our 1 Tanjong beachfront-condominium project in Tanjung Bungah intend to stay there. In future, the supply of this type of properties along certain stretches will be limited.

Q: How will developers strategise to promote their properties this year in view of the slower economic growth locally and globally?

Nazir: Penang developers are now more organised. Developers like IJM, SP Setia and Mah Sing have set benchmarks that we local developers have followed. They have given Penang companies competition and a challenge, and you can see better designs in houses and apartments in Penang because of that.

Rajoo: The healthy competition has made us think more creatively. The supply of properties now is a completely different breed of product than those completed five years ago.

Q: Has Mah Sing made the right move to enter the Penang property market?

Low: The local market, particularly in Batu Maung, has accepted the new concept. The buyers expect different concepts, innovation and design. They buy into the lifestyle aspect, and they are willing to pay more for it. All these factors will steer the property market and make it just as favourable, if not more favourable than the outlook this year.

Q: Going forward, would the market be sustainable, and why?

Chan: If the job creation is there for Penang in the years to come, the demand for housing will follow. We just need to consider the kind of supply situation. After every recession, there is inflation, which drives property prices up. Everything else goes up – fuel prices, energy costs, raw materials, transportation, labour costs, cost of living, compliance costs, construction costs, fees, land prices. Inflation is not suddenly going away, and these costs are not coming down.

Rajoo: If you’re doing high rise, it’s all about pricing and location. We were selling our Reflections condominiums in Sungai Ara for over RM400,000. The last few units we had sold at RM550,000. And there is a long list of people waiting for sub-sale units.

H.B. Tan: The branding for Penang has been done even 40 years ago when Tun Dr Lim Chong Eu was the Chief Minister. He moved Penang forward with industrialisation. Penang also had the branding of the free port status before 1969. When it comes to property, Penang has this macro branding and there is micro branding among every developer in terms of the location and type of development. Having said that, every square foot that we build on Penang island means there will be another square foot of land gone. Yet, the demand for property is continuous.

Q: Do you foresee what has been described by the media as a property bubble forming?

Toh: A lot of people say that property in Penang is driven by speculators. If you actually look at it, the number of people who own two to three houses is very small compared to the population. So, there is no bubble. People will still buy if the location is good. They also look at the product — the lifestyle, design, innovation and features — and reputation. The market was hot for the last few years but there were still houses that never sold. Yet, people still queue up for other houses and these are snapped within days of the launching.

Rajoo: About six years ago, we thought the market was going crazy because it was already very high. But people have actually made money. A year ago, we launched our Setia View houses and priced them from RM600,000 to RM998,000. I thought the bubble was up. I was wrong, it was taken up overnight.

Low: Basically, we have all unanimously agreed that there is no bubble.

The trend is going for products that have value for money. If you have good branding, innovative design, good concepts, the price will probably hold.

Q: What do foreign buyers look for, and how can we make Penang appeal more to them?

H.B. Tan: Penang it is still very much a local market. Most of the “foreign buyers” in Penang are former Malaysians who come back to invest. It is not really an international market.

Ooi: Foreigners buy in Penang because it is a good location, the environment is relaxing, and we have international schools. Some would like to retire here one day. They also like to buy seafront properties. And the prices here are cheap in relation to what they would have to pay for such a big unit in their country. But there is a lot of improvement that can be made to attract foreigners — infrastructure, transport system, hospitals and schools.

Q: Does Rehda think there is a need to look into possible strategies to attract more foreign buyers?

Chan: There are certain projects that will have a higher demand for foreign buyers. However, most of them who stay here do not buy property as they find that the rental is so low. Then, there is the Penang diasphora. Malaysians who probably are not going to stay in Penang may want to invest in Penang because of confidence.

It is a two-edge sword to go out and encourage more foreigners buying property. That would create additional demand but cause a backlash when property prices go up, as you’re not catering to the local market first. People are already blaming developers for marketing high-end properties overseas.

Q: How can the local infrastructure support further development in Penang to meet demands?

Ooi: Plans for a monorail and the Penang Outer Ring Road (PORR) which were earlier conceived should be revived. Taxis should be made more pleasant and regulated. By having a more efficient public transport, people will not drive and this will relieve congestion.

Chan: If you want to remove congestion, you have to make it expensive to drive to reduce traffic congestion. Only then can you improve public transport. The cheapest, fastest and most convenient system is the tram, as you don’t need purpose-built stations.

The existing road system can determine the routes, so you don’t need to create something new. The bus system can run concurrently for longer distances but within greater George Town, the tram system can run on certain roads. But we need legislations for that.

by The Star