City & Country: Secondary market remains strong

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THE Penang secondary property market continues to perform well as developers hold back launches due to new and unbudgeted infrastructure charges, says Raine & Horne International Zaki + Partners Sdn Bhd director Michael Geh in presenting the Penang Housing Property Monitor for 3Q2014.

“Activity in the market is limited to people who really need to buy a house … Short-term investors, speculators and flippers have left the market, allowing serious long-term players to come in,” he says.

Based on National Property Information Centre figures, Geh points out, secondary transactions accounted for 84% of the market last year while newly launched products made up only 16%.

He also highlights that developers have been hit by a new infrastructure charge that he noticed being implemented at the beginning of the year, resulting in some of them holding back their launches and most likely adjusting their selling prices. “Developers have to pay an infrastructure charge of about RM15 psf on the gross area. Some of them will have to pay maybe RM3 million to RM7 million extra up front. This is an unbudgeted expense.”

Thus, the primary market may soften in the coming months while the secondary market keeps climbing steadily.

“I think the sentiment in the third quarter in Penang will continue into 4Q2014 because there have been no major inspiring announcements from Bank Negara Malaysia or changes in policy,” remarks Goh. “Moreover, people are anticipating affordable housing and may wait until next year to buy.”

PPPs for affordable housing

The Penang government is looking to incentivise developers to build affordable housing based on new guidelines and criteria. Jagdeep Singh Deo, a member of the Penang state executive council for town and country planning and housing, revealed in a speech on Sept 13 that private-public partnerships will be formed between the state and private developers on affordable housing.

Under the new guidelines, the affordable homes will have built-ups of 750 sq ft, 850 sq ft and 900 sq ft and be priced at RM200,000, RM300,000 and RM400,000 respectively. Developers that wish to build affordable houses will be exempted from the requirement to build low-cost or low-medium-cost units and see a reduction in the development charge to RM5 psf.

According to Geh, these developers will also be given a high plot ratio for high-density products, depending on the location. “I’ve seen many serious private developers make submissions. The state government has been proactive in the issue of affordable housing. The new guidelines are considered among the most significant policies for the quarter.”

In his speech, Jagdeep said in their project submissions to the state government, developers could propose to build only affordable homes but these had to be the 850 sq ft/RM300,000 units. Alternatively, they could build a selection of affordable homes: 20% of 750 sq ft/RM200,000, 60% of 850 sq ft/RM300,000 and 20% of 900 sq ft/RM400,000.

To ensure quality control, there are guidelines as to what each unit should have, such as ceramic tile floors in all the living spaces and at least minimum fittings in the kitchen and bathrooms.

Landed properties

As the market waits to see the result of the Penang government’s push for more affordable housing, the secondary market grew overall in 3Q2014.

On the island, the 1-storey terraced homes in Green Lane showed the highest growth of 28.21% with prices rising to RM780,000 year on year. Prices rose 26.92% to RM780,000 in Jelutong and 14.29% to RM700,000 in Sungai Dua while in Tanjung Bungah, they remained unchanged at RM750,000.

On the mainland, there was no y-o-y change in prices in Seberang Perai Utara, although there was growth of 11.11% to RM180,000 in Seberang Perai Tengah and 3.33% to RM150,000 in Seberang Perai Selatan.

Q-o-q, prices rose only in Green Lane (+3.85%), Jelutong (+3.85%) and Seberang Perai Tengah (+11.11%).

In the 2-storey terraced house category, homes in Green Lane led the way with prices growing 16.67% to RM1.2 million y-o-y. Coming a close second were houses in Sungai Nibong, which saw prices rise 15% to RM1 million, followed by those in Sungai Ara (up 14.77% to RM880,000) and Pulau Tikus (up 14.29% to RM1.4 million).

On the mainland, the prices of 2-storey terraced houses rose in Seberang Perai Utara (up 6.25% to RM320,000), Seberang Perai Tengah (up 14.29% to RM350,000) and Seberang Perai Selatan (up 14% to RM250,000) y-o-y.

Q-o-q, the only areas that achieved double-digit growth in prices were Sungai Nibong (10%) and Seberang Perai Selatan (12%). Prices also grew in Green Land (+8.33%), Seberang Perai Tengah (+5.71%) and Sungai Ara (+3.41%).

As for semi-detached houses, the prices of those in Island Park climbed 15% to RM2 million while in Minden Heights and Sungai Nibong, they gained 13.33% to RM1.5 million and 11.76% to RM1.7 million respectively.

It is worth noting that all semidees in Penang went past the RM1 million mark in 4Q2012.

Q-o-q, there was no price growth in this category, according to the monitor.

In the 2-storey detached house category, the Green Land homes saw the highest price gain — up 42.86% y-o-y to RM3.5 million. Next were those in Island Glades (+28.57% to RM2.8 million), Minden Heights (+15.15% to RM3.3 million) and Pulau Tikus (+10% to RM2 million).

Detached homes in Tanjung Tokong and Tanjung Bungah saw no change in price y-o-y while q-o-q, only the Minden Heights homes achieved a 3.03% increase.

High-rises

In the high-rise segment of the secondary market, the prices of standard 3-bedroom flats in Relau gained 20% y-o-y to RM250,000 while in Green Lane and Sungai Dua & Lip Sin Gardens, they rose 6.25% to RM320,000 and 6.67% to RM300,000 respectively. Flats in other areas did not show any price growth from the previous year. Q-o-q, only the flats in Relau showed price growth of 4%.

The highest y-o-y gain in 3-bedroom condo prices was seen in Tanjung Tokong (up 18.18% to RM550,000) while in Pulau Tikus and Batu Ferringhi, prices rose 16.67% to RM540,000 and 16.28% to RM430,000 respectively.

There was also double-digit price growth in Tanjung Bungah (15.79%), Island Park/Glades (11.11%) and Batu Uban (10.81%).

Q-o-q, the only price growth was in Island Park/Glades (4.44%), Pulau Tikus (3.7%), Batu Uban (2.7%) and Tanjung Bungah (1.75%).

Overall, the property market in Penang is continuing to grow, although rents are not moving much, resulting in low yields. According to Geh, investors are awaiting the launch of new affordable houses. Will this change the property market landscape in Penang? Only time will tell.

This article first appeared in City & Country, The Edge Malaysia Weekly, on December 8 - 14, 2014.