This article first appeared in City & Country, The Edge Malaysia Weekly on May 30, 2022 - June 5, 2022

The overall secondary market in Penang — whether on the island or the mainland — hasn’t fully recovered, according to Saleha Yusoff, executive director and regional head for research and consulting at Nawawi Tie Leung Property Consultants Sdn Bhd.

She says most residential properties analysed did not record any quarter-on-quarter (q-o-q) price growth, except for the 2-storey semi-detached houses in Sungai Ara.

“Year on year, prices at some developments such as the 1-storey [terraced houses] in Jelutong, Sungai Dua and Sungai Ara have continued to slide by 6% to 8%. Prices on the island for 1-storey [terraced houses] remained unchanged, ranging from RM520,000 to RM850,000 per unit,” says Saleha when presenting The Edge | Nawawi Tie Leung Penang Housing Property Monitor 1Q2022.

Most of the 1-storey terraced houses on the island are older ones and their sellers have maintained the prices, which are almost on a par with those of the newer high-rise units, she says. She adds that the average price of 1-storey terraced houses on the mainland stood at pre-pandemic levels, ranging from RM180,000 to RM220,000 per unit, driven by demand from owner-occupiers.

For 2-storey terraced houses, the average price in Pulau Tikus and Sungai Nibong saw a y-o-y decline of 7% and 13% respectively. She observes that these are old residential schemes of more than 20 years in George Town, and the houses come with small porches, which limit the opportunity for expansion and renovation.

Their average prices dropped from between RM1.15 million and RM1.6 million in 2019 to between RM1 million and RM1.3 million in 1Q2022. Prices on the mainland remained unchanged on both q-o-q and y-o-y basis.

For 2-storey semi-detached houses, the average price in Sungai Ara increased 4% on a q-o-q and y-o-y basis, while the average price in other locations remained unchanged. Prices ranged from RM900,000 to RM1.3 million per unit, depending on the location and age of the building. Prices on the mainland remained stable at pre-pandemic levels, averaging from RM290,000 to RM350,000 per unit.

According to Saleha, the average price of detached houses — which are typically purchased for the buyer’s own use — has remained stable since 2016, ranging from RM3.5 million to RM5.1 million. “The average price of the standard 3-bedroom flats and apartments/condominiums remained unchanged.”

She notes that rents and yields have remained stable. “We expect prices on the secondary market on the island, especially for the older schemes, to remain at current levels due to the competition from newly launched projects priced between RM400,000 and RM600,000. New developments offer modern facilities, various designs and layouts, and security.”

According to the latest National Property Information Centre (Napic) data, Penang ranked No 3 in 2021 in terms of the total number of overhang units, which stood at 5,493 and valued at RM3.56 billion. 

As 71% of the overhang units in Penang are condominium and apartment-type properties, and with more high-rise units being developed on the island, 80% of the overhang properties are on the island, says Saleha.

She notes that the Penang property market picked up in 1Q2022, recording the highest volume and value of transactions in the past five years. The volume and value of transactions increased 16.3% and 30.2% respectively from 2020.

According to Napic’s Property Market Report 2021, secondary market/subsale transactions contributed to about 80% in the residential sub-sector, compared with around 20% of primary market transactions/developer sales, says Saleha.

“The secondary market continues to be more active than the primary market because most of the new launches are priced at RM500,000 and above, while the majority of the transactions are priced below RM500,000. We also note that for new launches, developers are reducing discounts as building material and labour costs have increased,” she adds.

In terms of rental yield, Saleha says smaller serviced apartments in good locations will fetch a better yield than larger condominiums with higher maintenance costs. “Therefore, most of the new launches now offer smaller units with lower initial capital, lower maintenance costs and better marketability.”

Among the notable launches in Penang during the quarter in review are The Meg by E&O Bhd at Seri Tanjung Pinang 2 (STP2); Lucerna Residence by Ideal Property at Ideal Vision Park, Bayan Lepas; and Anggun Residence @ Batu Kawan by PE Development.

The Meg is the first project developed on the 760-acre reclaimed island STP 2. It is part of the 253-acre mixed-use development planned on the STP 2A parcel known as Andaman Island. 

The project will offer 1,020 serviced apartment units in two blocks and 28 retail lots. Targeting young professionals, young families and start-up entrepreneurs, it offers nine layouts with built-ups from 567 to 897 sq ft to cater for the lifestyle of millennials. The fully furnished units are priced at an average of RM850 psf.

Lucerne Residence will comprise 480 residential units and 103 shopoffices on a 4.71-acre site. The units have built-ups of 1,100 to 1,200 sq ft and are priced from RM663,900. 

As for Anggun Residences @ Batu Kawan, the development is designed to allow owners the option of renting out their units like a typical hotel room. The project will consist of 496 condominium units, with built-ups ranging from 1,045 to 1,400 sq ft and prices starting at about RM550 psf.

Marriott International Inc announced that it had entered into a management agreement with local Rackson Group to develop the 200-room Le Meridien Hotel at Penang International Airport in Bayan Lepas. Located opposite the airport, the hotel will be linked by a bridge to the proposed light rail transit at the airport.

Saleha expects the construction of the hotel to start in the middle of this year. It is scheduled for completion in 2026. 

In addition to the Le Meridien hotel, which is Phase 1 of the Penang Gateway mixed-use transit-oriented development, the other components of Penang Gateway include an office tower, serviced suites and a wellness hub to capitalise on Penang’s strength as a popular destination for medical tourism in Malaysia. “We expect Penang Gateway to garner interest from potential buyers and investors due to its strategic location in Bayan Lepas and direct link to the airport,” says Saleha.

Penang has also seen the launch of a nuclear medicine centre in George Town at Penang Adventist Hospital. Saleha says the centre will benefit the state’s medical tourism industry.

Various upgrading works on Penang Island that are underway will also boost tourism. This includes that of the Esplanade Seawall, which is expected to be completed this quarter, she notes. The project involves a 460m stretch from Medan Renong food court to the Royal Malaysian Naval Base. 

“Once completed, the site will be accessible during low tide, which offers a direct view of the original seawall. The project is meant to enhance the appeal of key monuments and demonstrate the value of Penang’s heritage city,” says Saleha.

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