Penang property in pause mode

The Edge Malaysia, February 15-21,2014

By Laura Lee

While many developers and property consultants see a softening of the Penang property market, chief minister Lim Guan Eng prefers a more positive view interpreting the situation as a pause to digest measures recently announced by the state government rather than as a marked decline.
Among new housing guidelines announced by the state government is the 3% levy on property purchases by non-Malaysians, which took effect on Feb 1.

Meanwhile the 2% levy for vendors disposing of their property within three years of signing the sale and purchase agreement will take effect on March 1, following a mixed reaction and appeals from professional bodies including the Real Estate and Housing Developers Association Malaysia (Penang) (Rehda)

The National House Buyers (HBA) for instance, does not think new housing rules will stifle Penang’s property market but considers that they will curb speculative activities that have sent prices sky-rocketing in the state.

Penang is squeezed by a slowing demand for property on one side – Rehda Penang chairman Datuk Jerry Chan anticipates it will drop by 30% this year and rising construction costs on the other; Chan has consequently appealed to the chief minister to defer further land use and restrictions.
Chan urges Lim to instead allow the market to adjust. “This is the time to help us and not to burden us.”

His call to Lim to engage Rehda before introducing policy change as part of the state government’s promotion of competence, accountability and transparency (CAT) hints at a lack of consultation between the private sector and the state government.

“You can get our feedback and consider the implications we think could happen before implementation,” says Chan. A case in point, he says, is the hike in drainage contribution costs.
“When Penang flourishes, thrives and grows in wealth, employment and prosperity, we all benefit. The property sector is tied to the economic wellbeing of Penang. We all huat (prosper in Hokkien) together. So if the state fails, we will suffer.

Responding to Chan’s concerns, Lim explains these measures have been taken to ensure there is no property bubble in Penang and that the building of affordable housing is given due attention.
“We won’t implement measures where you cannot make money,” says Lim adding these measures are meant to make the Penang property sector ‘strong and at the same time sustainable.”

Batu Kawan hotspot

The state government says foreign investors are unperturbed by these measures and their confidence is reflected in the investments coming into the state.

Lim cites the recent example of IKEA, a Swedish home-furnishing store which will soon establish its first shopping mall outside the Klang Valley, saying it (via Ikano Pte Ltd) has bought 245 acres (98ha) in Batu Kawan in Seberang Perai Selatan for RM483.95 mil or RM45 per sq ft, despite having to do its own landfill. “Other states were willing to offer their land for free but they did not want to go there.”

With IKEA’s entry, Ho Chin Soon Research director Ho Chin soon says the prospects for Batu Kawan, seen as the new Penang hotspot, cannot be brighter given the completion of the 24km Second Penang Bridge, expected to open by the first quarter of this year.

This federal government bridge project, costing RM4.3 bil, will link the Bayan Lepas Free and Non-Free Industrial Zones visa Batu Maung with the Batu Kawan new township and industrial park on the mainland.

“Batu Kawan has that potential and IKEA is the beginning,” remarks Ho, who views the amount paid by IKEA as ‘expensive’.

Of the 245 acres, 75 will be to develop the IKEA Store and Shopping Mall while the remaining land has been designated for mixed development that includes offices and residences.

Two pieces of the land in Bandar Cassia, Batu Kawan have also been identified for a proposed international theme park and golf resort. The land for these will measure around 87ha and 190ha.
International theme park

According to Datuk Lee Kah Choon, special adviser to the Penang chief minister, under this proposal for an international theme park possibly worth over RM100mil, the park would cover a minimum of 69ha with the balance for residential, commercial and other components related to the golf resort.

Addressing a lack of proper workers’ accommodation, Lee says the Penang Development Crop has also invited proposals for the development of a Workers Village in Juru and Batu Kawan.

Other key projects coming up in Batu Kawan are premium shopping outlets by PE Land, slated to open in 2016; and PKT Logistics One Auto Hub with the ALC College/University of Hull franchised programme, to begin by 2017.

Paramount Corp, KDU’s parent company will build a university college which will open ny 2017, hw adds.

According to Henry Butcher Malaysia (Penang) Sdn Bhd’s research report for Q1 2014, other major developments for Batu Kawan include a RM 1bil project comprising an upmarket shopping mall, 300-room international-class hotel and a branch campus for Britain’s University of Hull.

Meanwhile, Ho says Penang’s house price index stands at a comfortable level, Latest statistics from the National Property Information Centre (Napic) show that as of Q3 2013 project Penang’s house price index at 218.2, higher than Malaysia’s 194.4 but lower than Kuala Lumpur’s 234.