Area Analysis (Penang Island)
Land-scarce Penang Island has 293 sq km of land. Like Singapore, Penang is experiencing the “island effects”, where a spike in property price has been noted since 2008. Penang’s unique geography and its attractiveness as a property investment destination have contributed largely to this.
According to the data from the National Property and Information Centre (NAPIC), Penang has the second highest price index in Malaysia after Kuala Lumpur. The price index has been rising steadily by approximately 50 points to reach almost 150 points since NAPIC started tracking the data from the first quarter of 2000.
As most of the island is made up of hilly and forested areas, land reclamation has been the way to go, particularly in the Seri Tanjung Pinang area, where Eastern & Oriental Bhd has plans to reclaim even more land.
A recent study published by Khazanah Research Institute (KRI) had shown that housing in Penang is “severely unaffordable”. The report, called “Making Housing Affordable”, showed that Penang has a median multiple affordability of points based on a monthly median income of RM4,702 and market median price of housing at RM169,272.
The median multiple is a measurement of how affordable the housing market as a whole is performing. Anything above 3.0 points is considered unaffordable. Therefore, with a median multiple affordability of 5.4 points, properties on the island are by no means unaffordable for locals.
The average per-square-foot price on Penang Island ranges from around RM350 to RM1,000, depending on the location.
According to the data from NAPIC, the majority (827) of transactions in Penang from the third quarter of 2013 to the same period in 2014 were for properties ranging from RM500,000 to RM1 million. While properties on the island are considered expensive, there are still pockets where homes are still affordable. Let us study the different areas.
George Town, Tanjung Bungah, Gurney, Batu Ferringhi, Pulau Tikus, Jesselton Heights
These areas are where affluent Penangites, the “old money” generation, expatriates, and foreign investors prefer to live. Properties here have an asking price ranging from RM700 to RM1,000 per square foot on average with a quantum price of more than RM500,000.
Gurney and Batu Ferringhi are tourist hotspots and where condominiums can command million-dollar views. However, some views may be blocked due to land reclamation at Sri Tanjung Pinang.In addition, almost 1,500 residential units will be coming up in Batu Ferringhi. This will pose a future problem for those living in this area who are thinking of renting out their units and may put pressure on rental yields. Thus, it is best to buy properties here for one’s own occupation.
In addition, almost 1,500 residential units will be coming up in Batu Ferringhi. This will pose a future problem for those living in this area who are thinking of renting out their units and may put pressure on rental yields. Thus, it is best to buy properties here for one’s own occupation.
Penangites are very loyal and will only want to invest within Penang. These areas are noted for their significant number of “old money” families, whose wealth and properties have been passed down from one generation to another. As such, the average monthly income here starts from around RM5,000 per month.
As such, the average monthly income here starts from around RM5,000 per month. For Penangites, this area is not affordable for most. It is mainly for rich locals and foreign investors or retirees. Many will use the residence for their own stay.
In addition, the newly approved high-density project in Batu Ferringhi and the land reclamation for Eastern & Oriental Bhd’s project at Seri Tanjung Pinang Phase Two (STP2) will mean you can expect traffic congestions along the way.
Meanwhile, Gurney Drive, George Town, Pulau Tikus, Tanjung Bungah and Batu Ferringhi are popular among foreigners as the pricing for these areas exceeds RM1 million, and therefore, are geared towards the overseas market.
The minimum purchase price for foreigners buying properties in Penang is RM1 million for condominiums and RM2 million for landed homes. While some may rent out their units, many will use them as holiday homes.
Bukit Gelugor is the new hotspot as it is located near the Second Penang Bridge. This suburban area is very much driven by locals and will be served by an upcoming LRT station. Asking prices for apartments here range from RM500 to RM550 per square foot.
Bukit Gelugor mainly consists of local population. Like the northern part of the island, there is a significant “old money” generation living here. The income here is more than RM4,000 a month.
For Penangites, this area is a bit of a conundrum. While it is a local area, it is very much dominated by the middle- to high-income bracket. However, you’d be pleased to know there is an affordable housing project in the pipeline, which includes a PR1MA project that will be launched with a below-the-market per-square-foot pricing. There is currently no indicative price.
For foreigners, the area near the Second Bridge is popular as the quantum price is more than RM1 million on average. Some of the iconic projects here include The Light, which has been well-received.
In my opinion, the industrial area of Bayan Lepas provides the most potential as the average prices here range from RM550 to RM800 per square foot.
Bayan Lepas is home to the Bayan Lepas Free Industrial Zone (FIZ), a manufacturing and electronics hub for various multinational companies, from Sanyo to Osram. There is a planned LRT station in Bayan Lepas and a 25km expressway linking it to Tanjung Bungah. This will help to unlock the capital values of homes in this area once the projects are completed.
Bayan Lepas has a mixture of expatriates and locals. As it is located away from the city, properties here are considered affordable. The monthly income here ranges from around RM2,500 onwards.
For Penangites, again, this area is a bit of a conundrum. Some areas are expensive and some are not. There are so many hidden pockets of affordable homes in Penang Island if you do your research.
Generally, Bayan Lepas is a local area where many of the homes are for your own occupation. The farther away it is from the city, the more affordable the homes are.
In my opinion, Bayan Lepas is the next hotspot as it is close to the Second Bridge, the Free Industrial Zone, and the airport. In addition, there will be two LRT stations: one at the airport, and another at Bayan Lepas.
For those who qualify, there is the federal-initiated PR1MA project to be launched here. This affordable home project will target the low- to middle-income households. As such, they will be launched at an affordable quantum price, well below the market per-square-foot pricing here. There is currently no indicative price.
For foreigners, this area has a good mix of locals and expats due to the manufacturing, electronics, and semiconductor industries at the Free Industrial Zone (FIZ). However, as the prices here are relatively affordable, this means you will need to purchase big units. In addition, units here stand a good chance to be rented out to the expatriates working at the FIZ.
Seberang Perai – Batu Kawan
For those who are priced out of the housing in Penang Island, you should target the new growth areas near the Second Bridge on the peninsula. Since the Second Bridge was announced in 2006, land prices in Batu Kawan and Seberang Perai have moved up from RM8 per square foot in 2006 to RM50 per square foot this year, according to the data from Henry Butcher.
Affordable housing in the launched pipeline in Batu Kawan includes those of the state government, called the Penang Affordable Housing Scheme (PMM). There is also a planned BRT line from Permatang Tinggi to Batu Kawan.
A Word of Advice
For those of you wanting to buy your first home, I would advise you to study the Penang Transport Master Plan (PTMP) and look into outlying areas dominated by locals. Usually, such areas will see less volatile price fluctuations. Subsequently, you should narrow down on areas where it will be served by the Light Rail Transit (LRT) station.
Meanwhile, there are pockets within Penang Island where you can still find affordable homes. On the island, the areas that I see have the most potential are in Bukit Gelugor and Bayan Lepas. If you find yourself still being priced out, study the various projects on Seberang Perai. I see the most potential in Batu Kawan.
Things to Note
1. Penang Integrated Transport Master Plan (PTMP)
In December 2015, the Penang Integrated Transport Master Plan (PTMP) was approved by the Penang executive council and it is expected to cost RM27 billion.
In all, there will be two LRT lines, three monorail lines, and a BRT line. Phase one will comprise an LRT system, which will run from the Penang International Airport to KOMTAR in George Town. It also includes the Pan Island Link, an expressway linking Bayan Lepas to Gurney Drive.
There will also be two monorail lines within the island: the Ayer Itam monorail, and Tanjung Tokong monorail. This is expected to be launched in the subsequent phases, which will include a tram line.
Over in Seberang Perai, there is a planned George Town–Butterworth LRT line linking Penang Island to Seberang Perai. This will be integrated with the Raja Uda–Alma monorail line with an interchange station in Butterworth.
The monorail line will have an interchange station linking it to the planned BRT line from Permatang Tinggi to Batu Kawan. The BRT line will be extended northwards to Seberang Jaya and southwards to Nibong Tebal. The LRT, monorail, and BRT lines will also have connecting stations to the KTM Komuter Line.
2. George Town UNESCO Impact
Since George Town was listed as a UNESCO World Heritage Site in 2008, the island had undergone a sort of cultural renaissance that marries the old and the new, yet retaining the unique flavour that is distinctly Penang.
What has upped Penang’s hip quotient appears to be the annual George Town Festival that has become a major tourism highlight. Launched in 2010, in honour of the city’s listing by UNESCO, this art event takes place during the entire month of August. It features a mostly local ensemble with cultural activities ranging from experimental visual arts installation to theatre.
Penang was listed on the U.K.’s The Guardian as number 8 in the Top 40 global destinations in January 2014. As a result, it has given this historic city a new lease of life and has turned it into a hip, bohemian enclave drawing an eclectic mix of trendy locals, well-heeled tourists, and budget travellers to check out what the buzz here is all about.