Chart 1: Penang Map

THERE is always a past and present which justify and lead the incoming future. Penang is a fascinating storyteller which has been able to treasure antique flavours while developing modern high-tech manufacturing enclaves that have attracted the world’s attention.

Past memories… Treasures of the future

On July 7, 2008, a huge opportunity was offered to the Penang State, the already famous Malaysian Silicon Valley. George Town, its capital city, was inscribed as a UNESCO (United Nations Educational, Scientific and Cultural Organisation) World Heritage Site due to its unique architectural and cultural townscape without parallel anywhere else in the East and South-East Asia.

Penang has been capitalising on the attention that has been driving the surge of tourist arrivals (local and international) from below three million arrivals in early 2000 to more than six million tourists in 2012. The target for this year is to attract above 10 million tourists.

The geographic configuration of the Penang State has surely contributed to the consistent growth of diversified economic drivers which consequently include property developments. (Refer to chart 1)

Two totally different scenarios in Penang have been prevalent in the last seven years: On Penang Island, a vibrant, high standard cosmopolitan lifestyle while the other is concentrated more on industrial and manufacturing projects backed by logistics and educational initiatives.

The first aspect which is related to Penang Island, is now rated the eighth best destination for retirement in the world while the mainland has been nicknamed the Malaysian Silicon Valley. Property development and their values have been rising accordingly, generating a stable and positive market.

Present with abundant opportunities

How the two property markets of Penang Island and the Mainland have been evolving in the last few years and how they will move on can easily be seen from this comparative table which shows the past, present and future supply of residential properties in the two locations. (Refer to chart 2)

Chart 2: Supply of residential units

By looking at the estimated population growth in the two areas based on a conservative calculation and without taking into account the “seasonal” resident crowd (expatriates and retired foreigners), we can clearly see the viable potential that both these areas have.

It is interesting to note that Penang State is the only one in Malaysia offering an almost adequate amount of low-cost housing proportionate to its population. The Malaysian average is 5.5% while Penang state is at 13.15% (low cost unit over total population).

The table above offers a clear and positive estimate for developers, buyers and investors in the years to come, clearing the horizon from possible cloudy forecasts in the form of a price bubble or drop in demand. (Refer to chart 3)

Chart 3: Current and future demand

Path for future potential growth

“Follow the economic growth drivers and the infrastructure.” This is the best thing a property investor can do. What is on Penang Island is quite easily seen.

As mentioned earlier, talking about the geographic and economic configuration, Penang Island can be viewed more as a retirement and holiday paradise where tourists will flock in from international shores to relax.

Keep in mind that the ratio between tourist arrivals and receipts generated has kept on growing at a favourable pace. (Refer to chart 4)

Chart 4: Tourist arrival and receipt value

Many of these tourists are looking for a short-term stay, spanning one week to three months at most and prefer to rent a medium or small house instead of living in a hotel.

Full facilities, nice locations and scenic views will be their decision drivers together backed by shopping amenities within the vicinity.

Looking at the infrastructure, we cannot miss the recently opened second link that will generate a new wave of residential and mixed-use developments.

It is sufficient to see how the first link has, since 1985, been contributing to the explosive development of the areas surrounding the landing point on the mainland to understand the high potential of this new “growth driver”.

Land nearby Batu Kawan and Jawi has more than doubled in value over the past few months from between RM7 per sq ft and RM10 per sq ft to between RM35 and RM45 per sq ft, and several developers are now fighting to secure prime positions for their future projects. No doubt the area has a very high potential in terms of accessibility and for sure, we will see interesting initiatives there taking off from the second half of this year.

Universities and big retailers, Ikea and the University of Hull just to mention the most recent developments, have been already acquiring space there as they are aware of the future direction for population growth while the developers’ planners are working on integrated townships that will offer houses with prices ranging from RM200 per sq ft up to RM500 per sq ft in the future.

Also, the proximity to the second link on the island, Batu Maung, Bayan Lepas or Teluk Kumbar, will profit with the Second Penang Bridge which will bring about a “property stage” that was in the past, dominated by George Town and Batu Feringghi.

Property market outlook

By looking into current values of residential properties in the northern areas of Penang Island, the possible growth will be within the range of RM200 per sq ft to RM400 per sq ft during the next two to three years (with 15% to 20% capital appreciation) as we cannot forget the type of buyers or the users of dwellings here. For the same reason, the (Return On Investment) ROI that smart investors will fetch in the area are surely going to be very attractive and on an uptrend for several years to come.

Mainland-wise, I’m personally looking forward to seeing the launch prices of properties located adjacent to the Second Penang Bridge take off in the next few months.

If entry values will be, as I’m expecting, below RM300 per sq ft, there will also be very good opportunities to profit from there and again, with more international schools, universities, retailers and businesses coming in as economic drivers, capital gain and yields will be, in my view, extremely attractive.

Different locations with property values are related to the future estimates of growth and will be offered on a “first come first serve” basis.

Do not think too long, otherwise these good and unique opportunities might be missed.

Source: StarProperty.my