Looking back at 2015

2015 was certainly a challenging year for property developers. Various cautionary signals continued to influence the market sentiments. This is evidenced by the consecutive quarter-on-quarter decline in the residential property transactions since 2013.

Figure 1: Average transacted price vs volume (residential property)

The decline in transactions was particularly obvious for residential property in the island. The total transactions in the Island for Q3 2015 by far the lowest in the past decade, a further sign that Penang Island’s property market has significantly cooled.

For home buyers and investors, the continued enforcement of cooling measures, tighter credit environment, the sluggish rental market and a various pessimistic economic factors were some of the main factors affecting their appetite.

Nevertheless, 2015 was definitely a good start for first time home buyers. There were plenty of affordable housing available in the Island; ranges from RM200k onwards. Moreover, some of these projects are strategically located within well-established township namely Georgetown, Tanjung Tokong, Sungai Ara and Tanjung Bungah. The first batch of affordable housing is slated to be completed by 2018.

While the overall sales data indicated some price correction and continuous softening in residential property market, a positive price trends is observed when we take a deeper dive into the 3 most common residential property types (condo, 2-3 storey terrace & semi-D) in Penang. [Figure 2]

Figure 2: Property sales data for condo, terrace and semi-detached.

Notably, the average transacted price for a condominium in north-east district of Penang Island registered a 19% quarter-on-quarter increase in Q3 2015. The average transacted price for a semi-detached house in south-west district also recorded a 14% increase in the same quarter.

On top of that, PenangPropertyTalk.com has also recorded a total of 1.61 million visits in 2015, a 37% increase over 2014. This is an indication that there are still strong interest for the property market in Penang but the affordability and sluggish economic factors has hold them back from buying one.

Property market outlook in 2016

Going forward in 2016, the market sentiments will be quite similar to 2015. As the cooling measures and economic situation do not look like they will be eased in the short term, coupled with an anticipation of more affordable housing supply, the residential property market, especially in the island, will remain over supply situation.

However, despite the fact that 2016 is slated to mirror the trends set in 2015, there is a high chance that buying activity may pick up towards the end of the year. This is due to the belief that prices would be corrected sufficiently by Q3/Q4, encouraging buyers to grab the opportunity and re-enter the market. This assumption is further supported by the growing engagement observed in PenangPropertyTalk.com.

Statistically speaking, upcoming mid-size condominiums located in the north-east District of Penang Island have invited the most attention from our readers, mainly coming from Penang, Kuala Lumpur and Selangor.

Affordable housing – The key growth driver

With the significant demand, affordable housing would be a key growth driver for residential property sector. But accessibility has become the main obstacle, mainly because commercial banks typically have a more stringent credit assessment for lower income groups, whose income is below the ‘viable’ threshold to ensure repayment. Many developers now need to resolve its housing inventory problem and driving expectations for more measures to address the affordable housing supply glut.

In 2016, more affordable housings are expected to be introduced by private sector, addressing the demand of such housing in other popular area of Penang Island. These area includes but not limited to Gelugor, Bayan Mutiara and Balik Pulau.

The combination of low-cost and easy credit is going to be the key to the success of affordable housing in Penang. The state government should also continue to introduce more measures to stimulate affordable housing development, striking a balance between demand and supply. This is to encourage a decent take up rate for viable execution, while avoiding speculation.

The potential of Mainland

Property prices in mainland has escalated significantly over the past few years. For those who has been focusing on the island would be surprised to find out that the prices of a landed property in mainland is getting unreachable now.

It has been my firm believed that the landed properties at prime location in mainland will continues to flourish as upgraders are looking for exclusiveness and a better lifestyle with lower price tag. EcoWorld has achieved 80% take-up rate for their 2-storey terrace houses in Eco Meadows is another indication that now more buyers are willing to pay higher premium for an exclusive living experience despite a less branded location.

Figure below shows the ratio of residential property transactions in Penang Island vs mainland since Q1 2012. The consistent decline in property translation ratio for Penang Island is an indication of a possible shift in Penang’s housing market, suggesting a growing potential in mainland.

Figure 3: Residential property transactions ratio (Island vs Mainland)

Upcoming areas to consider in 2016

For first time home buyers, there are plenty of affordable housing projects to choose from. If the existing options does not meet your requirement of a realistic lifestyle, keep a lookout on a few more upcoming affordable scheme located in Georgetown, Gelugor and Bayan Mutiara.

For those who has more budget, stay tuned for the upcoming condominium by SP Setia at Jelutong, and Queens Waterfront Residences by Ideal Property Group at Bayan Bay. These units are likely to be priced below RM1 million.

Over at the mainland, Penang Design Village will be ready towards the end of 2016 to fulfil your shopping needs. For upgraders with seven figures budget, wait till you see the upcoming zero-lot bungalow at Eco Marina by EcoWorld. You can also expect the launching of Vertu Resort Condominium by Aspen Group at Batu Kawan.

Certainly, these are just the tips of the iceberg. Most important, continue to follow us for more exciting updates in 2016!

Happy buying and investing… plan realistically, know your affordability and buy within your means.

– Ken Lim
(Founder, PenangPropertyTalk.com)