The property outlook in Penang is bullish

The property outlook in Penang is bullish because of economic activity and major projects in the pipeline. Property prices in Penang have always done well, and will continue to be on the rise. Cost pressures alone will increase prices. For instance, at the peak of the property cycle just before the market crash in 1997, land in prime areas of Penang cost anywhere between RM80 and RM200 per sq ft (psf). The supercondos in Gurney Drive were going for RM300 psf. Today, these peaks have been surpassed, and land prices in prime areas of Jesselton, Green Lane, Tanjung Bungah and George Town are going between RM100 and RM250 psf. The supercondos are easily snapped up at RM400-RM450 psf.

Statistics wise, Penang has the highest sales growth in Malaysia (five-year compounded annual growth (CAGR) rate of 11% versus average of 8%). House prices on the island have risen to almost match the Klang Valley’s, growing at a five-year CAGR of 4.3% versus the national average of 2.9%. In terms of buying property, we do not need to look beyond Malaysia. We are much cheaper than our regional peers. With the level of economy we are going to be seeing in the state, land prices both on the island and mainland should continue appreciating by at least 5% to 10% over the next 5 to 7 years.

This price appreciation even before taking into account the abolishment of real property gains tax (RPGT). Now that this ruling has been done away with, property investment is almost a “no brainer”. You do not get taxed anymore. Property development is an honest business. Property is an immovable asset. It is tangible and it is safe. It will not depreciate, and over time will continue to appreciate. People spend too little on properties compared to cars and luxury goods. In a rising market, you cannot go wrong buying properties.

For those who are not assured, the completion of the second Penang Bridge alone will act as a catalyst for major growth. Penang has not seen major infrastructure activity since the first bridge was constructed back in 1985 and the last stretch of the North-South Expressway was completed in the early 90s. The amount of activity itself will see big spillover effects throughout the state.

People have yet to see how they things will change because of the second bridge. You will notice that whenever there is an interchange, land prices zoom. Since the opening of the first bridge, it has become the major lifeline to Penangites. Apart from water and electricity, the bridge is almost a living necessity. Problems, however, arose when the bridge reached congestion point earlier than expected.

In the last three decades, industrial development has been in the middle part of Seberang Prai. The southern part of Seberang Prai has seen the least development. But with the building of the Second Bridge, and a link connecting the bridge from Batu Kawan to Jawi, economic activity in the vicinity will automatically intensify.

Batu Kawan will be the first point between Penang island and Seberang Prai. From Batu Kawan, a link from the Second Bridge to Jawi will be built. With the opening of the Second Bridge, more people will be moving to the mainland, especially to the southern part of Seberang Prai. With the escalation of house prices in the island far from ceasing, house buyers will view the mainland as a favourable alternative, considering that a home there would be 3 to 4 times cheaper. The southern part of the corridor between the two bridges – (Simpang Ampat and Jawi) will see the greatest potential in land prices and development.

Location-wise, the distance from the first bridge to the second bridge is about 20 minutes, unlike the Johor Causeway to the Second Link to Singapore, where the distance is huge. For southerners travelling up north, the second bridge will be the first point of entrance towards the island. When the first bridge was built, it was a nucleus for growth. There is industrial areas mushrooming in the northern part of Seberang Prai. Hence, areas like Butterworth, Juru, Bukit Tengah and Bukit Minyak started growing, and land prices appreciated.

People have yet to see it, but what happened with the first bridge will happen with the second bridge. The government will not sink in RM3.5bil on a bridge without trying to recoup that money. A lot more land around that area will be opened. The Penang Development Authorities are now looking into it. With the construction of the monorail from George Town to the airport in Bayan Lepas, previously not so prime areas like Bayan Baru will begin seeing the land prices appreciating. Whenever a road crosses a building, house or shop, the price always appreciates. We see that happening in the southern part of Seberang Prai – areas like Jawi, Sungai Bakap and Simpang Ampat. These areas have seen the least development, and where there is the least development, the potential is always the greatest.
Land prices in the southern part of Seberang Prai now range between RM8 and RM20 psf. With the kind of projects happening over the next few years, land prices can easily appreciate by 50%. Meanwhile, piling works in the sea for the 24-km second link are scheduled to begin end of the year. Test piling are now being carried out in the sea to determine if the soil can withstand the load of the bridge. This should be completed in three months.