This question requires a very long answer, beyond my usual 300 words article. 🙂 However, let us focus on three aspects for now. Space, people and connectivity. There are a few key property markets in Malaysia. This includes Klang Valley, Iskandar, KK, Kuching and without any doubt, Penang. If we look in terms of space availability, we can see a clear reason for Penang. In terms of actual land size, Penang is just 295 sq km. Singapore is 710 sq km. Yes, there is also Penang mainland but if you realistically ask any Penangite, if prices are the same, would they stay in island or mainland, the answer is almost always ‘island’.
My question is, if we assume Penang is 10-15 years behind Singapore, why the property prices cannot rise to Singapore level by then? Penang’s airport is 3rd busiest but it is growing by double digit every year. Medical tourism is increasing as well as overall tourist arrivals. Manufacturing is still key and advanced development centres are being built. The latest science park built in mainland Penang is nearly full! Instead of typical technicians, some factories have 80% engineers, most of whom are paid very well.
Penang’s current population is 1.6 million, expected to increase to 2 million in 7 years time. In terms of increase, it’s 400,000 of which if we assume 4 person to 1 home, another 100,000 new properties are needed. In terms of new properties, in a very good year, Penang may have a total of 12,000 units of new homes being built? I repeat, in a very good year. And even at this rate, it is not possible to satisfy the needs of the new population. What about the current population? What about people who wants to move out from their current home?
The potential is there, definitely. According to Michael Geh, a Director of Raine & Horne, in the secondary market, ‘the prices are between RM500 and RM800 psf for NE, and RM450 to RM750 psf for SW’. If we were to compare this to Singapore, you cannot even buy the cheapest flat of a good size. Today there are at least 15 flights to and fro Penang and Singapore, making these two cities just 1 hour from each other and connected nearly every hour!