If you have recently seen my article for Malaysian property market as a whole, do note that Penang market is different. In fact even within Penang itself, it is divided into two, the island and the mainland. No prizes for guessing, even in Hong Kong, the more expensive would be the island part and the mainland portion is cheaper. Despite all the recent hype about Second Bridge and Batu Kawan, if you intend to make quick money flipping, I do not think it is a good idea unless speculative activities really happen instead of fundamental developments. Come on, even IKEA is opening in 2020!
Thanks for Michael Geh, Senior Partner of Raine & Horne, we have these clear and concise charts about the property transactions for Penang property market. Buying Penang properties? You should understand the dynamics of it.
Looking at 2011, we could see that the market was actually still ‘affordable’. 70% of all properties transacted was RM250,000 or lower. Typically, these are the 700sf apartments all over the island at areas like Relau, Farlim, Paya Terubong, Sungai Ara, Bayan Baru etc. It was not just apartments, many landed properties in the mainland was also very affordable. There were just 10% of propeerties which were above RM500,000! 20% of the properties were the mid level ones. However, this did not last long because it was also in 2011 where the buying activities peaked in Penang. Queues were crazy during many of the new launches.
In 2012, it has shifted. Transactions total actually gone down but the value of the properties transacted increased. Those below RM250,000 dropped 5% and this was taken over by those above RM500,000. In fact this huge drop of transactions was slightly over 30%. There are a few ways to look at this. Perhaps the transactions in 2011 was NOT due to 100% real demand. Some of it must be due to speculative buy. Alternatively, it may also because due to the price increase in 2012, some people may be spooked by some predictions of bubble bursting in 2013 or 2014. Personally, I think it is more of the former. All these changed again in 2013.
In 2013, transactions dropped even further! Another 20% drop. I think 2013 was a year where people were fearful due to the many predictions by the research houses, property gurus as well as the fact that property prices cannot be going up forever right? Nevertheless, for those who waited, the prices went up further. Now, the properties which are RM250,000 or lower dropped down to just 33% while those within RM250,001 – RM500,000 increased to 44%. This is simple to explain. Many of the properties which were just slightly below RM250,000 has increased to over RM250,000. The % for properties above RM500,001 is now at 23%. Within two years, this has more than doubled.
Actually, as long as the economic growth of Penang is stable and the urbanisation continue to happen with many new graduates from states such as Kedah or Perak moving to Penang, we can safely conclude that property prices in Penang will be pressured to rise. The consolation would be the Second Bridge, which has helped to open up more choices. This will do a lot in keeping prices in check. Already we could see some of the launches in Relau being priced back lower than RM500,000 or just slightly above it. There are also more SOHO being planned but these are on hold currently. Read about it here: Freeze! SOHO in Penang.
If you are seriously thinking of buying your first property and has sufficient savings to do so, I think it’s best to proceed. Even if prices may drop if the world economy collapses but over a longer period of time, demand will definitely push up the price. If it is for investment, I think there are also other choices throughout Malaysia and not just Penang.
written on 5 April 2014
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