Penang Property Market? Expert Series with Michael Geh.

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It’s never easy to catch someone who’s also sought after by many newspapers, especially when it comes to views about property. Fortunately, after queuing for some time, I managed to get views from my friend, Michael Geh, Senior Partner of Raine & Horne Malaysia. I have asked him a few great to know questions and I think his concise and yet insightful answers will help many to be able to anticipate and plan for what’s ahead in 2015. Happy reading.

1. How did the overall Penang market performed in 2014?

In the Primary Market, all residential below RM600k are snapped up. However, for primary properties between RM600K to RM1.5 million it is sluggish. The Interest and optimism remain high but the bank loans are short in coming. Rejection rates are above 50%! Secondary properties faring better with higher volumes and less than 5% dip in value. This is also affected by the loan rejections. If only there are less rejections.

 

2. What were Malaysia’s significant policy changes, landmark developments and significant land transactions in 2014? How will these affect the market overall and Penang’s property market?

The main one was the increase in threshold to RM1 million for international investors. This will put off many of the potential investors into Malaysia. However, this may be good for Penang because some of them may go into a Quick-Gain strategy in Penang. However, this Quick-Gain strategy is not healthy for the local market because it pushes prices of properties up significantly. For example, land prices in prime areas has reached RM1200psf – RM1500psf. Someone even told me of a RM2000psf land transaction last week! This would soon be reported by NAPIC. These continuous high land costs, coupled with higher development charges and even the new introduction of infrastructure charge of RM10 – Rm15 psf would raise the overall development costs. Depending on projects, these additional costs would surely be passed on to the purchasers.

 

3. What is your outlook for 2015? Will the slowdown in the property market continue and how will the Goods and Services Tax affect the market?

The Penang property market Is mostly domestic driven. Domestic driven means it’s bought by those who are working and staying in Penang, not necessarily be just Penangites. Today, foreign buyers constitute less than 3% of the total purchases. Many purchasers are from the smaller towns within northern Malaysia. I think the interest for Penang’s residential market will remain strong for 2015. Affordability is however a huge issue as mentioned and thus, majority of the projects being launched these days are aiming at affordability instead. Thats why many of these new units would be mopped up easily. In fact, once GST kicks in, it may affect higher range properties, especially those which are RM700k or higher.

 

4. What and where should investors look at in 2015?

2015 will be a good year for home buyers. Many of the ‘investors’ looking for quick gains have already been pushed out. As for the medium to longer term, investors may want to look at the commercial properties and for residential perhaps newer areas such as Batu Kawan, Balik Pulau. These areas are not so popular today, thus opportunities are still present.

 

5. What’s in your wish list for 2015?

I hope the developers would focus on delivering and selling first homes, upgrade homes and ultimately homes to Malaysian families and youths. It should not be the current predominant mindset which is focussed on properties giving quick gains, flipping or speculations. This is not healthy and has reached epic proportions with the entry of buyers from China, Taiwan and Singapore. These investors are being invited to speculate on the Malaysian property market and as more of these are happening, the property prices would rise resulting in the unaffordable property prices in Malaysia today.

Michael Geh, Senior Partner, Raine & Horne Malaysia.

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