I have always been telling everyone that the reason until today I do not own a single unit of a landed property is because condo is the future. Landed would become so expensive that the current units and even future supply will not be so easily available or even affordable. Thus, growth would not be huge when compared to condo. After you buy one unit, who can you sell to? Well, honestly when I look at just Penang, I am WRONG. Haha. Yes, please take a look at the chart below provided by my good friend, Michael Geh, the senior partner of Raine & Horne International Zaki + Partners Sdn Bhd. It shows that whether it’s 2013 or even 2014, landed terrace homes of 2-3 storey remain the MOST popular in Penang. This is despite the fact that one row may have just 30 units of these but a few acres of land may be housing a few hundred condo units.
Thus the conclusion from this chart is simple. Penangites are VERY rich or if they are not rich, it meant that they are crazy for these landed units. Perhaps Penangites are both. Actually, the supply of these landed units would be very limited because the available land within the island is getting lesser. Even for developers who reclaims land, they have to build a lot of high-rise and not these landed ones because it would not be able to cover their costs or even obtain high profits. Besides a usual 2 storey landed is already easily RM1 million in Penang. How many people can afford to buy one anyway? Refer to some samples of latest listings below:
The conclusion from the chart and these landed properties tells us that I may be wrong for now but I may not be wrong for too long once all the high-rise units bought in 2011, 2012, 2013 and even 2014 are continuously coming into the market. Just assuming the prices increase by 3 percent per year would meant that these terrace houses would be considered ‘super grossly unaffordable’ to majority of the usual full time employees like you and me just a few more years down the road. It is now ‘grossly unaffordable.’ For those who can afford to buy a few and wait, I guess the choice is clear yeah. For Penang, landed would always be a premium, then, now and future. Happy owning one.
written on 30 Apr 2015
next suggested article: Landed in Penang? Be prepared with lots of money
0 Responses
I believe klang valley will be the same trend for long term…
any idea what going to happen for property market for balance 8mths?
i start received property agents call to offer lower or match my previous offer….
Are u referring to landed property in pg island?
Kennix, I think your situation should apply for condos which many speculated previously. Happy buying.
Hi Charles, Firstly, i have been following your writings and I enjoyed reading all your posts.
Just to check, your chart on transaction refer to primary + secondary transactions? also, are the numbers purely island or both island + mainland?
Also, just sharing my view. I beg to diff from your view in that condo and not landed is the future. It always go back to supply and demand. supply for landed will be limited and + unlike condo, supply is much more in term of volume. Malaysia with a young population, demand will be there.
Low supply + high demand = increase in price
High supply + high demand = same/ depends.
(Not taking sentiment into consideration)
Also, in accounting terms, building depreciate over times, but not land.
I totally understand where you are coming from and that you are using “affordability” /pricing to determine that demand will be low for landed in the future. However, it is demand that determine pricing and not otherwise in my opinion. If no demand, seller will then have to reduce pricing and the valuation of the area will then drop.
“affordability” is a sensitive topic as what is affordable to one may not be affordable to another.
There is also not much of a premium for landed houses today over condo. Taking your example, the average psf for terrace is about $500. which is the same as condo or lower. a 2000sqft condo today is also about the same price as a 2000sqft terrace.
In my humble opinion, i do foresee terrace house will be in demand even in the future due to malaysian mentality. Condo owner will seek to upgrade their house when their income increase as they age and this group of buyer will consider terrace houses as their next upgrade. Likewise, terrace owner will seek to upgrade to semi d generally. I do agree that condo in the future will be easier and faster to sell compared to landed.
I am interested to hear your view and hope to read a writing from you that if during a property downturn / correction / bubble burst, will landed or condo be more resilient to price fall?
Hi froggy, the numbers are for Penang as a whole. Will see if I am able to get the transaction numbers by mainland versus penang. Haha. Yes, I like differing opinions. Imagine if everyone thinks the same, property investment would be so boring. Premium for landed is there because today unless we are willing to buy landed a little far away, the prices have gone up way too much. However when we look at the overall market, there are still lots of landed which are cheaper than high-rise units in the city centre. Most of the time, a terrace of double storey would be around 1,600sf (two floors). In terms of actual numbers of high-rises with 1,600sf and higher, there are still few units today. Yes, I do agree that some condo owners would likely upgrade to landed if they are able to but do note that this upgrade must be to gated and guarded ones most of the time. As soon as we come to G&G, the premium becomes even larger. In any property downturn, I would think you are right, the focus should be on demand vs supply. Any property which is overpriced is likely to fall, irregardless of landed or high-rise. If it is correction / bubble bursting, we will see a sudden fall in price across all types. Since there are less landed, I would imagine it should be more resilient. However, I am not a futurist. Your guess is as good as mine. Cheers!