Penang property outlook: Prospects still intact

TRANSPARENCY, accountability, economic viability and investor- friendly policies are all the positive virtues that have been promised by the Penang Government. To uplift accountability in the issuance of government contracts, Chief Minister Lim Guan Eng has insisted on an open public tender system for all projects.

Even the fate of the RM25 billion Penang Global City Centre (PGCC) project is hanging in the balance as Lim recently brushed aside the need to review the project after being informed by the Penang Municipal Council and the state Town and Country Planning Department that it has yet to be approved in the first place. As the proposal for the project was still in the processing stage, he noted the project's application would go through the normal procedures "but whether it will be approved or not is a different issue."

In January, the Federal Government had asked the developers of PGCC to revise their plans, which could delay the project, following widespread protests from residents. The revisions included such measures as scaling down its density, complying with affordable housing norms and leaving hilly land untouched.

To be undertaken by Abad Naluri Sdn Bhd, a 25%-owned by listed property developer Equine Capital Bhd, the PGCC project was to be built on the existing 104 hectares of the Penang Turf Club land, which Abad Naluri purchased for RM488 million in 2002.

To gauge what the future holds for Penang under the DAP-led Opposition State Government, Malaysian Business speaks to some prominent industry people in the state.

Datuk Jerry Chan Fook Sing, Real Estate and Housing Developers' Association Malaysia (REHDA) Penang Chairman and Managing Director, Asas Dunia Bhd

From a recent property fair officiated by Penang's Deputy Chief Minister II P. Ramasamy, I was pleasantly surprised to see development company bosses and their staff reaching out enthusiastically to him. It appears that the new DAP/PKR/PAS administration is accepted without a sense of apprehension or fear. I believe the current concern is uncertainty about pending changes in the administration of the local councils and other policy-making/ approving bodies.

Speaking for REHDA, we have outstanding issues that have been highlighted to the previous administration. Among them are a review in Penang Municipal Council (MPPP) density guidelines, price increase in low cost/low medium cost units, conditional approval of layout pending land conversion, automatic release of unsold Bumiputera units, release of unsold low-medium cost units for public sale, and the removal of back lanes.

On the whole, we believe we should see greater transparency, accountability and accessibility in decision-making as this was the platform on which the current administration used in their election campaign. The Chief Minister and exco members whose portfolios involve land, housing and local government should understand problems the property development industry faces. Then they must have short, medium and long- term plans for housing and real estate in Penang.

Most of the public and the investment community did not expect the outcome of the 12th General Elections (12GE). If public confidence is reinforced by the right policies and noises, what makes Malaysian property investable remains intact and would be further reinforced by such moves.

If the Federal Government carries out what our Prime Minister has assured the public, namely the Second Penang Bridge, the Penang Outer Ring Road and monorail projects, there will be positive spillover effect on the property sector.

Insofar as Penangites are concerned, I don't believe buyers would just hold back buying a property because of a change in the Government. The new administration has promised a "pro-business" approach and if the Pas-held Kelantan experience is any guide, there should be sufficient business and confidence momentum to carry the property sector for the next five years.

Dr Jason Teoh Poh Huat, Director, Henry Butcher Malaysia (Penang) Sdn Bhd

In the short term, real estate investors in Malaysia are expected to adopt "a wait and see" strategy on how the country's new economic landscape will unfold in the wake of the changing political climate. We have received many calls from our foreign investors, counterparts and clients anxious to get a better feel of the ground on the implications for the property market.

In the longer term, we expect Malaysia to continue being attractive as property prices are generally perceived to be still competitive and in most cases below that of its immediate neighbours. Attracting investments, tourisms and residents would indeed be a greater challenge today in view of the growing Asia Pacific real estate market offering alternative opportunities for investors in 2008.

Penang has its own peculiar challenges, which are unlike Selangor. Selangor is a much richer state with greater affluence and even population base. In order to bring further progress to the property sector in terms of creating greater demand, it is imperative to draw in more people to the state.

A survey showed that the average price of a house bought by foreign residents, which may include the Malaysia My Second Home (MM2H) programme participants, is in the region of RM1 million. Taking an average of say 10% of participants buying a house in Malaysia, the impact on the property market as a whole would be say RM1 billion on the basis of about 10,000 participants over the last eight years. This translates to an average of about RM100 million per year.

Competitive pricings of properties in Kuala Lumpur and Penang, being much lower than Hong Kong, Singapore and even Vietnam, are anticipated to continue to drive investment interest. It is also interesting to note that real property prices in Penang and KL are still below their peak levels vis-a-vis 1996 and 1997 notwithstanding their rapid price appreciation over the last six years.

Datuk Tan Chiew Piau, Group Excutive Chairman, CP Land Sdn Bhd

I expect some changes in the authority approval process for development projects and it's likely to take some time before this new state governments come out with clear guidelines. This will cause delay in some of the projects that are pending approvals.

However, I believe once these issues are ironed out and clear guidelines are made known to the developers, the approval process may well be even simplified.

Generally, property developers have no problem with transparency and accountability on the part of the government but we wish this new state government will be consistent in their policies and have forward looking guidelines that are more adaptable to the current market scenario. Unsuitable guidelines, notably lower plot ratio and density in previously classified suburban areas, should be reviewed in line with the openings of new growth areas.

The immediate action needed from both the federal and state government is to restore confidence in the market. Pessimism can be felt immediately after the 12GE and this is further aggravated by the seemingly unending financial turmoil in the US.

Penang and Selangor are among the most developed states in Malaysia. Boasting high value investments in properties from both local and foreign investors, any slowdown in demand emanated from these two states will drag down the property market.

Post-election, our property stocks are experiencing turbulence deriving from the shocking outcome of the 12GE and a volatile global financial market. Investors are already very cautious as the property prices in Malaysia have been constantly testing new heights and may have even reached its peak of this current uptrend cycle. Some may view these events as a triggering point for a downturn cycle in property prices and thus abandoning the property stocks.

I foresee the property market experiencing price consolidation in the near future. Property prices in Penang & Selangor will likely hover around current level. Rental yield based on current prices may not be too attractive to investors to commit in at this stage.

Moving forward, investment in real estate should be made based on mid-to long-term view and also ability to hold on the assets for a longer period, ie, five years and above to reap capital appreciation. Penang and Selangor will still be the choice investment destinations for real estate in Malaysia with Johor and Sabah offering alternative choices.

Dr Goh Ban Lee, Retired Academic and Urban Governance Columnist

If the new government keeps to its election promises - transparency, accountability, rule of law and all fairness - the impact will be positive on the property development sector. Doing business, including building houses, will be competitive and competition is good in a capitalist market. Hopefully, the reduction in the cost of property development and competition will ensure that the price of properties will also be competitive and affordable.

In the efforts to foster transparency and accountability, it is time to make the decision-making process more transparent, especially with regards to approvals of development projects, land conversion, excision from hill land gazette and acquisition of land for development.

It will be wise to also review all existing land and development control laws and policies. Having done that, all laws and policies must be implemented fairly and firmly.

Local plans must be gazetted so that everyone knows exactly what is being planned for the near future. There is a serious need to understand the impacts of rapid rise in property prices on the housing needs of average families. Hopefully, a more efficient and transparent administration of land by the state government and processing of land development projects by the local councils will have positive impact on the prices of properties.

For a start, it is good if the councils can list all applications for permission to undertake development (planning approval) on their main notice boards and their websites. Similarly, all applications for land use conversion, from hill land reserve or other restrictions should be displayed properly, especially on the official websites.

Cheah Chor Sooi "Penang property outlook: Prospects still intact". Malaysian Business. Apr 1, 2008. FindArticles.com. 08 May. 2008.