PENANG REAL ESTATE MARKET Research Report H1 2013 (For Internal Circulation Only)
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HENRY BUTCHER MALAYSIA PENANG International Asset Consultants PENANG REAL ESTATE MARKET Research Report H1 2013 (For internal circulation only) Research Report H1 2013 TIME TO BUY, HOLD OR SELL? WHAT’S AHEAD? Real estate is always a crucial link in global capital markets and risk management. While the emerging economies of Malaysia go through its metamorphosis, the real estate industry is also developing rapidly with demand for sustainable developments, social amenities, physical infrastructure as well as the exponential increase of residential and commercial properties. For the past few years, the Penang property market has been unprecedentedly extraordinary, exciting and challenging. This means that there is an inherent need for information and Malaysia, Penang, is pleased to present its current knowledge to improve decision making, whether views on the Penang property market. it is among public institutions, commercial and financial entities, developers and investors. This report is intended for discussion and should not be relied upon as professional advice. This brief report is part of an ongoing effort to facilitate a better understanding of the market. While every reasonable effort has been made to ensure the accuracy of the contents, no warranty is made with Against this backdrop, Henry Butcher regard to that content. Malaysian GDP growth at 4.1% Malaysian economy is still on sturdy track with Residential subsector, hike up to 9.8% , largely GDP growth at 4.1% in Q1 2013 ~ Department attributed by housing development projects in Klang of Statistics. Construction and services sectors Valley and Penang. were the major catalysts that spearheading the country’s economy with 14.7% and 5.9% growth respectively. On the other hand, manufacturing sector registered a mild growth of 0.3% only during Q1, 2013, largely due to the decline in the sub-sector of petroleum, The impressive growth of construction sector chemical, rubber & plastic products and the lacklustre was mainly contributed by civil engineering momentum in other sub-sectors. subsector reinforced by infrastructure projects. Research Report H1 2013 The unemployment rate remained fairly stable upon global demand, was more vulnerable to the ex- at 3.3% in March 2013. ternal economic climate compared with the country as a whole (Chart 1). Inflation or Consumer Price Index (CPI) for the first five months of 2013, increased marginally Manufacturing and Approved Manufacturing by 1.6% to 106.2 compared to figure recorded Projects (104.5) at the same period last year. The manufacturing sector, predominantly led by electronics and electrical clusters, is one of the key engines for the growth of Penang’s economy. During Penang, from a sleepy the first quarter of 2013, Penang ranked third, among the counterparts, in terms of the total proposed in- tropical… to a Silicon Island vestment in the approved manufacturing projects. Penang State, also commonly known as Pulau The proposed capital investment in Penang accounted Pinang, Pearl of Orient, Prince of Wales Island, for about 7.2% of the total proposed investment of the and Silicon Island of the World, encompasses an country. Domestic investment plays a significant island and mainland (Seberang Perai), with a role, accounted for almost 87% of the approved total land area of 293 km2and 738 km2 projects in Penang (Table 1 overleaf). respectively. Penang continues to be one of the key choices for The State, with mix of beachfront, city heritage, manufacturers. Apart from the halt of Bosch Solar and hillside residential living, has been one of Energy proposed crystalline photovoltaic (PV) plant, the excellence choices to live, work, raise the others major plants, such as Boon Siew Honda Sdn family and retire. The population in Penang was Bhd, VAT Manufacturing Malaysia Sdn Bhd, Bose approximately 1.645 million (2012) against 1.611 Systems Malaysia Sdn Bhd, and Malaysian million (2011), with an average annual growth rate of 2.11%. Chart 1: World, Malaysia and Penang’s GDP Growth, 2001 - 2013 GDP Growth of Penang Penang is the country’s top three most developed and industrialized State despite being the second smallest State in Malaysia. The manufacturing and tourism industries are the two key engines of economic growth and have generated substantial employment opportunities for the State. Source: World Bank Databank, Department of Statistics The State, with it’s open and export based Malaysia, IMF World Economic Outlook, October 2012. economy activities, which is highly dependent Notes: E= Estimated; F=Forecasted Research Report H1 2013 Automotive Lighting Sdn Bhd are expected to start their operation at the Batu Kawan Industrial Park in 2013, which are also expected to generate additional 2,500 employment opportunities. Source : InvestPenang Table 1: Approved Manufacturing Projects, January – March 2013 January - March 2013 Total Proposed Domestic In- Foreign Invest- Capital Invest- vestment ment ment State No (RM mil) (RM mil) (RM mil) Penang 21 0.739 0.111 0.850 Other States 123 2.615 8.274 10.889 TOTAL 144 3.354 8.385 11.739 Source: Malaysian Industrial Development Authority (www.mida.gov.my) Tourism Tourism industry is the second engine of economic growth for Penang. Penang was in the top three with approximately 11% of the total registered hotel guests of the country.The number of hotel registered guests in Penang (2012) was 6.093 million, or 1.2% higher than the preceding year. (Table 2). Foreign and domestic guests recorded for nearly 51% and 49% respectively in Penang. Table 2: Registered Hotel Guests, 2011 and 2012 Domestic Foreigner TOTAL 2011 2012 2011 2012 2011 2012 (in mil) (in mil) (in mil) (in mil) (in mil) (in mil) Penang 2.956 2.996 3.063 3.097 6.019 6.093 Malaysia 27.737 29.901 26.019 26.171 53.756 56.072 Source: Research Division, Tourism Malaysia (www.tourism.gov.my) The average hotel occupancy rate in Penang was recorded higher than the country, with 63.5% and 64% recorded in 2011 and 2012 respectively. (Table 3). Today, tourism industry is fairy vibrant in Penang, particularly around George Town Unesco World Heritage Site. Various programmes and events have been arranged throughout the year with encouraging participation from both domestic and international tourists. George Town Festival, Unesco George Town Heritage walking and cycling tours, streets art, clan jetties tour, etc, are among the niche tourism products that have drawn substantial interest of tourists to Penang. Research Report H1 2013 Table 3: Average Occupancy Rate of Hotels, 2011 and 2012 2011 2012 Penang 63.5 64.0 Malaysia 60.6 62.4 Source: Research Division, Tourism Malaysia (www.tourism.gov.my) On the other hand, the Malaysia My Second Home (MM2H) programme has generated a lot of interest and to-date (March 2013), more than 21,000 foreigners have been approved under this programme ~ Source : Tourism Malaysia. Penang, with mix of beachfront, city heritage, and hillside residential living, has been one of the excellence choices to stay / retire for foreigners under the MM2H programme. Employment and unemployment rate “21,000 foreigners have been approved Penang almost experienced a full employment situation. The latest unemployment figure yet to be out at the point of writing, but in average, the unemployment rate under Malaysia My of the State was less than 3 per cent. Second Home (MM2H) According to the latest Labour Force Survey conducted by the Department of Statistics, the manufacturing sector in Penang provided almost one-third of the programme as at total employment opportunities in the State, followed by whole sales and retail trades. (Table 4) March 2013” Table 4: Penang - Employment Structure, 2011 Q2 - 2012 Q1 2011 2011 2011 2012 Industry (Q2) (Q3) (Q4) (Q1) Agriculture, Forestry and Fishing 2.1 2.0 2.2 2.4 Mining and quarrying - - 0.1 - Manufacturing 32.7 34.3 32.4 32.2 Electricity, gas, steam and air conditioning 0.3 0.2 supply 0.1 0.2 Water supply, sewarage, waste manage- 1.0 0.3 0.2 0.6 ment and remediation activities Research Report H1 2013 Construction 6.6 6.7 6.8 8.0 Wholesale and retail trade: repair of motor vehicles and motorcy- 14.8 14.7 14.9 15.3 cles Transport and storage 5.7 4.8 5.3 5.8 Accommodation and food service activities 9.6 9.6 9.3 8.2 Information and communication 0.5 0.9 1.2 0.5 Financial and insurance / takaful activities 1.8 2.3 2.1 2.0 Real estate activities 0.6 0.7 0.6 0.5 Other services 24.5 23.5 24.7 24.2 TOTAL 100.0 100.0 100.0 100.0 Source: Labour Force Survey, Department of Statistics, Malaysia Note: Slight discrepancies may occur due to rounding. Industry is classified according to the ‘Malaysia Standard Industrial Classification (MSIC) 2008’ Development Highlights Five New Proposed Highways under Penang Transport Master Plan Strategy 2013 Second Penang Bridge A new enabler – the RM4.3 billion 24km-long Second Penang Bridge, will appear in the landscape of Penang soon in the 3rd quarter of this year. The bridge will provide a better linkage between the Bayan Lepas Free and Non-Free Industrial Zones (via Batu Maung) and the Batu Kawan new township and industrial park on the mainland (District of Seberang Perai Selatan). Penang Transport Master Plan Under the “Recommended Penang Transport Master Plan Strategy, 2013”, there are five new proposed highways, namely, George Town Outer Bypass, The North Coast Pair Road, The Air Itam – Relau Pair Road, The North-South Expressway Link Road, and Third Sea Crossing. Source: Recommended Penang Transport Master Plan Strategy 2013 Research Report H1 2013 Sentiments of Penang real estate on With the aims to protect the interest of the local an upward trend..