HENRY BUTCHER 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 ), 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 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 Free and Non-Free Industrial Zones (via ) and the Batu Kawan new township and industrial park on the mainland (District of 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 – 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... property buyers and to curb the property speculation activities by foreign purchasers, the Penang State Government imposed a guideline on the minimum Penang’s property market performance softened purchase price of property for foreign purchaser in the first quarter of 2013. (Table 5).The total with effect from 1 July 2012. number of properties transacted in Penang during the 1stquarter of 2013was recorded at 5,756 transactions, a significant drop of 18 per On , the minimum purchase price for cent compared to the figure recorded at 7,007 strata-titled and landed properties are capped at transactions at the same period last year. RM1 million and RM2 million respectively. Nevertheless, for permanent residents, the existing limit of RM500,000 is retained. Despite the drop, the residential sector still remained its dominant share of 75% from the total number of properties transacted (Chart 2). For the approved applicants under the Malaysia My Second Home Program (MM2H), the minimum purchase price remains at RM500,000 with the limit The number of commercial lots transacted, fell to purchase up to 2 units only. sharply in 1stquarter of 2013 compared to the same period last year. Nevertheless, despite the drop in number of transactions, the total transacted value of residential properties increased by 3.5% in the 1stquarter of 2013, due to the relatively strong demand from home purchasers as well as property investors coupled with the limited supply of residential stock in the market. Table 5 indicates the performance of Penang’s property market.

Table 5: Performance of Penang Property Market, Q1, 2013

No. of Transaction Value of Transaction (RM mil) Q1 2012 Q1 2013 % Change Q1 2012 Q1 2013 % Change

Residential 4981 4200 -15.7 1494.98 1546.62 +3.5 Commercial 776 465 -40.1 402.36 307.54 -23.5 Industrial 153 119 -22.2 198.83 132.46 -33.4 Agriculture 530 451 -14.9 139.11 136.63 -1.8 Development 563 518 -8.0 396.52 574.16 +44.8 Land

Source: Valuation and Property Services Department, Penang.

Research Report H1 2013

Source: Property Stock Report, Q1, 2013,

Source: Property Stock Report, Q1, 2013, JPPH

Research Report H1 2013

Foreign transactions, of the total properties transacted  , one of the premier projects of in Penang, accounted for a small portion of 2.98% (or Penang-based developer Hunza Properties Bhd, is 774 transactions) and 2.26% (or 890 transactions) in scheduled to be opened on 23 July 2013. It will 2010 and 2011 respectively. provide a consistent stream income to the group with the option to set up a real estate investment

trusts (REITs) vehicle, possibly in 2016 or 2017. Below are some snapshots of current development of Hunza has some 40 acres of land in several key developers in Penang: and the developer plans to build an iconic project when it is launch in mid-2015 or so. Initial estimate  Ivory Properties Group Berhad (IPGB) will kick off of the project will have a gross development value its Penang Times Square Phase Three, Forth and (GDV) of at least RM6 billion. Fifth developments with a total of 1.5mil sq. ft. in gross floor area by end of 2013. The three phases, upon completion, consist of exclusive Small-Office-  Eastern & Oriental Berhad (E&O) aims to start Home-Office (SOHO) units, a luxury shopping mall, reclamation work next year for the 740 acres of a five-star hotel with 300 en-suite rooms, exclusive land in in the north-east coast of suites and a stand-alone Cineplex. The mall will be Penang for its RM12 billion solely owned by IPGB and target to lure in more Phase Two (STP2) development. It should take international retailers to fill up approximately two years from the start of the land reclamation 500,000 sq. ft. of the mall for a class of its own. before the first project launch can be embarked upon. Phase Two, at three times the size of Phase One, will be a mixed integrated development  IJM targeted to spend about RM100 million for road comprising two islands of approximately 740 acres infrastructure of The Light Waterfront Project. The in size, and is projected to generate a GDV of 152-acre development on reclaimed land will have RM12 billion. about 1,000 residential units. Of this 152 acres, 102 acres will comprise of commercial offices and retail outlets, several hotels, malls, a convention  Southbay, The Loft and Ferringhi Residences are centre and a waterfront dining and entertainment among the current key projects of Mah Sing Group district. Commercial projects for The Light are in in Penang. The company is still looking for lands the final stages of design at the moment. Land reclamation has just been completed and physical that can generate of a minimum yield of construction work is expected to commence in RM1 billion, and Penang is one of the prime areas 2014. The residential portion, known as The Light for their land banks search. The group also plans Collection IV, comprising 78 condominium units to redesign its housing concepts to include more and 19 units of sea-front luxurious bungalows, will township projects featuring many affordable units. be launched next year. They are looking at building homes that will be priced below RM1 million and that will comprise mainly the types of homes that they are planning to build in the future.  SP Setia Berhad will launch two new projects, namely Tower B of on Persi- aran Gurney and Setia Sky Vista in Relau on Penang Island in the coming months. The sizes of  Penang Master Builders’ and Building Materials condominium for Tower B of Setia V Residences Dealers Association highlighted that Penang’s are ranging from 1,300 to 1,800 sq. ft. and will be construction and renovation industry would be priced at approximately RM1,200 to RM1,300 per booming with RM6 billion worth of jobs expected sq. ft. The units are slightly smaller and cheaper over the next 8 years. IJM Land (RM5.4 billion compared with neighbouring Tower A in the same GDV), Mah Sing Group Berhad (RM248 million), parcel. The Tower B project (106 units) will be Sunway Berhad (RM120 million), Ideal Property launched in September or October 2013 and would Development Sdn Bhd (RM2 billion), SP Setia be its new development in the famed Persiaran (RM945 million), Eastern & Oriental Berhad Gurney strip for the next three years. Meanwhile, (RM500 million) and Ivory Properties Group Berhad the Sky Vista (426 units) – a high-rise residential (RM520 million) are among the developers with development in a green area at Relau, will be plans for new residential and commercial launched in November 2013. schemes on the island in 2013.

Research Report H1 2013

PURPOSE BUILT OFFICE Nibong / areas.

The total supply of purpose built office space in The market prices and rentals were generally Penang State was fairly stable with 1.068million sq m healthy and stable. The market prices of prime in Q1 2013, a slight increase of 0.6% from the office space ranged from RM180 to RM500 per sq. preceding quarter (Q4, 2012). A slight improvement ft., whilst the market rentals ranged between (0.8%) is observed in terms of demand with a take-up RM1.50 to RM3 per sq. ft. on the island, space of 0.863 million sq m in Q1, 2013, compared to depending on the location, grade of building, size 0.856 million sq m in the last quarter, 2012. The and facilities provided. occupancy rate was registered at 80.9%.

Overall, the purpose built office sector is expected Of the total supply of purpose built office space, 76% to remain stable in both selling and rental were located on the island. On Penang Island, the markets. demand or total space occupied has registered a marginal increase of 0.4% to 0.651 million sq. m. from the previous quarter. The occupancy rate of the office RETAIL SECTOR space was about 80% in Q1, 2013.

In Q1, 2013, the total existing supply of shopping complex / retail space in Penang State was 1.422 million sq m. (15.3 million sq ft), an increase of 1.1% from the preceding quarter. The overall occupancy rate was recorded at about 69%.

Penang Island accounted for about 63% of the total retail space with an average occupancy rate of 75% recorded in Q1, 2013. On the mainland, the occupancy rate of the retail space was about 59%.

Source : HBMPR/JPPH

The incoming supply of purpose built office in Penang State (all located on the mainland) is estimated to be 0.027 sq. m. As at Q1, 2013, about 0.148 million sq. m. of planned supply (on the island) was submitted for approval.

In brief, George Town prevails in the supply of office space, whilst there are more purpose built office buildings being planned in the Bayan Baru / Sungai Source : HBMPR/JPPH

Research Report H1 2013

Gurney Paragon, a new shopping mall with a net Table 6: Malaysia and Penang: Existing Hotels and lettable area of about 0.7 million sq. ft., is Total Rooms, as at February 2013 scheduled to commence its retail business in July 2013. Penang Malaysia

No. of Total No. of Total Apart from George Town, the South-West Dis- Hotel Rooms Hotel Rooms trict could be another potential growth area for 5-Star 9 3,180 93 35,012 retail sector, especially in the Bayan Baru / 4-Star 13 4,122 117 30,190 / Bayan Lepas areas with a current population of more than 140,000. The 3-Star 10 1,619 209 37,365 population is expected to grow in large numbers 2-Star 11 1,047 191 14,386 in the near future, given the fast pace of 1-Star 3 126 115 5,484 dynamic development of the new and upcoming property projects around the area. Moreover, 3-Orchid 3 247 120 4,362 the Bayan Lepas industrial area houses more 2-Orchid 4 145 203 5,877 than 300 factories, comprising MNCs, major local industrial players and small and medium 1-Orchid 10 200 166 3,943 manufacturing establishments. These factories Unrated 87 3,963 1,420 50,252 are estimated engaging more than 50,000 of strong spending working professionals, TOTAL 150 14,649 2634 186,871 engineers and manufacturing specialists. Source: Property Stock Report, Q1 2013

Furthermore, the on-going Subterranean

Penang International Convention and Exhibition Center (sPICE) with an Aquatic Centre, a four- Table 7: Penang: Average Hotel Occupancy Rate star hotel and a retail podium, is expected to (1-5 star) draw substantial number of domestics and foreign visitors and participants for meeting/ Average Hotel Occupancy Rate (%) incentive/convention/exhibition (MICE), which could potentially spur the retail / commercial Q1 Q2 Q3 Q4 Q1 activities of the Bayan Baru / Bayan Lepas 2012 2012 2012 2012 2013 vicinity. Penang 65.6 65.9 57.3 52.3 56.9 Malaysia 55.6 54.8 50.5 53.4 51.6

HOTEL SECTOR Source: Property Stock Report, Q1 2013

As at February 2013, there were a total of 150 hotels with 14,649 rooms in Penang, accounted Most of the smaller budget and boutique hotels, that for about 5.7% of the total hotels and 7.8% of the used to cater for local and international guests, are total rooms in Malaysia (Table 6). predominantly located in the historical city of George Town. The promotional rates of boutique hotels are between RM350 to RM500 per rooms per The hotels in Penang, in general, registered a night. higher average occupancy rate of nearly 56.9% in Q1, 2013, compared to their counterparts in Malaysia (Table 7).

Research Report H1 2013

Novotel, a proposed RM100 million hotel with 250 Of the total landed properties, 75% were located at rooms, would be developed by Ideal Group at Bayan Seberang Perai, with nearly half of them were Lepas. This RM100 million hotel would be located at situated at the District of Seberang Perai Tengah. Bayan Lepas and is expected to be commenced for On the other hand, 70% of the stratified residential business in 2014. properties were built on the island, with more than fourth-fifth were located on the North-East District.

Other upcoming hotels such as Rice Miller Hotel & Residence, Hotel, Jazz Hotel, Royal In terms of future supply of residential property Bintang Hotel, G Hotel (extension), St Giles Hotel and (Chart 7), about 51% are stratified property whilst Cititel Express, are scheduled to be completed in 49% will be landed property. Of the stratified 2013/2014. residential property, 63% will be located on the island.

On the flip side, nearly 90% of the future supply of RESIDENTIAL SECTOR landed residential property will be constructed on the mainland. As at Q1, 2013, the existing supply of landed and stratified residential properties in Penang State was Chart 7: Future Supply of Residential Properties in 132,070 units and 234,195 units respectively.(Chart 6). Penang State, Q1, 2013

Chart 6: Existing Supply of Residential Units in Penang State, as at Q1, 2013

Source : HBMPR/JPPH

Several new luxurious condominiums located at the prime areas such as Gurney Drive and Source: HBMPR/JPPH on Penang Island were transacted at approximately RM1,000 per sq. ft. Generally, the prices of condominiums at North-East District are in the range of RM400-RM700 per sq. ft.

Research Report H1 2013

Apart from building cost hike, the trend towards  Rice Miller City Residences, Weld Quay lifestyle concept and better quality of building  The Shorefront, Farquhar Street specifications - to certain extent due to relatively strong demand derived from the home  The Latitude, Mount Erskine purchasers, have attributed to the higher selling  Permai Village and Permai Garden, Tanjung prices of new residential projects for both landed Bungah properties as well as high-rise condominiums.  Andaman Series @ Seri Tanjung Pinang

 Marinox, Tanjung Tokong Rental yields of landed residential properties, in general, fetch lower yield of 2% -3% , whilst  Ferringhi Residences, apartments and condominiums could fetch slightly higher yields that hovering around 4%- 5%. PRE-WAR PROPERTIES

Major KL-based property developers, who are George Town, under the UNESCO World Heritage confidence with Penang’s real estate future, have site, has been apportioned into core and buffer made their present felt in Penang. Nevertheless, zones. The Core Zone covers an area of about 109 land scarcity, particularly on the island, remains hectares bounded by the Straits of Malacca on the a key challenge. north-eastern cape of Penang Island, Love Lane to the north-west and Gat Lebuh Melayu and Jalan Dr. Lim Chwee Leong to the south-west corner. Selected major upcoming / under-constructions The Buffer Zone (150 hectares) is protecting Core residential projects are as follows: Zone, bounded by stretch of sea area around the harbour, Jalan Prangin to the south-west corner  Southbay, Batu Maung and Jalan Transfer to the north-west corner.  Summerton @ Bayan Indah  Penang World City There are a total of 4,665 buildings, with 50.2 per  Vertiq, Metro East cent and 49.8 per cent located at Core and Buffer zones respectively. (Table 8):  The Light Waterfront

 Nadayu 290, Jalan Bukit Gambier Table 8: Total No. of Buildings within the Core and  Olive Tree Residences, Hotels and Buffer Zones of George Town Commercial terrace, Bayan Baru

 Arena Residence, Bayan Baru Site Number of Buildings  Elite Height @ Bayan City, Bayan Baru Core Buffer Zone Total Zone  Promenade, Bayan Baru George Town 2,344 2,321 4,665  Setia Greens, Source: Draft Special Area Plan – George Town,  Setia V Residences, Gurney Drive Historic Cities of the Straits of Malacca  Pearl Villas @ Setia Pearl Island  Scott Residence, Jalan Macalister  Icon Residence, Pykett Avenue

Research Report H1 2013

It is observed that pre-war heritage property is in hot demand with immense poten- tial capital appreciation. Rare and unique good listings are limited.

The average price psf of pre-war heritage properties in George Town started to soar after 1999. (Chart 9). The CAGR (1999- 2012) of pre-war properties average prices psf was 13.4%.

The demand for the pre-war heritage properties seems pretty resilient despite global economic uncertainty.

Source : HBMPR/JPPH

Chart 9: Average Price PerSq Ft of Penang’s Pre-war Properties (1980 – 2012)

Source : HBMPR/JPPH

Research Report H1 2013

On average, the current market price of pre-war properties at the George Town world heritage site ranging from RM800 per sq. ft. – RM1500 per sq. ft., depending on the location and condition of the said property.

INDUSTRIAL SECTOR

The industrial sector of Penang State has recorded a minor increase (0.14%) of industrial units supply and contracted growth (-22.2%) of transacted units in Q1, 2013. Global economy uncertainties and internal political risk have posed substantial challenges to the investment climate during the first quarter of 2013. As a Source : HBMPR/JPPH result, investment / expansion decisions have been on hold and industrial market was softened. In term of future / incoming supply of Industrial units for the State (Chart 12 and Chart 13), more than In terms of supply (Chart 10 and Chart 11), more 75% would be constructed on the island (majority of than 80% of the existing industrial units were them would be placed at South West district). located on the mainland as at Q1, 2013. Of these, more than two-third were situated on Seberang Perai Tengah. The mainland will accommodate the balance of about 25% of the future / incoming supply of industrial units for the State. Of these, more than 80% of them would be constructed at Seberang Perai Tengah. There would be no incoming supply of industrial unit at the Seberang Perai Selatan.

Source : HBMPR/JPPH

Research Report H1 2013

Source : HBMPR/JPPH Source : HBMPR/JPPH

The political risk is softened after the general election which was held in early May 2013. According to the World Investment Report 2013 released by the United Nations Conference on Trade and Development (Unctad), Malaysia is ranked 16th top prospective host economy for 2013–2015, as well as maintained its ranking as the third largest recipient of FDI in Asean.

With the continuous concerted promotional effort by Invest Penang, the State continues to be a location of choice for foreign and domestic investors. The demand for industrial sites and factories is foreseen to remain relatively resilient. Nonetheless, due to the scarcity of land suitable for industrial development on the island as well as with the new linkage to Seberang Perai via the Second Penang Bridge, the future request for industrial sites and factories are projected to shift towards mainland, particularly to the and Batu Kawan areas.

Market prices and rentals of ready built factories, in general, are expected to remain at current levels as a result of oversupply of unoccupied factories in certain unpopular and non-strategic locations in Seberang Perai.

MARKET OUTLOOK 2013

The dust of 13th General Election starts to subside. The property investors begin to revive or resume their investment interests that have been put on hold for the past one and a half year due to some political uncertainties. The astute investors, equipped with their conventional wisdom, are of the opinion that buying properties in choice locations in Penang are the preferred mode of wealth creation. Consumer confidence of both local and international investors on Penang’s properties remains buoyant. Therefore, Penang’s property market is foreseen to be filled up with more excitement soon. Nevertheless, global economy uncertainty, natural disaster and local political development are among the downside risks that should be observed. 142-M, JALAN BURMA , 10050 PENANG MALAYSIA HENRY BUTCHER MALAYSIA PENANG Tel. No. +604 229 8999 A ONE-STOP CENTRE FOR ALL YOUR REAL ESTATE NEEDS Fax No. +604 229 8666 Email : [email protected]

PROPERTY MARKET OUTLOOK 2013—con’t CONSULTANCY SERVICES The opportunities could arise both on the island as well as the mainland.  Property Investment Investors perhaps could look into and analyse the future potential  Estate Agency opportunities of the land banks around the intersection of the North-South Highway and the Second Penang Bridge. These could be the potential hot  Leasing & Lettings locations for the property market in the near future.  Property Management  Building Surveying  Asset Valuation Sentiments are anticipated to remain cautiously optimistic whilst the  Research & Consultancy general propensity for property investments is still strong for residential  Tenders/Auction Sale homes not only in the traditionally preferred locations but also for homes  Project Consultancy of high quality specifications, finishes, good security features and facilities.  Marketing Consultancy  Urban Planning On the other hand, Malaysia’s household-debt-to-Gross Domestic Product (GDP) ratio is a high 83%. It is the highest in emerging Asia. Bank Negara HOTLINE Malaysia (BNM) or the central bank of Malaysia, therefore, has recently on 5 July 2013 announced stricter lending guidelines with the aim to reduce Sales & Marketing household debt in the country. Three measures the central bank +6016 412 5582 announced were (1) a maximum tenure of 10 years for personal loans, (2) a Asset Valuation maximum tenure of 35 years for property loans, and (3) a ban on +6019 558 6199 pre-approved personal financing products. Nonetheless, the new limits +6012 513 6942 will not affect loan applications made before the announcement.

RESEARCH TEAM Under these new measures, property buyers will no longer have the option Lim Wei Seong to take loans for longer than 35 years. Before the new caps, property Yeoh Peng Hong buyers could take loans for up to 45 years. Moreover, new borrowers, David Lim especially those with lower incomes, can only take on debt amounting to Advisor : Shawn Ong 60% of their monthly take home pay.

COPYRIGHT The latest caps would mainly affect the younger generation, but may have No part of this publication a limited impact on the majority of older generation of Malaysian who including images & charts may could afford for higher monthly repayments. In today’s property prices in be reproduced or copied in Penang (especially for freehold properties on the island), the level of any form without written affordability for the younger generation would be lower. However, these new measures are a positive pre-emptive move to reduce / curb household permission from Henry debt and excessive speculation, as well as to foster a better and healthier Butcher Malaysia Penang. market and economy. DISCLAIMER N o r epr esent at i on or warranty, either expressed or implied is made as to the For more property articles, news and properties for sale/rent, please login accuracy, reliability of the to our website www.henrybutcherpenang.com contents in this newsletter. You are advised to seek inde- pendent opinion.