Above: Under George Town Transformation Programme (GTTP), would be transformed from a moderately functioning urban centre into a model 21st century “secondary” city

Key Economic Indicator

Penang’s Gross Regional Product (GRP) was mainly contributed by the manufacturing and services sectors. Manufacturing accounted for 50% of the GRP shares while 46% was from the services sector. The manufacturing main sub-sectors include electrical and electronic while services include hospitality, medical tourism and outsourcing of support services. The services sector is expected to surpass the manufacturing sector soon and is projected to grow by 48.6% in 2015. Unemployment rate remained stable at less than 3%. Penang’s population stood at 1,638,400 as at 2013 and 2/3 of Penang’s population is less than 40 years old.

Malaysian Currency

The Malaysian Ringgit currency continues to weaken and has slid to 17-year lows against the USD as at 30 July 2015. Year-to-date, the ringgit is the worst-performing currency in Asia with a lost of 8.4% against the USD. The downward pressure on the ringgit is due to external and domestic uncertainties. A local forex researcher forecasted that the lowest the ringgit would go is 3.85 against the USD. Impact of Goods & Services Tax (GST) Goods & Services Tax (GST) under the Budget 2014 which replaced Sales Tax Act 1972 was implemented on 1 April 2015. The sale, purchase and rental of residential properties will not attract GST. However, any sale, purchase and rental of commercial & industrial properties will be taxed at 6%. Under the GST tax regime, consumers have been paying more for food, products and services. In view of the overall cost increases in property development, most analysts are of the opinion that this will have an eventual impact on property prices in the primary market. Commercial properties which attract GST are now beginning to feel the brunt of its effect.

Above:The Malaysian Ringgit currency continues to weaken and has slid to 17-year lows against the USD.

Base Rate

Effective Jan 2015, the new reference rate is known as Base Rate (BR). The latest BR as at Jan 2015 is between 2.96 to 4.02% while effective lending rate hovers between 4.45 to 4.8%.

Non-Performing loan

The percentage of non-performing loan (NPL) reflects the health of the banking system. A higher percent of such loans means that the banks are having difficulty to collect their interest and principal on their credits. The total housing loan approved this year was RM1.937 million as at May 2015 compared to RM1.723 million during the same period in 2014, an increase of about RM0.214 million.

Penang Property Market

Penang property prices have been on an upward trend since recovering from the dip in 2009 with 2% increase from 2013 to 2014 with total value of transaction recorded at RM13.49 million and RM13.77 million respectively. The period of Q1 2015 saw a slight drop from RM3.578 million compared to RM3.776 million in Q1 2014. The total volume of transactions increased slightly with 24,346 units of transactions recorded in 2013 compared to 25,555 in 2014. Q1 2015 registered lower volume at 5,637 units compared to 6,416 units on the same corresponding period last year.

The residential sector remains the most active at 68% of the total volume of property transactions as at Q1 2015. The shift in investment from residential saw transaction volume for commercial sector recorded at 8% in 2014, an increase from 9% compared to last year while the development land sector remained the same at 7% for both years.

2014 saw an increased in total value for residential sector from 53% in 2013 to 55% while development sector saw a drop from 23% in 2013 to 20% in 2014. The total value for commercial sector remained the same at 13% for both years.

Penang Residential Market

The year 2014 registered a slight increase of 1,026 units with a total volume of 247,251 units compared to 246,225 units in 2013. The total value as at 2014 also increased to RM82.059 million from RM72.060 million in 2013.

Q1 2015 recorded 3,834 units compared to 4,291 units in Q1 2014, a drop of 0.12% while Q1 2014 and Q1 2015 registered RM1.883 million and RM1.547 million of total value of transactions respectively, a drop of 2% during the same corresponding period.

There is a total supply of 206,000 units on Penang Island of which 80% are strata-titled while 20% comes from landed property.

In terms of supply, on Penang Island, 62% of the properties are less than RM250,000 while properties above RM1M is only 8%.

What is the outlook for Penang’s Real Estate Market in H2 2015?

• Penang has a charm of “outstanding universal value” that showcases George Town’s unique historical and architectural buildings.
• George Town, under George Town Transformation Programme (GTTP), would be transformed from a moderately functioning urban centre into a model 21st century “secondary” city
• Desirable property is limited in supply.
• Demand from local & international buyers is expected to consolidate.
• Challenging market amidst global economic uncertainties.
• Property prices are currently stable.

Source：Henry Butcher Real Estate Penang