Thursday, December 20, 2012
REHDA: Penang’s property sector to remain bullish
Some property developers have been selling RM300,000 units in bulk to speculators who will then sell it at a higher price, perhaps RM100,000 more, to genuine house buyers to make a fast profit.
December 17, 2012
GEORGE TOWN, Dec 17 – Penang’s property sector is expected to remain bullish next year despite a slight slowdown due to uncertainty of the country’s political situation.
The strong property sector in Penang experienced a growth rate of between five to 15 per cent last year and is expected to remain consistent next year, said state Real Estate and Housing Developers’ Association (REHDA) chairman Datuk Jerry Chan.
“The growth for this year is expected to be between five and 10 per cent, slightly lower than last year,” said Chan.
As for next year, while projections remained positive to be between five and 10 per cent, Chan said transactions may remain stagnant as the business community are more cautious while waiting for the general elections to be held.
“People will be more cautious until after the general elections so we will not know how the outlook will be for next year.”
However, property prices are expected to remain high or continue to increase according to market demands.
“We expect a steady appreciation of property values as Penang still has all the ingredients for a strong property sector,” he said.
However, the commercial sector are lagging behind the residential sector in the industry.
“The transactions for commercial properties did not move a lot while transactions for residential properties are going up steadily,” Chan told a press conference today.
The property industry in Penang has always experienced robust growth throughout the years where prices continue to climb.
According to national committee member of Fiabci (The International Real Estate Federation) Malaysia, Michael Geh, new launches in prime locations are being snapped up making it one of the strongest moving segment of the industry.
Last year, the industry saw a total 39,415 transactions, an increase as compared to 25,986 transactions in 2010.
According to Chan, the industry so far recorded only 24,203 transactions as of the third quarter of this year and it is not expected to reach the high transactions of last year.
However, the lower transactions does not equate to lower value as the value of property transactions continue to increase.
In 2009, a total RM6.5 billion worth of property transactions took place and this increased to RM13.1 billion last year.
As at the third quarter of this year, a total RM9.4 billion worth of property transactions were recorded.
These property transactions include residential, commercial, industrial, agriculture and other development projects.
Property prices in the state have increased between 40 and 60 per cent since 2009, Chan said.
One of the factors driving such strong prices in the property industry are the ever increasing land and construction costs.
Chan said cost of land has more than doubled and increasing far ahead of the selling prices of properties.
Geh also agreed that the asking prices for land are now at a record high.
“Constructions costs have also went up and on top of that, developers will have to also bear the costs of building low cost and low medium cost units for every project we build,” Chan said.
He said the increasing costs of land, construction and the requirement for developers to build low cost and low medium units have also indirectly contributed to the increase in property prices in the state.
“We have to set higher prices to cover the costs and also to subsidise the construction of the low cost and low medium cost units, the pricing of which had not been revised in the last decade,” he said.
Chan also admitted that the free market forces of supply and demand plays a role in driving the prices of property in the state up which is a major concern amongst Penangites.
The escalating prices of housing in the state have resulted in calls for more affordable housing and a rising concern that the middle income group will not be able to afford a home.
According to Geh, another factor that is driving the prices of property is ‘property flipping’ or speculative activities.
He had pointed out that some property developers have been selling RM300,000 units in bulk to speculators who will then sell it at a higher price, perhaps RM100,000 more, to genuine house buyers to make a fast profit.
Chan admitted that there were some developers who are selling units in bulk to investors and property speculators.
“But many developers are now realising that they have a responsibility to give preference to first time house buyers and those looking to upgrade their homes from low-medium cost flats to apartments instead of selling units that are priced between RM200,000 and RM400,000 in bulk to speculators,” he said.
He added that development in Penang is inevitable as it drives the state’s economy which brings about higher demand for properties.
“Higher demand equals to higher prices but rental rates are still affordable so if they can’t afford to buy a property here, then they can still rent a place to stay,” he said.