In part two of the StarBiz roundtable on the Penang property secor our panelists discuss concerns over the state's long-term attraction as a property investment hub and what can be done to enhance the competitive edge.
STARBIZ: What are the strategies that can be employed to make Penang a destination of choice for second home and property investment?
Ishihara Shotaro: The developers in Penang should really look into building apartments with built-up areas ranging between 900 and 1,300 sq ft that come with two bedrooms, priced between RM400,000 and RM600,000.
The Japanese buying properties in Penang are usually retired old couples and they are not looking looking for units that are very large size, for example, like a super-condominium.
Developers should also look into providing professional management services for foreign buyers.
Penang is losing out as a second home destination to Australia and Hawaii, where professional management services for high-rise properties are available.
Some 85% of the Japanese staying in Penang rent their homes. There are about 300 Japanese couples staying in Penang.
Penang also has to stop advertising and promoting itself as an island resort with nice beaches.
The beaches and waters here are dirty and this has adversely affected tourist arrivals from Japan and South Korea.
Singapore and Hong Kong don’t promote themselves as island with nice beaches so tourists also do not have such expectation when they visit Singapore or Hong Kong.
Datuk Alex Ooi: There’s a need to upgrade the state’s transportation system, hygiene, environment and traffic management in order to attract Malaysia My Second Home (MM2H) programme participants.
I recently bumped into several Japanese and their main complaint is the transportation system in Penang.
Previously, there were Penang maps everywhere. However, I can hardly find any now, even at the airport. When I travel abroad, I usually bring a bunch of them to distribute overseas.
To attract foreign investors, we also need more international schools. Some foreigners are complaining that there are not enough of such schools.
Datuk Wong Siew Hai: There must be improvements made in the security of Penang, where burglaries are prevalent. This is the reason why gated projects are popular, as house owners want to avoid thefts.
Properties here are still cheap in comparison with the properties in Kuala Lumpur and Singapore.
Our property prices are about 15% of the same range of properties in Singapore. The prices in Penang are between 40% and 50% of the Kuala Lumpur selling price.
Datuk Rosli Jaafar: For Penang Development Corp, we don’t have much experience with the MM2H programme.
One thing I’d like to understand from the Japanese is whether they want to stay within their own community or they don’t mind being apart of the local community. This factor will have a bearing on our architectural designs.
There should also be more varied pricing and not just either focus on the high end, the middle cost and the low end pricing.
In addition, there are a lot of restrictions on our designs caused by the bylaws. If you look at the bylaws, there are certain requirements involving the height, ventilation and staircase of the projects which we have to abide.
Datuk Faudzi Naim: Our second home programme is currently attracting investors from north Sumatra.
These investors are impressed with Penang’s positioning as a hub for education and medical services.
Last year I promoted Penang properties in Medan.
It generated much interest among the potential investors who the came to Penang later to buy some RM30mil and RM40mil worth of properties.
These investors always compare Penang and Singapore as a choice destination for second homes.
Thus I believe that the property prices in Penang will hit between RM750 and RM1,000 per sq ft by 2010.
We must, of course, work towards providing the foreign investors with what they are looking for such as high quality professional management services for the high-rise properties, raising the security standards, and improving the garbage collection system and traffic conditions in the state.
Wan Mohd Ebrahem: Malaysia Airlines is the first airline to have signed an agreement with Henry Butcher to conduct special tours for foreigners to view Penang’s properties. Critics have said, “How can an airline and real estate surveyor get married?” This is to create awareness on what kind of properties are available in Penang.
This could be my last forum because I’m leaving Penang. My boss is sending me to India.
StarBiz: What are the factors that could be considered to increase domestic demand for properties?
Faudzi: To increase domestic demand for properties, the state government must play a role to bring down the costs of properties.
The selling prices of properties are being driven up because developers have to cross-subsidise low-cost housing from other projects.
Thus the state government must stop requiring the developers to fulfil low-cost housing obligation. There must be a different policy to provide low-cost housing to the lower income group.
The state government should look into redeveloping certain districts in the mainland as growth centres and as an area for affordable housing.
Wong: Penang must be able to attract the young people to come over. It is not able to attract the younger generation because Penang is not known to be a happening place.
I have friends who can go to a different restaurant in Kuala Lumpur every day for 365 days. But in Penang, there isn’t much to do.
If Penang can transform itself into a happening place, then it can attract the younger generation to stay and work in Penang.
These people can then drive the demand for property here.
Dr Lim Mah Hui: If you look at Japan at the height of its stock and property market in 1989, the value of land around the Imperial Palace was worth more than all the land in California. Its urban land price index increased to more than 100. It has dropped over the years to 60 now.
I encouraged developers and real estate surveyors to collect statistics and make them public. When developers sell their units, they must have the buyers’ profile, which includes details like their nationality and income, to create a data bank. This is important for developers to know how much more to build.
One more thing I want to say. I disagree that Penang is underdeveloped. If you live in a town like Kyoto, you will see it’s a wonderful town. It has stringent laws on their development. Its authorities used to allow buildings to be as high as 10 storeys, but now this has been reduced to eight storeys.
There are too many condominiums in Penang and they have horrible quality. I don’t understand how the MPPP (Penang Municipal Council) and developers can allow this to happen. It’s better to go for quality than for quantity. I think they should be torn down and rebuilt.
StarBiz: Is there a perceived oversupply of residential properties?
Ooi: For the past three to five years, many people invested in properties due to the low interest rates and a sluggish capital market.
Housing loans are very attractive as they are 0% to 2% below the base lending rate (BLR) which is about 6%.
As there is likelihood that Bank Negara may increase the BLR to curb inflation, the property market may be negatively impacted, as there would be forced selling of properties.
Rosli: Once you have reached an optimised level, any further development may cause chaos. We can’t simply continue to develop and develop.
Certain areas that have reached an optimised development level should be redeveloped instead.
Gated communities are not actually catered for in the existing bylaws. I was told there’s still much confusion on them.
Looking at low cost and low medium-cost projects, it’s sad to say that many foreign workers are occupying them. When they leave one day, who’s going to occupy them?
There are also many houses in the mainland, which are sold but not occupied. The owners could have been speculating when they bought them. We often hear of low cost houses being auctioned off below the market price. Developers are building these houses not because they want to but because they have to. Even in my area, 8% of the units are sold but are unoccupied.
Ng Bock Tye: Penang is underdeveloped. However, we must be careful in the type of development we plan to do. Penang should go for high-density development, especially along Penang Outer Ring Road.
StarBiz: What can be done to improve the livability?
Syed Ahmad Fauzi: Penang still got historical charm and is till today a melting pot of diverse cultures.
Firstly, the red tape should be reduced in the state and local government machinery.
The concentration of executive power on the above hinders the implementation of projects that can raise the quality of life and the livability of Penang.
We also need to set up a fund to restore Gurney Drive, which is a nostalgic place, and the beaches.
We also need more car parking space and good marketing efforts to promote Penang.
Wong: The manufacturing sector contributes about 40% of the state gross domesticproduct.
It is important to keep this sector healthy so that it can in return provide support for the property sector.
Penang now lacks the ingredients of a happening place, which is essential to attract a younger generation of house buyers to move over.
Ooi: Penang has got the natural environment and historical culture.
To make it livable, you would need to have a bigger population with the spending power, as money is crucial to drive growth.
Thus we need a bigger population and to do that Penang has to become a happening place.
Local entrepreneurs must also explore blue ocean strategies and fresh areas of business opportunities to create spill over economic effects.
StarBiz: On financing and house purchases, what strategies can be employed to ensure adequate financing for the housing market?
Lim: I’m not a developer but I can speak from the economic and social point of view.
Speaking as an ex-banker and looking at the bigger picture, I don’t think it’s actually wise to encourage a higher loan margin.
For 20 years, I’ve been a banker in the overseas - New York, Tokyo, Singapore, Hong Kong.
I want to share what are the factors which usually precede a banking and financial crisis.
There’s too much money flowing into the system either from foreign investors or due to the central bank’s policy being too loose.
This invariably leads to two types of bubble. The first is the property bubble while the other concerns the stock. It has happened in the past and it’s happening today. The cost of cleaning up a banking crisis is enormous. Developers should not just build and build to make more money.
Thus it’s okay to take into account that we should not overdevelop. The current loan margin of 70% is fine. If one does not have money, the one shouldn’t be buying.
I lived in Manila for six years and I also lived in Jakarta. I think gated communities are not desirable because they’re too exclusive. I can’t pass from one town to another because they are all gated. I have to go round and round and use a longer route. We should not cater to every whim and fancy of the foreigners.
I had been away for over 25 years and when I came back to Penang a year ago, I found that it’s overdeveloped. I can’t understand how people can afford to buy properties worth millions of ringgit. I was recently informed that only 5% of the total households in Malaysia earned RM10,000 or more monthly.
I also didn’t know that foreigners could buy houses here. They can’t do that in Thailand, Indonesia and Singapore. By allowing them to do it here, it will push up the property prices. Where are the local people going to go? This is a very crucial issue for developers to consider.
StarBiz: Will mega transportation projects solve Penang’s traffic woes?
Ng: When the second Penang bridge is completed, we will need an outer ring road to complement it.
So the government must build one or else there’s no way of dispersing traffic.
Lastly, I would like to say that a high-density project does not mean that it generate a poor environment. It can be a good one if there’s proper planning.
Lim: I don’t think another outer ring road is the answer. We should go the same route as Singapore where one has to pay through his nose to have a car. Higher parking rates and taxes on cars should be imposed.
Rosli: There are two issues which need to be addressed: transportation and security. I share the view that there’s inadequacy in the transportation system. Monorails and building more roads may not be the best way.
There are already a lot of roads here. The problem is the buses here don’t stop at the right time and right place.
More roads and bridges will result in more cars. We should reverse the scenario by making it inconvenient to use cars. In some parts of the world, the number of roads was reduced.
In one place 20 years ago, there was a busy road. Today, it’s parkland. The road is gone.
On the security aspect, if you are rich, of course you can pay anything to be well guarded. But for the poor, they can rely on a good design, which promotes security surveillance.
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