THE property market in Penang is expected to contract by at least 10% this year compared with 5% in 2017 as a result of the overnight policy rate (OPR) been raised by 25 basis points to 3.25%.
“You can argue that it is not a lot. If wages increase correspondingly and the cost of doing business remains the same, there won’t be much impact,” says Raine & Horne Malaysia senior partner Michael Geh.
However, in Malaysia, the impact cannot be regarded as insignificant, he says.
“The median household income in the country is currently RM5,228 compared to RM4,585. But (even at that level) of the income, it would be very hard for them to get a bank loan.
“The absorption of the excess supply would slow down,” he adds.
According to Geh, a conservative estimate of the incoming supply of residential properties in Penang is about 95,000.
If half of the properties can be sold, it will take the remaining 50% at least three to four years to be absorded, if the annual consumption stays constant at 12,000 to 13,000 per annum, says Geh.
He adds that with the interest rate hike, the rate of absorption will slow down, as banks are now even more selective.
“There is also the concern about buying properties near hill slopes and flood-prone areas. These properties are likely to experience a decline, following the recent flooding which destroyed millions of ringgit of property and assets.
“House buyers would exercise caution when buying either landed or high-rise properties near such areas.
“This could slow down property transactions in the state over the next 12 months.
“The pricing of properties near hill slopes and in flood-prone areas could drop below market price,” he says.
On the sub-sale market, the price of high-rise properties on the island has either stayed stagnant or contracted slightly since 2014.
In Tanjung Bungah, the present selling price is between RM720,000 and RM1mil, depending on the size and location of the properties. Batu Ferringhi’s high-rise units range between RM620,000 and RM820,000, while that of a detached landed property is from RM2mil to RM2.7mil, depending on the size and location.
In comparison, a Paya Terubong high-rise unit may be transacted between RM230,000 and RM435,000, while in Jalan P. Ramlee, a high-rise unit can cost between RM125,000 and RM405,000.
Secondary market
On the sub-sale of properties in the country, the number of transactions for the first half of 2018 is projected to dip to 76,000 from 80,000 in the second half of 2017. In ringgit value, this is expected to stay flat at RM27.6bil, according to Geh.
In Penang, the number of transactions for the sub-sale market in the first half of the year is projected to drop sightly to 5,000 from 5,200, compared with 5,000 in the second half of 2017, while the value of transactions is expected to stay flat at RM2.13bil.
The sub-sale segment constitute about 80% of the property transactions in the country.
The rental yield for Penang residential units is expected to stay stagnant with prices expected to remain flat.
Geh says the rental yield per annum for residential properties should be above 5% in order to be attractive. Rental yield for condominiums on the island is still around 3.3% to 4.2% per annum for North-East district, while for South-West district, the yield is between 3.2% and 4.6%.
“The monthly rental is between RM3,000 and RM7,000 in the North-East district, while in the South-West, the monthly rental is between RM2,500 and RM3,000, more or less the same as a year ago,” he adds.
For landed properties, the rental yield per annum is 1.6%-2.5% on the island.
“This is for double-storey semi-detached houses in the North-East district, where the monthly rental is between RM2,000 and RM4,500.
There could be more launches of serviced condominiums this year.
“The freeze on the development of properties valued over RM1mil per unit will increase the popularity of serviced condo projects. Deve-lopers would move to this segment as they would not come under the RM1mil freeze.
“With the high pricing of residential properties on the island, we can expect more young people to rent rather than buy.
“This is why we are seeing serviced condominiums being developed nowadays,” he said.