PENANG’S PROPERTY PEARLS
by Lim Lay Ying
Property Times, New Straits Times
08th May 2004

Taking a stroll along Penang Island’s Gurney Drive after sundown in search of a bite to eat or a bit of entertainment can be quite invigorating. Tourists and locals crowd into this district which has already established a nightlife centred around the sea-fronting promenade.

In those few years during the recession, developers were more comfortable pouring money into sure bets such as middle-income residential neighbourhoods on the island. But now, several of them are lining up to build projects for the well-heeled in the isle’s urban playground at Gurney Drive.

There is geographic reason behind this trend. Put plainly, there is little land left to develop. Bordered by the Straits of Melaka to the east, Georgetown to the south, and Pulau Tikus to the west, development is limited in this part of Penang Island. Reclamation and infill are the new answers to the land shortage.

One developer leading the way is E&O Property Development Bhd. which will spend close to RM840 million to carry out a multi-use development project in a reclaimed area at Tanjong Tokong, which is located to the immediate north of Gurney Drive.

E&O Property, formerly known as Kamunting Corporation Bhd., is paying about RM340 million to subsidiary Tanjung Pinang Development Sdn Bhd (TPD) to buy a portion of land in Tanjong Tokong, and plowing another RM500 million to develop it.

TPD has an exclusive right (via a concession agreement with the State Government) to reclaim, sell, and develop 980 acres (392 hectares) earmarked for the north-east coast’s foreshore at Tanjong Tokong. The deal with E&O Property’s subsidiary, E&O Property (Penang) Sdn Bhd (EOPP), was to jointly develop 240.63 acres (96.25 hectares) of the soon-to-be reclaimed land.

New Lifestyle Homes

The land has been approved for the development of a variety of housing types which include terrace, semi-detached, and detached houses, medium-rise condominiums, and low-medium cost apartments. The residential community will be serviced by commercial properties and recreation facilities such as a marina and clubhouse. E&O Property has earmarked “super-linkhouses” for its maiden launch scheduled for the third quarter of this year. The homes have been tentatively tagged at RM600,000 per unit.

The RM7 billion project which will see E&O Property through a period of 8 to 10 years, is being master-planned by Group Design Partnership(GDP), a Kuala Lumpur-based architectural firm renowned for residential and urban development projects. Led by its principal Kamil Merican, GDP hopes to revive the sense of place that was once unique to the island but had diminished significantly due to the frantic pace of development sweeping through the city.

GDP is also lending its experience in previous prominent projects in Kuala Lumpur to another lifestyle development located on Gurney Drive proper. Named 11 Gurney Drive, the 35-storey luxury “super-condominium” block features only 62 units of avant-garde homes with floor areas mostly ranging from 3,400 square feet to 4,200 square feet. Other than the two “pool villas” fronting the swimming pool at the podium block and an 8,000-square-foot penthouse at the block’s pinnacle, the rest of the condominiums are laid out in pairs on each floor level, starting at level four.

Rising Prices

Starting at RM1 million to as much as RM1.6 million a piece for most of the homes (based on RM310 to RM400 per square foot), 11 Gurney Drive is staking a place for itself amongst the top-notch condominiums in Penang Island, joining Gurney Palace, another luxury condominium development along this popular beach-front stretch. The 31-storey block launched less than a year ago, offers 28 large condominiums with built-up areas of over 4,000 square feet and are priced from RM1.2 million each (at RM290 to RM300 per square foot).

Even higher up the luxury homes’ rung is Millenium Tower, also a sea-fronting condominium project on Gurney Drive, which houses only 20 homes. They are probably the priciest so far at RM380 per square foot. With floor areas as large as 6,000 square feet, a home in Millenium Tower goes beyond RM2 million a piece.

In Penang, after several years of recession, there are now signs that the luxury home market is coming out from its slumber, being fueled by low interest rates, an improving economy, and renewed demand led by prosperous local investors.

Over the last few years, upmarket property values have increased by 20 per cent to 30 per cent (and in some cases by as much as 50 per cent), and more luxury homes are expected to join the market in the next couple of years. Developers are warning that sharp rises in raw material costs will produce increases in property prices. Condominiums in particular, many of which use steel as the main raw material, could possibly experience the highest increases.

Demand for Up-Scale Accommodation

Sales of uncompleted units so far, are however not unanimously strong for all the new projects. Gurney Palace, launched two years back in mid-2002, is close to a sell-out with only one unit left. 11 Gurney Drive registered quite an impressive response at 75 per cent within a year from its soft launch. Millennium Tower on the other hand, has another 12 units of the total 20 luxury homes which are currently almost 80 per cent completed, in its stock.

But as long as Penang’s key GDP contributor – its manufacturing sector, accounts for a high percentage of expatriate employment, foreign residents on medium- to long-term contracts will continue to create strong demand for up-scale accommodation. Well-managed condominiums such as Sri Pangkor at Jalan Pangkor (which is within walking distance to Gurney Drive) are as popular as ever amongst the top brass of the expatriate community in Penang. Condominium owners have been enjoying gross yields of as much as 10 to 12 per cent per annum since the project’s completion some eight years ago. Some of the fully-furnished homes are commanding rents as high as those condominiums on Gurney Drive which are fronting the sea.

Silverton Condominiums for instance, which enjoy unobstructed views of the sea, rent out for about RM6,000 to RM7,000 a month currently. The super-sized luxury homes (about 4,000 square feet of living space) are asking anything between RM1.2 million and RM1.5 million in the secondary market – quite a hefty appreciation from the developer’s price of RM800,000 less than a decade ago.

Trend to Remain Upbeat

Prospects for luxury property investment in the island are optimistic. Long-established investment buyers from Hong Kong, Singapore, Indonesia, and to some extent Europe and North America, who retreated from the market during the recessionary period, are slowly but surely making a come-back. New interest is also coming from the direction of the Chinese and Middle-Eastern markets.

This will not only pose a challenge to developers of new projects to provide a product that is attractive to Western and local Asian investors alike, but also drive them to be more creative and improve their build-quality and design standards to meet the foreign buyers’ expectations. Existing properties may need to be modernized and their facilities improved if they want to maintain a competitive edge.

Meanwhile, concepts new to the island such as serviced residences operated by experienced overseas serviced apartment management companies like the Ascott Group (which currently operates several blue-chip properties in Kuala Lumpur) offer great appeal in a market that is expected to remain upbeat through the next couple of years.