In Depth: Buyer straits

By Liam Aran Barnes

In the 1952 'Penang Illustrated Guide', expatriate resident JW Clark described the island's lure as a "spell which makes those who have never been, wish to go there, those who live there want to stay, and fills those who have spent their appointed hour or two with a longing to return." Sixty years on this eulogy still rings true for many.

Penang's favourable location on key trading and shipping routes resulted in its acquisition in 1876 by the then massively influential East India Company. This in turn led to the island's rapid transformation into one of the British Empire's foremost Asian ports. Western traders and sailors soon became settlers, setting up shop alongside local Malays and the growing Chinese and Indian diaspora, paving the way for what has since become the modern-day melting pot.

Nowadays, the island's port continues to thrive and industry, notably the electronics manufacturing sector, is booming. However, foreigners now also look to the "Island of Pearls" for diverging attractions far beyond trade and industry.

New world residents

Ann Marshall, a seasoned Asian expatriate, originally relocated to the region from her native US back in 1978 residing in, amongst other places, Singapore, Bangkok and Tokyo over the last three decades. Since retiring in 2010, Marshall and her husband have called Penang's Seri Tanjung Pinang development their home.

As she takes her dogs on an early evening jaunt along the breezy promenade, the final flashes of sunlight sinking into the Straits, Marshall explains why, after years of Asian city hopping, the couple finally settled on the island.

"While living in Singapore we received an invitation to attend the launch of Eastern Oriental's (EO) Quayside condominium development. We enquired about the project and visited the showroom on numerous occasions, each time becoming more impressed with the quality and price," she says as the calm waters lap against the shore below. "Investment requirements in most Asian countries are quite restrictive for foreign retirees, but Malaysia is noticeably more welcoming. The Malaysia My Second Home (MM2H) programme is one of the world's best schemes for retirees as there are no restrictions on residential purchases, it's very easy to open a bank account and the medical care is great."

During the conversation, Marshall continues to summon myriad reasons for her move to Seri Tanjung Pinang as she strolls through the temperate December night back towards her home. She cites the location as being extremely attractive and compliments the friendliness of her neighbours, many of whom are also expatriates from various corners of the globe. EO's figures show that close to 20 nationalities, primarily Singaporeans, Japanese and British, are represented at the development.

Setting the watermark

Since its inception in 2005, the 980-acre Seri Tanjung Pinang project has raised the bar when it comes to high-end living in Penang. The development boasts the region's first private water-themed tropical resort, expansive luxury communal areas and direct access to the upscale retail marina Straits Quay. The 240-acre first phase comprises sea-facing villas, courtyard terrace houses and upon the Q1 2013 completion the Quayside will also offer five high-rise and two medium-rise super-luxe condo towers, with units starting at RM765,000 (US$250,000).

"The second phase — slated for completion in 2015 — is set to further cement the international prestige of Penang's waterfront address and garner additional investor interest," explains Christina Lau, general manager of sales and marketing at EO Property. "Its well-executed master-planned seafront setting is on par with the likes of Singapore's Sentosa Cove and Australia's Sovereign Islands, which is a strong supporting factor for buyers," she says, adding that Penang's bourgeoning reputation as one the region's top places to live has also encouraged investors.

"[Penang has a] vibrant socio-cultural character defined by its world-famous food, well-preserved heritage that has earned its capital, George Town a UNESCO World Heritage Site inscription and treasured rain forests that nature buffs love," Lau says. "Essentially, if you live in Penang, you have the luxury of waking up in your resort- setting home, can travel minutes to the bustling city for a business meeting, take your guests on a heritage walk and head to a five-star hotel along the Batu Ferringhi tourist stretch for a black-tie event … all within a day."

There is plenty to back up the EO representative's Penang pitch. In April last year, ECA International ranked George Town Asia's eighth most liveable city for the second consecutive year, ahead of Kuala Lumpur, Seoul and Bangkok. Substantial infrastructure upgrades, including transportation improvements and strengthened international education and healthcare systems are in full swing as part of the Greater Penang Masterplan and, of course, the country's biggest selling point — the MM2H programme — makes the country's property market one of the region's most accessible for foreigners.

Second home appeal

Introduced in 2002, the MM2H programme, which provides foreigners with a range of benefits, including a 10-year residential visa, has consistently buoyed annual increases in foreign investment and provided a platform for the zealous growth of the country's high-end property market. Over

the past few years, notable condominium projects, such as Skyhome, 8 Gurney (The Shore) and One Ritz Residence, have primarily been the order of the day for developers in Penang, and the significant influx of wealth into the state, which until recently recorded the country's highest growth rates, has resulted in the undertaking of land reclamation, spearheaded by EO Property.

Local developer IJM Land has also embarked on a reclaimed land-based mixed-use project. Phase one of the RM5.5 billion (US$1.79 billion) The Light Waterfront Penang, strategically situated on the island's eastern coastline, is set, upon completion in 2015, to comprise six parcels of luxury residential units.

"The Light integrated development is very important for the company, and for Penang, where we hope it will become a brand name. In fact, as soon as we opened the door, the units sold," Tan Saw Hoon, The Light senior sales and marketing manager says, adding that about 15 to 20 percent of investors to date are foreigners. "The source markets for Penang have expanded to many countries such as Indonesia, Australia, Japan, Korea, as well as other Malaysian states. When compared to other regional investment destinations, they understand Penang has its own charm."

Allure is certainly something Penang has in abundance. George Town, with its eclectic architecture of yesteryear, rich heritage and heterogeneous culture, was duly named a UNESCO World Heritage Site in 2008 while its cuisine, as many Penangites proudly declare, is one of the region's, if not the world's, most revered, incorporating sumptuous ethnic dishes and haute cuisine from all corners of the globe. The island's innovative modernisation and planned infrastructure is equally significant to Penang's appeal. Bayan Lepas International Airport — currently under renovation — offers direct connections to key Asian hubs, while Penang Bridge, one of the world's largest, will soon be joined by a second connection to the mainland. The island also boasts a number of well-respected education establishments that range from pre-school to university level, in addition to one of Southeast Asia's most established healthcare systems.

Foreign frustrations

With all the above lifestyle benefits in place, in addition to ever-increasing high-end residential options and an extremely favourable investment climate, it comes as some surprise to discover that H1 2012 transactions above RM1 million (US$327,000) by overseas investors totalled only eight percent of all Penang property transactions, according to National Property Information Centre data. Figures provided by the Penang State Government are even lower for previous years, with purchases hitting 2.98 percent and 2.26 percent in 2010 and 2011, respectively.

Some Penang-based agents believe that the percentage of foreign buyers remains relatively low due to the strong demand shown by Malaysian expatriates, particularly when compared to other regional investment destinations.

"Malaysians working overseas are still very much attached to their home ground. With the high exchange rate for the money earned overseas, they are able to invest in high-end properties back home, thus improving the lifestyle of their families," explains Helen Tan, vice president of international business development at property agent Henry Butcher Penang. "The support from Malaysians working overseas is encouraging, and a key factor to the growth of property demand in Penang."

Another factor may be that last July the Penang State Government raised the minimum property prices for purchases by foreigners from RM500,000 (US$164,717) to RM1 million (US$329,435). However, Ng Kooi Leong, Penang branch manager of Rahim Co Property Consultants believes the amendment will not stymie foreign investor interest.

"There are rumours that foreign buyers influenced property [price] hikes in Penang and it was reported that the state [government] increased the minimum house purchase for foreigners … however, it is not yet confirmed and transactions involving foreign buyers still start at a base price RM500,000 [under the MM2H]," he says, adding that the rental market also remains an attractive option for both foreigners and local investors.

"Some of the domestic buyers in Penang intend to seek yields from their investments by renting properties, especially to foreigners," he adds. "Increasing numbers of foreign tourists and [contract workers involved in] Penang's manufacturing industry will provide a stable rental return to investors."

The opportunity for financial gain remains a prominent factor behind both domestic and overseas investment in the island's high-end condominium sector which experienced average price increases of between 7 to 22 percent in the last two years, according to Rahim Co statistics. Yet for full-time residents such as Ann Marshall and her husband, Penang's pull is firmly in the here and now, and although an imminent exodus from other parts of the region is not expected, she believes it is only a matter of time before the Pearl of the Orient becomes one of the region's most fancied real estate havens.

"Since moving here we've seen improved efforts to promote the island, and slowly but surely it's becoming more attractive as an investment destination," she concludes, as her dogs trot over the threshold, "but for the time being Penang remains a sleeper."

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Article source: http://www.thethailandlinks.com/2013/02/01/in-depth-buyer-straits/