This article first appeared in City & Country, The Edge Malaysia Weekly on December 2, 2024 - December 8, 2024

Penang’s residential property market was active in the second quarter of this year, backed by major infrastructure developments such as the Penang Light Rail Transit (LRT), Penang Silicon Island project and the Ayer Itam-Lebuhraya Tun Dr Lim Chong Eu Bypass Road, says Nawawi Tie Leung (NTL) Property Consultants Sdn Bhd executive director and regional head of research and consulting Saleha Yusoff when presenting The Edge Malaysia | Nawawi Tie Leung Property Consultants Penang Housing Property Monitor 2Q2024. These projects have enhanced the appeal of the state to investors and homebuyers, she adds

The proposed Mutiara LRT Line, which was finalised in June and will comprise 21 stations, aims to address traffic congestion on the island and will connect key areas such as Penang International Airport, George Town and Penang Sentral. Construction is expected to start at the end of the year and the project is slated for completion by 2030.

As for the Penang Silicon Island project, the man-made island spans 2,300 acres, with plans for public amenities and components such as industrial zones, housing, mixed-use developments and commercial areas.

The construction of the Ayer Itam-Lebuhraya Tun Dr Lim Chong Eu Bypass Road is expected to be completed by January 2025. This 5.7km alignment is expected to significantly reduce travel time from Bandar Baru Ayer Itam to the expressway, cutting the current 40-minute journey down to less than 10 minutes.

With these infrastructure projects coming along, properties in areas such as Seberang Perai are expected to experience growing demand from homebuyers, says Saleha.

“Residential demand in Penang, especially for terraced houses in Seberang Perai, saw significant growth. This demand is fuelled by improved accessibility and the appeal of lower property prices in Seberang Perai compared to Penang Island. However, the price gap between these [two] areas is anticipated to narrow as infrastructure projects progress,” she adds.

According to the National Property Information Centre’s (Napic) data, residential properties in Penang saw both transaction volumes and values drop slightly on a quarter-on-quarter basis in 2Q2024.

During the quarter in review, 4,109 residential units worth RM1.86 billion were transacted in the state. In comparison, 4,134 residential units valued at RM1.88 billion were transacted in 1Q2024. The total existing stock as at 2Q2024 stood at 569,008 units — an increase of about 1% from the previous quarter.

Despite the lower transaction activity in the second quarter, buyers were actively inquiring for properties, says Saleha. 

“We observed that people were actively looking for properties and making enquiries during the quarter. People are very optimistic, especially with the progress of the LRT and the upcoming completion of the highway. The transaction [activity] will only be seen two or three quarters after that.”

In the high-rise segment, condominiums and apartments continue to contribute the highest transaction volumes in Penang’s residential property segment, compared to serviced apartments, SoHos, SoFos and SoVos, says Saleha.

In 1H2024, 1,556 units of condominiums and apartments were transacted, 533 units of which were priced at between RM300,001 and RM500,001.

There are 34,597 units in the pipeline, bringing the aggregate supply to 603,605 units in the next three years. The incoming supply is dominated by high-rise units, at about 64% or 22,238 units.

By districts, Timur Laut has the largest share of incoming serviced apartment units at 3,214 as at 2Q2024. This is followed by Barat Daya at 1,949 units, Seberang Perai Tengah at 662 units and Seberang Perai Utara at 230 units. There will be no new units in Seberang Perai Selatan.

Besides infrastructure developments, Penang’s strong industrial property segment has continued to push the demand for residential properties in mainland Penang, says Saleha.

“This industrial growth has continued to attract both foreign and domestic buyers who are looking for housing options close to their workplace. As Penang’s industrial sector thrives, it fosters an ecosystem that supports residential demand, pushing property values in key mainland areas upwards,” she adds.

She says the rising cost of living on Penang Island, combined with improved connectivity between the island and mainland, has driven further demand for residential properties on the mainland, making it a key area of focus in future real estate development.

“Areas such as Batu Kawan and Bukit Mertajam have attracted attention from both local and foreign investors, driven by their proximity to major industrial hubs. The industrial boom has led to higher demand for affordable and mid-range housing, especially among workers in the manufacturing and technology sectors,” says Saleha.

Meanwhile, concerns about affordability are growing in tandem with the increased demand on the mainland, she notes.

“There is a concern that rising property prices may start to limit affordability, especially as the industrial sector continues to thrive and attract more residents. However, developers remain optimistic, with new projects to meet the growing demand,” she says.

“While prices have remained generally stable, we observe that the transacted prices of residential properties in Bandar Cassia, Batu Kawan, were on an upward trend during the quarter in review.”

Several Nasdaq-listed companies in the electrical and electronics (E&E) sector announced investments in Penang’s mainland during the quarter in review.

In April, TTM Technologies Inc commenced the operation of its manufacturing facility in mainland Penang. The US-based printed circuit board (PCB) manufacturer invested US$200 million (RM958 million) for its first manufacturing plant in Malaysia at Penang Science Park in Simpang Ampat to address the growing demand for geographical manufacturing diversity and PCB supply chain resilience.

In May, Taiwan-based semiconductor packaging and testing service provider Siliconware Precision Industries Co Ltd held a groundbreaking ceremony for its 8ha state-of-the-art facility worth RM6 billion in Bandar Cassia Technology Park in Batu Kawan. The facility is expected to introduce advanced packaging, testing technologies and turnkey solutions, including wafer bumping, wafer-level chip packaging, flip chip packaging and testing.

In June, US-based MKS Instruments Inc announced its plans to build a super centre factory in Penang to support wafer fabrication equipment production, both regionally and globally, with a US$100 million investment value. 

The company subsequently held a groundbreaking ceremony in October for its 500,000 sq ft factory in Batu Kawan, which will be built in three phases on a 6.88ha parcel. The first phase is scheduled for completion in 1H2026.

That same month, Taiwan-based copper clad laminate (CCL) manufacturer and TWSE-listed Elite Material Co Ltd (EMC) commenced the construction of its 5.6ha Penang Science Park North facility in Simpang Ampat. The company’s first facility in Southeast Asia will be developed in two phases and will serve its local and global customers. The first phase is expected to be completed in 1Q2025 while its operations are expected to commence in 2Q2025.

In terms of outlook, Saleha expects Penang’s residential property market to continue growing stronger with the robust investments in the industrial property segment and infrastructure developments.

“Strong growth in the industrial sector will support the growth in the property market in mainland Penang, particularly in areas like Batu Kawan and Seberang Perai. The steady growth of the E&E industry is driving the demand for housing among the middle-income and industrial workers. This is expected to keep the demand for residential properties steady in the mainland.”

The Penang government is actively spurring the property market. It has introduced several initiatives, including extending the Home Ownership Campaign (HOC 3.0+), which offers a 10% price reduction for affordable homes in the state.

The price ceiling for affordable homes on Penang Island and the mainland is RM300,000 and RM250,000 respectively. With the 10% reduction, the price of these units on the island and mainland will be lowered to RM270,000 and RM225,000 respectively.

The affordable homes will come with a built-up of at least 850 sq ft. The HOC 3.0+ will help first-time homebuyers to own a unit and developers to promote their affordable housing projects.

Meanwhile, the relaxed requirements for the Malaysia My Second Home (MM2H) programme is expected to attract foreign buyers to the state, says Saleha.

“The relaxed guidelines are expected to revitalise interest from foreign property buyers, particularly in the luxury property segment. However, the programme faces competition from neighbouring countries like Thailand and Indonesia, as both offer more lenient visa conditions,” she notes.

To recap, the MM2H programme was introduced in 2002. The programme was halted in 2020 to be reassessed and was reintroduced in 2021 with stricter requirements.

It subsequently underwent another round of revisions, with some of the requirements being relaxed in June this year, such as the reduced amount for fixed deposits, offshore income and liquid assets. Under the latest MM2H programme, applicants are divided into three tiers — Platinum, Gold and Silver — which requires them to place a fixed deposit of US$1 million, US$500,000 and US$150,000 respectively, along with other criteria and conditions.

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