Penang island is slightly smaller than Singapore but it beats Kuala Lumpur and Iskandar Malaysia hands down when it comes to attracting foreign retirees.
Words and photography by Khalil Adis
The playing field has now leveled across the property markets in Malaysia now that the federal government has implemented similar minimum purchase price policy that mirrors those in the opposition state of Penang.
The announcement by Prime Minister Dato’ Sri Najib Tun Razak in October last year follows closely what Penang had implemented in 2012 but without the RM2 million minimum purchase price ceiling for landed homes.
What this means is foreign property investors will now study the market carefully before deciding which areas to invest in.
Hot property destinations like Kuala Lumpur, Penang and Iskandar Malaysia will still be on the radar of foreign investors.
However, what could make or break the deal are the unique characteristics of each destination.
Market reacts to Budget 2014
Shortly after the Budget 2014 announcements, the National Property and Information Centre (NAPIC) released its data for the fourth quarter of 2014 which showed a subdued market which goes to show the measures have been effective in curbing excessive speculation.
For example, transaction for residential properties declined by 9.7 points.
Data from NAPIC also showed that huge drops were recorded in Kuala Lumpur, Selangor and Penang at 47.5 per cent, 16.2 per cent and 28.1 per cent respectively.
Johor was the only one that witnessed an increase of 4.9 per cent.
This decline came as a result of the new Real Property Gains Tax regime which will see Malaysians and foreigners paying 30 per cent tax should they sell within the first to third year and first to fifth year respectively.
A combination of the cooling measures and oversupply have resulted in the overall price index decline in Malaysia – something that the federal government has been wanting to achieve prior to the election period in 2013.
An oversupply situation is a conundrum as it means plenty of choice for investors and a softening market ahead.
However, it also means it will be challenging to find a tenant and rental yield may not be as attractive.
Kuala Lumpur, Iskandar Malaysia or Penang?
According to Malaysia Property Incorporated, foreign investor accounted for 5.5 per cent of the Malaysia market with Kuala Lumpur coming out top at 10 to 16 per cent followed by Johor and Penang at 10 to 14 per cent and 6 to 7 per cent respectively.
While Kuala Lumpur has always been a perennial favourite and will appeal to investors who want the excitement of city living, the city is notorious for traffic jams and high cost of food.
Another concern is the oversupply in condominium units that have seen increasing vacancy rates.
According to data from the National Property and Information Centre (NAPIC), as of the fourth quarter of 2013, Kuala Lumpur has an existing stock of 424, 324 units, incoming supply of 52, 714 units and planned supply of 22, 629 units.
Meanwhile in Iskandar Malaysia, the property market has finally woken up from its slumber.
For the first time, Johor has seen its property prices increasing at an alarming rate after Iskandar Malaysia was launched in 2006 by former Prime Minister Abdullah Badawi.
From RM250 per sq ft for the very first condominium, Ujana in Nusajaya in 2009 to RM1, 350 for Puteri Cove in 2014, the upbeat in property sentiment caused the state government to impose a new state levy for foreigners from RM10, 000 to RM20, 000 or 2 per cent of the property purchase price (whichever is higher).
However, the property market in Iskandar Malaysia is still in its infancy stage and while food is affordable, they aren’t as authentic and tasty as Penang’s.
Also, the only visible tourism landmark here is LEGOLAND Theme Park while the key industries in Nusajaya will take time to develop as Iskandar Investment Berhad (IIB), only started to bring brand names like Newcastle University of Medicine Malaysia (NuMED) in 2008.
The case of an oversupply is also a scary reality in Iskandar Malaysia as we are looking at almost a million units coming on stream (including existing stock).
While Penang attracted the least number of foreign investors, its tourism industry is vibrant thanks to Georgetown being listed on the UNESCO World Heritage Site.
Tourists who come to Penang are often drawn by the cheap yet delicious street hawker fares, original drinks like nutmeg juice and Georgetown’s old world charms.
With The Guardian listing Penang as number 8 in the Top 40 global destinations in January this year, more tourists have fallen for Penang’s charm and see it as an ideal retirement place.
In fact, Penang is one of the top retirement destinations among foreign retirees under the Malaysia My Second Home (MM2H) Programme.
Since March 2013, more than 21, 000 applicants have been approved and Penang has always come out top due to the charming island life, scrumptious local food and idyllic beaches.