Malaysia’s Hidden JewelPenang is shaping up to be Asia’s next property hotspot

Tucked on the northwest coast of the Malaysian peninsula, Penang is a wellknown and well-travelled destination for quick getaways and long weekends, particularly for Singaporeans and Hongkongers. It’s one of the more developed states in Malaysia as well as one of its most economically important: the tech industry and banking accounting for well over half of the state’s business. Penang’s banking sector predates Kuala Lumpur’s significantly, and major banks like HSBC and Standard Chartered have had offices there since the 19th century.

But the island’s beaches, rich culture, UNESCOcertified history and generally high level of progressiveness have formed the basis of the booming tourist trade — and in the near future possibly its property investment sector. The historic state capital at Georgetown is a diverse, bustling city of 1.5 million complemented by the main island’s rolling forests. And those hills are forcing Penang’s property prices up. In a development eerily familiar to Hong Kong, land suitable for development is hard to come by, and limited buildable space has been putting upward pressure on prices. Nonetheless, Penang was the recipient of a record RM12.24 billion (HK$30 billion) worth of foreign investment in 2010, quadruple 2009’s and the future is bright. Penang is on track to be a high-income state with a per capita GDP of RM95 billion by 2020 — twice 2010’s RM48 billion.

Strong investment, a diverse and tolerant society and, perhaps most importantly, a high standard of living have made Penang an increasingly popular investment and eventual retirement location. Similar to Thailand’s appealing lifestyle, supported by strong infrastructure, more and more buyers are looking at Malaysia — and specifically Penang — as a smart investment that can one day be transformed into a personal retirement home. Its proximity to other major Asian centres appeals to regional buyers, and lower medical costs, a warm climate and laid back pace appeal to overseas investors. Hong Kong retiree Cely Cheung recently liquidated her property in the SAR and purchased 2,200 square feet at Ivory’s Moonlight Bay development for under HK$3 million. “Penang is so suitable for retirement and the price of units is affordable. Batu Ferringhi is like Repulse Bay,” she explains. “Luckily I didn’t put the money into the stock market. I think [this] is a safe and fruitful investment as well as a second home.” And Cheung’s pattern is being realised by investors in Hong Kong and on the Mainland in greater numbers, by young and old alike.

For investors right now, Penang properties boast returns that rival any in Asia-Pacific. Foreign banks in Malaysia frequently provide up to 85 percent financing, and the Malaysia My Second Home programme ensures pension tax exemptions as well as long-term visas for owners. As Gabriel Choi of Asia Homes (Hong Kong) argues, in addition to those key factors, new property projects net area per square foot as low as HK$1,200 to $1,500, market stability, Penang’s multi-lingual environment, freehold property, an appreciating ringgit, a reduced capital gains tax, and aforementioned returns often in the neighbourhood of 7 percent — double Hong Kong’s — make buying in Penang right now a smart investment option. There is limited downside risk as Penang prices are only one-tenth of Hong Kong and Singapore prices.

With the Malaysian and Penang governments each dedicated to exploiting the island’s development potential with the Greater Penang Transformation Programme, the RM17.9 billion infrastructure investments (for its connecting bridges, airport and port among others) is designed to keep the foreign investment pouring in — and with it multinationals and their staff who will demand housing. Penang is already home to branches of Dell, Motorola, Hitachi, Bosch and Intel, and expects to see more opening shop in the future. Penang has earned the nickname of Asia’s Silicon Island.

As property investors look for safer havens for their money after debt crises gripped European and the American markets, Penang could be the beneficiary of these outside funds as its property market is resilient and fundamentals are strong. Part of the attractiveness of Penang includes: rising income, boosted infrastructure, increasing urbanisation, tourism and economic restructuring. Limited land, high population in the region, and steady economic growth in turn produce higher incomes, which fuel demand for property developments within the island. Furthermore, an influx of Hong Kong and Chinese mainland investors is expected into the Penang property market, making it one of Asia’s next investment hotspots.