Batu Kawan in Penang kept expanding steadily despite the tremendous period of uncertainty that gripped the real estate industry.
The two biggest game-changers were the 1,151-acre Batu Kawan Industrial Park (BKIP) and Penang's second bridge (which opened in 2014). However, other elements that have contributed to growth include the opening of factories by regional companies like Vitrox, Inari, and Greatec as well as multinational corporations (MNCs) like Lam Research, Boston Scientific, and Bose Corporation.
With the opening of these factories and other businesses, additional job prospects have been created, said Maybank Investment Bank analyst Wong Wei Sum.
"This has, in turn, drawn demand for new residential and commercial properties, the former due to the housing needs of the rising population base. BKIP currently houses over 160 companies.
"We visited Penang island and mainland in Dec 2022 and came back feeling positive about Batu Kawan. During our site visits, we noticed significant positive changes at Batu Kawan. Batu Kawan may no longer be a secondary choice to the island in terms of property demand in the future, in our view," she said.
Wong said that in contrast to earlier site inspections made a few years ago, property developments in the Batu Kawan region have grown more established and have a larger population.
There are retail establishments such as IKEA Batu Kawan and The Design Village, institutions like UOW Malaysia KDU campus and The Ship Campus, and commercial store lots at Vervea @ Aspen Vision City and Eco Horizon.
The Columbia Asia Medical Centre is still being built, and it should be completed this year.
Overall, the investment bank is optimistic about Batu Kawan's long-term prospects, said Wong.
The state government has announced its intention to build 1,156 acres in Byram, Nibong Tebal as BKIP2, and a medical centre in Batu Kawan, which is to the west of IKEA.
According to Wong, these new developments augur well for population expansion and should continue to keep driving up demand for real estate.
Due to a robust recovery in the economy, Penang's residential property sales increased by 16 per cent quarter over quarter (QoQ) and 50 per cent year over year (YoY) in the third quarter of 2022 (3Q22), outpacing Malaysia's growth of 10 per cent QoQ and 40 per cent YoY. There was growth despite three OPR (overnight policy rate) increases since May 2022.
The construction of the projected LRT line under the Penang Transport Master Plan may increase interest in real estate in Penang.
The development of the proposed light rail transit (LRT) project under the Penang Transport Master Plan could accelerate demand for properties in Penang.
However, according to Wong, based on discussions with the developers, there are no updates on the construction timeline and location of stations for the proposed LRT project.
Meanwhile, Penang South Islands (PSI; 4,500 acres) reclamation is anticipated to begin in the third quarter of 2023.
The reclamation of PSI is designed to fund the Penang Transport Master Plan, which includes the Pan Island Link and Bayan Lepas LRT.
PSI involves the reclamation and development of three islands covering 1,700 hectares in the waters of Permatang Damar Laut near Bayan Lepas.
According to Wong, Maybank Investment Bank is cautious on this sizeable land reclamation, as it will significantly increase the land supply in Penang island in the future.
"Hence, it is important to monitor for future demand and supply for properties in Penang," she said.
Visits to five of Penang's most significant sites
Maybank Investment Bank visited five property sites during its trip to Penang in Dec 2022. These sites comprised Eastern & Oriental Bhd's (E&O) Seri Tanjong Pinang (STP2), IJM Corp Bhd's The Light in Penang island, SP Setia Bhd's Setia Fontaines, Eco World Development Bhd's Eco Horizon, and Tambun Indah Land Bhd's (TILB) Pearl City in the mainland of Penang.
Eco World and TILB are the investment bank's BUY selections for exposure to Batu Kawan.
Wong said that TILB has the greatest exposure to the Batu Kawan region. About 95 per cent of its gross development value (GDV) is made up of the Simpang Ampat Pearl City project.
She said that the growing population and housing needs would be advantageous for the Pearl City project.
To meet the housing needs of the mass market, TILB has attractively priced its landed residential goods between RM450,000 and RM700,000.
Elsewhere, Eco World's exposure to Batu Kawan is via its Eco Horizon and Eco Sun projects, accounting for 11 per cent of total GDV.
According to Wong, Eco Horizon, a township development located in the heart of the Batu Kawan commercial area contributed 12 per cent to the developer's total sales in the fiscal year 2022.
For E&O, reclamation of STP 2A (leasehold; Andaman island) and the bridge which connects STP1 and STP2, have completed in 2022.
According to Wong, E&O officially launched 1,020 units of apartments under its project called MEG (RM650 million GDV) on Andaman island in March 2022. The project, with unit sizes ranging from 570 to 890 sq ft is selling at RM950 psf (fully furnished).
"Most of the buyers of MEG are locals, either below 40 years old or above 60 years old. There are also 40 units of shop lot (with a selling price of RM1,100 psf) which have been fully sold," she said.
The MEG project is slated for completion by 2026.
According to Wong, E&O is looking to launch another high-rise apartment project with about 400 fully-furnished units (900 to 1200 sq ft) in 1Q23.
She said that E&O has also started the reclamation of STP 2B-2C (507 acres).
"STP 2B-2C reclamation will be completed by 2030, we were told," said Wong.
IJM's The Light project spans 152 acres of land (42 acres in Phase 1, 102 acres in Phase 2, and 7 acres of coastal park in Phase 3).
The developer handed over The Light phase 1 in 2017 and is currently concentrating on The Light City, a commercial area, under phase 2.
Wong said the remaining GDV for SP Setia's Setia Fontaines township development in Bertam, with a total land area of 1,691 acres, is RM12 billion.