GEMS FROM THE NORTH 1

GEMS FROM THE NORTH 1

About us. Incorporated in 1982, Raine & Horne International Zaki + Partners Sdn. Bhd. is a firm of Chartered Surveyors and Registered Valuers. Our practice covers a wide range of services including property valuation, investment and project management, property management, real estate agency and property consultancy. The firm currently operates twelve (12) offices in Malaysia: Kuala Lumpur, Petaling Jaya, Subang Jaya, Kelang, Johor Bahru, Melaka, Ipoh, Seremban, Kuantan, Penang, Kota Kinabalu and Kuching. Since its inception and establishment, Raine & Horne International Zaki + Partners Sdn. Bhd. has enjoyed an outstanding and enviable reputation and success. The firm has received wide recognition from all quarters, nationally and internationally. Founded in 1883, Raine & Horne is one of the world s largest real estate organisations with offices and affiliates all over the world, including in the major cities of South East Asia, Europe, Canada, USA, Fiji, Australia, New Zealand, Japan and Africa. Raine & Horne International Zaki + Partners Sdn. Bhd. aims to provide our clients with quality professional service. Raine & Horne International Zaki + Partners Sdn. Bhd. is committed to the Quality Management System required by ISO 9001:2008 Standards. Our team comprises of highly qualified partners in various expertise which authorize us to offer broad ranges of services in: Professional Valuation Services Corporate Advisory Services Project Management Property Management & Maintenance Real Estate Agency Auctioning Market Research & Feasibility Studies Property Investment Consultancy Building Auditing Bio Asset Valuation Forensic Valuation 2

Contents Summary......4 Overview......7 Components of Gems.....8 Basic Information...12 Residents Data...15 Property Market in Malaysia..19 Residential Market for Gems...26 Residential Market in Penang...35 Residential Market in Kedah...37 Residential Market in Perlis...39 References...41 Contact us.42 International Affiliations.43 3

Summary. Basic Information The northern territories of Peninsular Malaysia consists of 3 states; which are collectively known as Gems from the North. They include Penang, Kedah, and Perlis. Two of the smallest states in Malaysia (Perlis and Penang) are located in this region. Although geographically in proximity, the rate of development across the region varies considerably. Penang is one the most developed and urbanized state in the country, whereas Perlis has one of the lowest urbanization rate in Malaysia. These northern Gems only account for a small portion of Malaysia s land mass but is collectively growing in tandem with the country in many different ways. They include productivity, healthcare, population size, concentration, urbanization, job opportunities, income, and property market. It should be noted that Penang is in a more advanced stage of development, whereas Perlis is lagging. Gems property value made up 17% of its GDP output for 2013. The amount of activity was higher in the area as well with greater percentile of property transactions per 100 population. However, this rate of increment is diminishing slowly. Residents in Gems preferred to dwell nearer to the centre of commercial, industrial, and agricultural activities of respective states. They include capital of respective states such as district of Timur Laut (George Town) in Penang, and Kuala Muda (Sungai Petani) and Kota Setar (Alor Setar) in Kedah. On the other hand, Malaysia s population is aging slowly (but still in its early stages). Median age was 26.2 in 2010. Higher number of the population are leaving childhood and entering the workforce. This is the same for Gems. As for ethnicity, Gems composition is similar to that of Malaysia as a whole. The LQ/H ratio which came in at 1.18 for Gems has confirmed that there are no current shortages of houses in this area. However, the stock availability is not too high. An exception was noticed in the state of Penang which recorded a high LQ/H ratio when compared to the rest of the northern territories. The reading of 1.21 suggests that this area might be showing signs of excess residential properties. 4

Summary Property Market The property market is highly cyclical with a high correlation between volume and value. However, this trend was not observed in 2013. Value increased moderately, while volume dropped considerably. Average price per transaction had the best run in the 10 years being reviewed. Nonetheless, the residential sector was more resilient compared to the rest of the market. Residential sector made up the bulk of the total property market in Malaysia as well as Gems. The combined residential number of transactions for Gems accounted for 14% of the total transactions of Malaysia. Turnover rate was fair at 3.37%, but has declined slightly in terms of YOY. While percentage of unsold new launches were at the middle range of the country s list. Within the vicinity of Gems, a slow trend was seen emerging; where the total weightage of agricultural sector was gradually shifting towards residential and industrial sectors. The state of Penang held the majority of residential transactions for Gems due to its considerable population size, state of development, and wealth effect. The recent YOY decline in transacted volume was extremely evident in Penang (-24%). The entire northern territory was declining at a faster rate than the country. Gems average price per transaction was increasing at a similar pace with Malaysia; led by Perlis and Penang in Q1 2014. Gems provide 14% of the total residential supply in Malaysia, which is quite comparable to the number of transactions (14%) as mentioned earlier. Collective IS/ES and PS/ES ratios for Gems were slightly higher than national average. Both instances were led by Penang, followed by Perlis, and Kedah. Distribution of transactions was quite balanced with slight skewness to the right; which placed minor emphasis on lower price tags. The highest share was captured by the price range of RM 50,001 100,000. Two of the most preferred house types for Gems were terrace houses, and condominiums and apartments. Almost all house types recorded positive YOY changes for average price per transaction and the rate of increment seemed to be consolidating in the near term when compared to QOQ. 5

QOQ CHANGES (%) Summary The immense preference for terrace houses was fairly symmetrical across Gems with 2-3 storey terrace houses being the main choice in Penang, while single storey terrace houses were transacted the most in Kedah and Perlis. Heavy weightage of strata properties was only present in Penang. A growing number of transactions was witnessed within the price range of RM 200,000 and below in Q1 2014. In addition, gross rental yields for strata properties were higher than landed properties in Penang, while average gross rental yields for landed properties were higher in Kedah and Perlis compared to Penang. Figure 1: Q1 2014 QOQ changes of Gems for Residential Volume and Average Price per Transaction (NAPIC, 2014). 19.07 1.07 7.68 PENANG -8.66 KEDAH PERLIS TOTAL -13.24-15.62-25.13-30.45 VOLUME AVERAGE PRICE PER TRANSACTION A summary of the current residential market in Gems can be illustrated in the volume and price chart of Figure 1. In the most recent quarter of Q1 2014, Kedah was in the spotlight with high average price per transaction growth rate, while prices were fairly stagnant in Penang. Prices in Perlis depreciated rapidly. Though all states were badly hit by decreasing volume of transactions, with Penang the least severely affected. The performance of Gems as a whole was in a deteriorating state. 6

Overview The northern territories of Peninsular Malaysia consists of 3 states; which are collectively known as Gems from the North. They include Penang, Kedah, and Perlis. Two of the smallest states in Malaysia (Perlis and Penang) are located in this region. Although geographically in proximity, the rate of development across the region varies considerably. Penang is one the most developed and urbanized state in the country, whereas Perlis has one of the lowest urbanization rate in Malaysia. Penang is the only island state in Malaysia, which is prominently known as the Pearl of the Orient. It was originally part of the Malay Sultanate of Kedah. Due to the lack of land for development, a few land reclamation projects were untaken to provide suitable low-lying land in high-demand areas such as Tanjung Tokong, Jelutong, and Queensbay. Ancient Kedah is one of the oldest civilization in Southeast Asia. The state s mainland has a relatively flat terrain, which is suitable for growing rice. Thus, it is considered the rice bowl of Malaysia; accounting for about half of Malaysia s total production of rice. In 2008, the state government banned the conversion of paddy fields to housing and industrial lots to protect the rice industry. Under the 9 th Malaysia Plan, the Northern Corridor Economic Region (NCER) was implemented; in which an economic area that focuses on automotive and aerospace industries were established in Kedah. The tourismrenowned Langkawi island is located in Kedah as well. The smallest state in Malaysia; is situated at the northern edge of Peninsular Malaysia, bordered by Thailand. Similar to Penang, Perlis was originally part of Kedah. The Coat of Arms of Perlis consists of a sturdy green of wreath of padi, indicating the wealth of the kingdom and the chief economic activity of the people. 7

Components of Gems Compared to other selective regions that were being previously reviewed; such as the Inner Valley (Klang Valley), Outer Valley, and Borneo, these northern territories are considered relatively small and diverse. Figure 2: Georgetown (left), and Menara Alor Setar (Right). There is no current official designation of boundaries for Gems and groupings of selective areas could be highly subjective. For the purpose of studying the housing market, these selective areas are grouped according to the National Property Information Centre (NAPIC, 2014). They include: 1. Penang (5 districts) (Island: Timur Laut, Barat Daya; Mainland: Seberang Perai Utara, Seberang Perai Tengah, Seberang Perai Selatan) 2. Kedah (12 districts) (Kuala Muda, Kota Setar, Kulim, Kubang Pasu, Baling, Pendang, Langkawi, Yan, Sik, Padang Terap, Pokok Sena, Bandar Baharu) 3. Perlis 8

Components of Gems Figure 3: Map of Penang s districts (2010 Population and Weightage in brackets) (Department of Statistics Malaysia, 2014). 3. 288,692 (19%) 1. 510,996 (33%) 4. 197,131 (13%) 2. 362,820 (24%) 5. 166,685 (11%) TOTAL PENANG = 1,526,324: (42% OF GEMS) 9

Components of Gems Figure 4: Map of Kedah s districts (2010 Population and Weightage in brackets) (Department of Statistics Malaysia, 2014). 7. 92,784 (5%) 4. 214,479 (11%) 10. 61,970 (3%) 11. 48,347 (3%) 2. 357,176 (19%) 8. 66,606 (4%) 6. 93,598 (5%) 9. 66,387 (3%) 1. 443,488 (23%) 5. 132,304 (7%) 3. 281,260 (15%) 12. 41,352 (2%) TOTAL KEDAH = 1,899,751: (52% OF GEMS) 10

Components of Gems Figure 5: Map of Perlis s district (2010 Population and Weightage in bracket) (Department of Statistics Malaysia, 2014). 1. PERLIS 225,590 (100%) TOTAL PERLIS = 225,590: (6% OF GEMS) 11

Basic Information Table 1: Depiction of Gems and Malaysia (2012) (Department of Statistics Malaysia, 2014). DEPICTION PENANG KEDAH PERLIS TOTAL MALAYSIA % 1. AREA (KM 2 ) 1,031 9,425 795 11,251 330,290 3.41 2. POPULATION (MILLION) 1.63 1.99 0.24 3.86 29.52 13.08 3. AVERAGE ANNUAL POPULATION GROWTH RATE (%) 1.50 1.10 0.70 1.24 1.60-0.36 4. TOTAL FERTILITY RATE 1.60 2.50 2.40 2.11 2.10 0.01 5. LIFE EXPECTANCY (YEARS) 74.90 73.22 72.95 73.91 74.63-0.96 6. GDP (A) GDP AT CONSTANT 2005 PRICES ( RM MILLION) 52,530 25,307 3,535 81,372 751,471 10.83 (B) GDP PER CAPITA AT CURRENT PRICE (RM) 36,669 15,832 18,150 29,384 30,956-5.08 (C) GDP GROWTH RATE (%) 5.00 6.10 4.50 5.32 5.60-0.28 7. EMPLOYMENT (A) LABOUR FORCE ('000) 786.10 809.10 90.60 1,685.80 13,119.60 12.85 (B) PARTICIPATION RATES (%) 68.80 61.70 56.40 64.73 65.50-0.77 (C) UNEMPLOYMENT RATE (%) 2.00 2.90 4.00 2.54 3.00-0.46 According to table 1, it is worth noting that the current Gems has a combined land area of 11,251 km 2, which is only 3.41% of the country s total land mass. However, the subsequent data of the area is not proportional to its land size. Gems is home to about 13% of the country s total population, produces 10.83% of the country s GDP, and supplies 12.85% of Malaysia s total labour force. Average annual population growth rate and total fertility rate are -0.36% lower and 0.01% higher than the national readings, whereas life expectancy is -0.96% lower. Both Kedah and Perlis had higher fertility rates, lower population growth rates, and lower life expectancy rates; suggesting poor family planning, migration of workers, and lesser standards of living due to lower life expectancy. GDP growth rate of Gems is -0.28% lower than average and GDP per capita is -5.08% higher than the country s mean; dragged down by Kedah and Perlis but supported by Penang. Such data illustrates the potential of Gems (namely Kedah and Perlis) to improve on its productivity and standards of living. Job opportunities are comparable for Gems to other parts of the nation with participation rate of -0.77% and unemployment rate of -0.46% lower than the national average. Again, Perlis was the main drag in both aspects. 12

Basic Information Table 2: Continuation of Economic Data (2013) (Department of Statistics Malaysia, 2014). DEPICTION PENANG KEDAH PERLIS TOTAL MALAYSIA % 1. GDP (NOMIMAL) (RM BILLION) 65.78 31.69 4.43 101.89 940.97 10.83 2. PROPERTY MARKET VALUE (RM BILLION) 12.90 4.44 0.35 17.69 142.84 12.38 3. PROPERTY MARKET VALUE/GDP (NOMINAL) (%) 19.61 14.01 7.91 17.36 15.18 2.18 4. DENSITY (PER KM 2 ) (2010) 1,50 199.00 28 753.42 86.44 771.61 5. URBANISATION RATE (%) (2010) 90.80 64.60 51.40 74.84 71.00 3.84 Besides providing a fair share of the nation s GDP, Gems s property market is slightly ahead compared to its pace of development. In 2013, the area s combined nominal GDP and property market value accounted for 10.83% and 12.38% of that of the nation; with its property market growth rate and prices increasing at a faster rate than its GDP growth rate. Property market of the northern territories made up a significant share of the local economy; ratio of property market value per GDP was 17.36%, which was 2.18% higher than Malaysia. Population density and urbanization rate were 753.42 person per km 2 and 74.84% respectively. They were 771.61% and 3.84% higher than Malaysia s average. Such figures depict that Gems is a highly concentrated and fairly urbanized area in the context of a nation. Kedah and Perlis deviate substantially from Penang in this regard. Gems property market was noticed to be more vibrant than the national average. Number of property transactions per 100 population = 2013: (Gems): 1.38; (Malaysia): 1.30 2012: (Gems): 1.61; (Malaysia): 1.50 In addition, it was noticed that the transacted volume of property market in northern territories was cooling at a faster rate than the country s mean. Gems was one of the more severely affected area in Malaysia (led by Penang); YOY change for number of transaction was recorded at -14.19%, which was worse than the country s mean of -10.85%. Whereas value of transactions increased by 3.95% last year, compared to a 6.67% increment for the nation (JPPH, 2014). 13

Basic Information Table 3: Grouping of Household and Living Quarters by State (2010) (Department of Statistics Malaysia, 2014). DISTRICT HOUSEHOLD (H) % LIVING QUARTERS (LQ) % PERSON / H PERSON / LQ LQ / H PENANG 387,180 43.84 466,576 44.62 3.94 3.27 1.21 KEDAH 443,040 50.16 518,191 49.56 4.29 3.67 1.17 PERLIS 52,995 6.00 60,801 5.82 4.26 3.71 1.15 TOTAL 883,215 10 1,045,568 10 4.13 3.49 1.18 - Ratio of existing residential stock per 100 population = (Gems): 17.52; (Malaysia): 16. - Ratio of total population to number of person per household = (Gems): 884,180 unit of houses (breakeven point); assuming household size is held constant. - Existing residential stock = (Gems): 676,117 unit of houses (an additional of 208,063 units is required to reach breakeven point); assuming household size is held constant. As expected, Kedah recorded the highest count for both the number of household (443,040: 50.16%) and living quarters (518,191: 49.56%). Coming in second was the state of Penang with 387,180 households (43.84%) and 466,576 living quarters (44.62%). Perlis only accounted a small portion of the pie; with households and living quarters at about 6 percent of Gems. True to the wealth effect, Kedah which has the lowest GDP per capita (lowest purchasing power) has the highest ratio of person per household, whereas Perlis which is not too far off has the highest ratio of person per living quarter. The overall readings for Gems were 4.13 person per household and 3.49 person per living quarters. The combined LQ/H ratio which came in at 1.18 for Gems has confirmed that there are no current shortages of houses in this area. However, the stock availability is not too high. It is anticipated that there could be a high possibility of smaller household size in the future. Such a reduction in the number of person per household would directly increase the demand for new living quarters and strain the existing housing stock in the market. An exception was noticed in the state of Penang which recorded a high LQ/H ratio when compared to the rest of the northern territories. The reading of 1.21 suggests that this area might be showing signs of excess residential properties. 14

Residents Data Figure 6: Breakdown of Penang s population by district (2010) (Department of Statistics Malaysia, 2014). SEBERANG PERAI SELATAN 11% BARAT DAYA 13% SEBERANG PERAI UTARA 19% TIMUR LAUT 33% SEBERANG PERAI TENGAH 24% It may seem logical that most inhabitants will usually reside around the central hub of commercial activities. In the context of Gems from the North, this area of central activities include state capitals, industrial and agricultural areas. In the case for Penang, the district of Timur Laut which houses the capital of George Town; has the highest portion of the state s population. Whereas in Kedah, districts of Kuala Muda (Sungai Petani) and Kota Setar (Alor Setar) are the core of the state. Figure 7: Breakdown of Kedah s population by district (2010) (Department of Statistics Malaysia, 2014). LANGKAWI 5% PENDANG 5% BALING 7% YAN 4% SIK 3% KUBANG PASU 11% KULIM 15% KUALA MUDA 23% KOTA SETAR 19% PADANG TERAP 3% POKOK SENA 3% BANDAR BAHARU 2% 15

WEIGHTAGE (%) Residents Data Figure 8: Demographics of Malaysia by Age (2000 & 2010) (Department of Statistics Malaysia, 2014). 8 7 6 62.80 67.30 5 4 3 33.30 27.60 2 1 3.90 < AGE 15 AGE 15-64 > AGE 64 AGE GROUP 5.10 2000 2010 Age Malaysia s population is aging slowly (but still in its early stages); with lower portion of children age group (< age 15) in 2010 compared to 2000. Working age adults (age 15-64) and retirement segments (> age 64) have increased by 4.5% and 1.2% respectively. Median age has increased from 23.6 (2000) to 26.2 (2010); which is still a relatively young population. The country s dependency ratio has dropped from 0.59 (2000) to 0.49 (2010), reinforcing the fact that: 1. Population growth is slowing 2. Children age group is diminishing (entering the age of workforce) 3. Working age group is increasing 4. More working adults are supporting the non-working classes (children and elders). 16

POPULATION Residents Data Figure 9: Demographics of Gems by Age (2010) (Department of Statistics Malaysia, 2014). 1,400,000 1,200,000 1,000,000 800,000 600,000 400,000 200,000 0 0-19 20-29 30-39 40-49 50-59 60-75+ PERLIS PENANG KEDAH AGE GROUP Figure 10: Dependency ratio of Gems (2010) (Department of Statistics Malaysia, 2014). DEPENDENCY RATIO 0.20 0.40 0.60 0.80 1.00 1.20 PERLIS PENANG KEDAH The northern territories account for 13.08% of the total population in Malaysia and has a dependency ratio of 0.86; which is quite high. This indicates a significant proportion of non-working age groups (children and elders) as compared to the working age groups. It was worth noting that Penang has the lowest dependency ratio in Gems (0.73). While Perlis has an unusual ratio of more than 1, indicating there are more non-working age groups (children and elders) than working age. The overall population of Gems is very young as well; which is in tandem with the national average. The 3 largest age groups are 0-19 (36.30%), 20-29 (17.33%), and 30-39 (13.93%). They account for 67.56% of the total population in Gems. However, the huge gap between age group of 0-19 and 20-29 suggests that a large portion of the young working adults are moving to possibly the Inner Valley in search of better job opportunities. Even the highly developed state of Penang is not spared. 17

POPULATION Residents Data Figure 11: Demographics of Malaysia by Ethnicity (2010) (Department of Statistics Malaysia, 2014). OTHERS 1% INDIANS 7% CHINESE 22% NON- CITIZEN 8% BUMI 62% Malaysia has a total population of 28.30 million as at 2010; with 61.87% as Bumiputeras, 22.58% as Chinese, 6.70% as Indians, 0.64% classified as others, and 8.20% as non-citizens. Figure 12: Demographics of Gems by Ethnicity (2010) (Department of Statistics Malaysia, 2014). 2,500,000 2,000,000 1,500,000 1,000,000 500,000 0 BUMIPUTERA CHINESE INDIANS OTHERS NON-CITIZEN PERLIS PENANG KEDAH ETHNICITY Ethnicity Gems overall population composition is similar to that of Malaysia; 61.70% Bumiputeras, 25.22% Chinese, 7.81% Indians, 0.93% others, and 4.34% noncitizens. However, districts within Gems has significantly different ethnic composition. In the state of Penang, Chinese and Bumiputeras made up the bulk of the population (42.90% and 41.18% respectively). Whereas Indians came in at 9.82%. In Kedah, the top three ethnic groups were Bumiputeras (75.26%), Chinese (13.09%), and Indians (6.99%). Population composition in Perlis include 86.24% Bumiputeras, 7.77% Chinese, 2.36% others, and 1.19% Indians. 18

% CHANGE YOY Property market in Malaysia Figure 13: Malaysia s overall property market (2004 2013) (NAPIC, 2014). 5 4 3 2 1 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013-1 -2 VOLUME (% CHANGE) VALUE (% CHANGE) AVERAGE PRICE PER TRANSACTION (% CHANGE) The property market in Malaysia is highly cyclical. There is a high correlation between volume and value (correlation of efficiency value of 0.75; from 2003-2012). 2013 proved to an excepting year, which recorded the worst decline in amount of transaction for the last 10 years; declining by -10.85% YOY. However, the total value of transaction recorded a decent gain of 6.67% YOY. This led to the biggest yearly gain in the last 10 years for the average price per transaction (rising by a staggering 19.65%). It is yet to be determined that such a rise in average price per transaction is sustainable if volume does not exist to support it. 19

% CHANGE YOY % CHANGE YOY Property market in Malaysia Figure 14: Volume of Malaysia property market by sectors (2004 2013) (NAPIC, 2014). 4 3 2 1-1 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013-2 RESIDENTIAL COMMERCIAL INDUSTRIAL AGRICULTURAL DL & OTHERS Volume 2013 saw a broad decrease over all sectors of the property market; led by the commercial sector (-16.51%), industrial (-15.69%), agricultural (-12.37%), residential (-9.70%), and development land and others (-6.99%). Value Unlike volume, the commercial sector witnessed the highest incremental in value (27.96%), followed by the residential sector (6.34%), industrial (2.69%), agricultural (-6.97%), and lastly development land and others (-8.89%). For both of these instances, the residential property sector showed resilience compared to the rest of the market. Figure 15: Value of Malaysia property market by sectors (2004 2013) (NAPIC, 2014). 8 6 4 2-2 -4-6 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 RESIDENTIAL COMMERCIAL INDUSTRIAL AGRICULTURAL DL & OTHERS 20

Property market in Malaysia Figure 16: Malaysia s average price per transaction by sectors (RM in million (2004 2013) (NAPIC, 2014). Average price per transaction In 2013, the commercial sector recorded the biggest change in the last 10 years (53.27%), followed by the industrial sector (21.79%), residential (17.76%), and agricultural (6.16%). Whereas average price per transaction for development land and others marked the steepest unusual decline in the last 10 years (-43.28%). Abiding by the norm, the industrial sector has the highest average price per transaction of RM 1.46 million, followed by commercial (RM 1.04 million), development land and others (RM 0.89 million), residential (RM 0.29 million), and agricultural (RM 0.14 million). 21

Property market in Malaysia Figure 17: Weightage of Malaysia property market by sectors (Volume) (2004 2013) (NAPIC, 2014). Weightage of sectors The residential market made up the bulk of the total property market in Malaysia; with a 10 year mean value of 63.87%, followed by the agricultural sector (19.59%), commercial (9.36%), development land and others (4.67%), and industrial (2.47%). A decrease in weightage for all sectors except residential (0.82%), and development land and others (0.25) was observed in 2013. 22

UNITS Property market in Malaysia Figure 18: Number of transactions by state in Malaysia (2012 2013) (JPPH, 2014). 120000 10 100000 5.93 0 80000-8.59-10 60000-21.41-20 % 40000 30,977 27,775-30 20000 25,389 24,346 3,390 3,591-40 0-50 2012 2013 % (YOY) 2013 COUNTRY MEAN (% YOY) Number of transactions In 2013, Selangor recorded the highest amount of transactions (81,955: 22%) in Malaysia, followed by Johor (52,779: 14%), and Perak (46,234: 12%). These 3 states made up almost half of the total transactions in Malaysia. Kedah was ranked number 5 out of the 16 states being examined (25,389: 7%), Penang was at the 6 th spot with 24,346 number of transactions at 6%, and Perlis was third last with 3,591 transactions (1%). The combined number of transactions in Borneo made up approximately 14% of total transactions in Malaysia. In terms of YOY changes, all states recorded negative growth rates except for Johor (7.07%), and Perlis (5.93%). Kedah was ranked number 8 (-8.59%), while Penang came in at number 13 (-21.41%). Gems as a whole was worse off than the national average. The former declined by -14.19%, compared to a decline of -10.85% of the latter. 23

TURNOVER (%) Property market in Malaysia Figure 19: Turnover Rate of Malaysia Residential Market by state (2012 & 2013) (JPPH, 2014). 7 1 6 0.79 0.5 5 4.60-0.25 0-0.5 4 3 2 2.84 3.63 3.56-1.20 3.31 3.40-1 -1.5-2 -2.5 CHANGE (%) 1-3 0-3.5 2012 2013 % (YOY) 2013 COUNTRY MEAN (% YOY) Turnover rate (Residential) For the year ended 2013, the state of Perak recorded the highest turnover rate in Malaysia; clocking in at 4.35%, coming in second was Sarawak (4.04%), then Melaka (3.92%). The bottom 3 states were Labuan (1.60%), Kelantan (2.28%), and Sabah (2.29%). Gems has a combined turnover rate of 3.37%. The country s mean turnover rate was 3.34%. In terms of YOY changes, Perlis was the highest (0.79%), followed by Johor (0.37%), and then Pahang (0.22%). The bottom 3 states were Putrajaya (-2.85%), Kuala Lumpur (-1.71%), and Pulau Pinang (-1.20%). Gems as a whole recorded YOY change of -0.76%. The country s mean YOY reading was -0.50%. 24

UNSOLD (%) Property market in Malaysia Figure 20: Percentage of Unsold Residential Units (New Launches) by state in Malaysia (2013) (JPPH, 2014). 90 80 70 60 50 40 30 20 10-6.07 51.99 45.92 78.15 39.53-38.62-7.73 42.15 34.42 20 10 0-10 -20-30 -40 CHANGE (%) 0-50 TOTAL UNSOLD 2012 TOTAL UNSOLD 2013 % CHANGE (1 YR) COUNTRY MEAN (1 YR) Unsold units of New launches (Residential) In 2013, based on individual states; Kelantan recorded the highest percentage of unsold residential units (new launches) in Malaysia (66.70%), followed by Terengganu (63.46%), and Sarawak (51.43%). Gems has a collective unsold fraction of 41.75.%. The country s mean reading was 43.90%. In terms of YOY changes, Sarawak was the highest (11.21%), followed by Kelantan (10.95%), and then Terengganu (5.35%). The bottom 3 states were Perlis (-38.62%), Pahang (-8.67%), and Putrajaya (-7.74%). Gems has a mutual YOY change of -8.36%. The country s mean YOY reading was -3.22%. 25

NUMBER OF TRANSACTIONS Residential market for Gems Figure 21: Weightage of Gems property market by sectors (Volume) (2013) (JPPH, 2014). 60,000 15.00 50,000 1 5.00 40,000 30,000 20,000-5.00-1 -15.00 CHANGES (%) 10,000 0-2 -25.00-3 SUB-SECTORS PERLIS KEDAH PENANG YOY (%) Weightage by sectors Similar to national norm, the residential market made up the bulk of the total property market transactions in Gems; with a share of 63.31%, followed by agricultural (18.37%), development land and others (8.25%), commercial sector (8.05%), and industrial (2.02%). There was a shift in weightage from agricultural to residential and industrial sectors as a share of the total transactions. It is worth noting that the weightage of residential, commercial, industrial, and agricultural sectors were lower than national average. Whereas development land and others were higher. YOY, most sectors recorded broad decrease except for the industrial sector (2.97%). Such cutback was led by the agricultural sector (-26.45%), commercial (-12.23%), residential (-12.15%), and lastly development land (-1.33%). Gems average was -14.19%. 26

NUMBER OF TRANSACTIONS Residential market for Gems Figure 22: Number of residential transactions by state for Gems (2013) (JPPH, 2014). 300,000 25.00 2 250,000 200,000 150,000 100,000 50,000 0 15.00 1 5.00-5.00-1 -15.00-2 -25.00-3 PENANG KEDAH PERLIS TOTAL MALAYSIA AREA 2013 YOY (%) CHANGES (%) Weightage by area (Residential) Due to its population size, state of development, and wealth effect; Penang captured the major share of total residential property transactions in the northern territory. The state recorded 52.43% of Gems transaction, whereas Kedah and Perlis account for 44% and 4% of the total transactions respectively. Gems as a whole only possessed 13.71% of Malaysia s total residential property market transactions. In terms of YOY, Penang was affected the most by the recent declining trend. The state s transactions declined by -23.92%. While Perlis and Kedah improved by 21.07% and 4.84% respectively. This resulted in Gems transactions to deteriorate by -12.15%; which was worse than the national average of -9.70%. 27

AVERAGE PRICE PER TRANSACTION (RM IN MILLION) Residential market for Gems Figure 23: Average price per transaction of Residential Properties for Gems (RM) (2013) (JPPH, 2014). 450,000 400,000 350,000 400,738 6 5 300,000 281,616 292,661 4 250,000 200,000 150,000 148,523 172,564 3 2 CHANGES (%) 100,000 1 50,000 0 PENANG KEDAH PERLIS AVERAGE MALAYSIA AREA 2013 YOY (%) Average price per transaction (Residential) Contrary to its dwindling volume, Penang has the highest average price per transaction in the northern territory; RM 400,738 (YOY: 31.45%). Coming in second was the minuscule state of Perlis with RM 172,564 (YOY: 49.27%). The largest contributor in terms of land mass was last at RM 148,523 (YOY: 0.75%). The combined average price per transaction for Gems was RM 281,616 (YOY: 16.42%). The country s average was RM 292,661 (YOY: 17.76%). Hence the absolute and relative values for both Gems were slightly lower than the national average. Given the favorable conditions, there is high potential for further development in this region (especially Kedah). 28

NUMBER OF UNITS (SUPPLY0 Residential market for Gems Figure 24: Supply compilation of Residential Properties for Gems (2013) (JPPH, 2014). 7,000,000 18.00 6,000,000 5,000,000 4,000,000 3,000,000 2,000,000 1,000,000 16.00 14.00 12.00 1 8.00 6.00 4.00 2.00 SUPPLY RATIO (%) 0 PENANG KEDAH PERLIS TOTAL MALAYSIA AREA PLANNED SUPPLY (PS) INCOMING SUPPLY (IS) EXISTING STOCK (ES) IS/ES (%) PS/ES (%) Supply compilation As usual, Penang hoards the largest number of existing residential stock in Gems (55.90%), followed by Kedah (40.87%), and Perlis (3.23%). Incoming and planned supplies were witnessed to be increasing at a steady pace. In terms of IS/ES ratio, all 3 states were somewhat higher than the national average. The national reading was 14.76%. Whereas for PS/ES ratio, only the state of Penang (15.65%) was higher than the national average (13.05%). Perlis and Kedah were both lower at 11.60% and 10.53% respectively. Favorable economic and employment conditions, coupled with the progressive state of property market in Penang; reinforced the fact that this island is indeed The Pearl of the Orient. However, recent setbacks such as declining volume transacted and turnover rate were most likely part of the consolidation process. Nonetheless, strong price appreciation and improving incoming and planned supplies might just imply the resilience of this island state. 29

RATIO (%) Residential market for Gems Figure 25: Supply compilation of Residential Properties for Gems (2013) (JPPH, 2014). 18.00 2 16.00 14.00 12.00 1 8.00 6.00 4.00 2.00 1-1 -2-3 -4 YOY CHANGES (%) PENANG KEDAH PERLIS TOTAL MALAYSIA STATE IS/ES (%) PS/ES (%) NEWLY LAUNCHED/TOTAL TRANSACTIONS TOTAL LAUNCHES/TOTAL TRANSACTIONS COMPLETED/TOTAL TRANSACTIONS -5 Supply compilation (Cont d) Referring to Figure 25, near term supply growth rate was strong with Penang leading the charge at 17.06%. Whereas supply in the mid term was in a declining state led by Penang as well at 15.65%. When segregating new supply into physical availability, it was observed that majority of the launches were under construction (54.20%). YOY changes for newly launched and not constructed projects declined sharply across the board. Whereas YOY changes for completed projects were tremendous in Penang and Perlis but declined slightly in Kedah. Under construction units were positive in both Penang and Kedah but declined by a large margin in Perlis. The YOY change for newly launched units per total transactions was negative across the northern territories (-3.86%). YOY for completed houses per total transactions was positive except for Kedah (3.36%). While YOY for total launches per total transactions was positive (7.84%); supported largely by Penang. 30

NUMBER OF TRANSACTIONS NUMBER OF TRANSACTIONS Residential market for Gems Figure 26: Number of residential transactions by price range for Gems (Q1 2014) (NAPIC, 2014). 2,000 25.00 1,800 1,600 2 1,400 1,200 1,000 800 600 400 200 0 (A) 0-50,000 (B) 50,001-100,000 (C) 100,001-150,000 (D) 150,001-200,000 (E) 200,001-250,000 (F) 250,001-300,000 PRICE RANGE (RM) (G) 300,001-400,000 (H) 400,001-500,000 (I) 500,001-1,000,000 (J) 1,000,001 - ABOVE Q1 2013 Q4 2013 Q1 2014 W (Q1 2013) W (Q4 2013) W (Q1 2014) 15.00 1 5.00 WEIGHTAGE (%) Figure 27: Number of residential transactions by house type for Gems (Q1 2014) (NAPIC, 2014). 1,800 1,600 1,400 1,200 1,000 800 600 400 200 0 25.00 2 15.00 1 5.00 WEIGHTAGE (%) HOUSE TYPE Q1 2013 Q4 2013 Q1 2014 W (Q1 2013) W (Q4 2013) W (Q1 2014) 31

AVERAGE PRICE PER TRANSACTION (RM IN MILLION) Residential market for Gems Figure 28: Residential average price per transaction by house type for Gems (RM in million) (Q1 2014) (NAPIC, 2014). 4.00 20 3.50 3.00 2.50 15 10 2.00 1.50 1.00 0.50 0.12 0.16 0.45 0.24 0.65 0.88 0.60 0.20 0.49 0.22 0.08 0.08 1.32 5-5 -10 CHANGES (%) HOUSE TYPE Q1 2013 Q4 2013 Q1 2014 YOY (%) QOQ (%) Distribution for the value of transactions in northern territories was quite balanced with slight skewness to the right, which placed minor emphasis on lower price tags of RM 200,000 and below. The most transacted price range was RM 50,001 100,000 (17.33%) in Q1 2014, followed by RM 100,001 150,000 (13.88%), and RM 150,001 200,000 (12.35%). There was a redistribution of weightage from higher price range of RM 200,001 RM 500,000, to lower price range of RM 50,001 RM 200,000 in Q1 2014. However, transactions above RM 500,001 were resilient. The most preferred house type in Gems was terrace houses which made up close to 32% of the total transactions in Q1 2014. In addition, there was a high preference for condominiums and apartments which represent 11% of the total transactions. Singlestorey semi-detached, flats, and low-cost houses each made up 10% of Gems Q1 2014 transaction market. All of the other house types were less than 10% each. Number of transactions for all strata properties was less than 27%. Generally, almost all house types recorded positive YOY changes for average price per transaction except for housing classified under others. When compared with QOQ changes, the rate of increment seemed to be consolidating in the near term. 32

GROSS RENTAL YIELD (%) Residential market for Gems Figure 29: Average gross rental yield of Residential Properties in Penang (2013) (JPPH, 2014). CONDOMINIUMS (%) 12.00 SINGLE-STOREY SEMI-DETACHED (%) 3.82 DOUBLE-STOREY TERRACED (%) 1.98 SINGLE-STOREY TERRACED (%) 1.91 2.00 4.00 6.00 8.00 1 12.00 AVERAGE GROSS RENTAL YIELD (%) Figure 30: Average gross rental yield of Landed Residential Properties in Kedah (2013) (JPPH, 2014). 8.00 7.00 6.00 5.00 4.00 4.60 3.00 2.00 1.00 KEDAH AREA UPPER CASE (%) LOWER CASE (%) AVERAGE (%) 33

Residential market for Gems Figure 31: Average gross rental yield of Residential Properties in Perlis (2013) (JPPH, 2014). SEMI-DETACHED (%) 2.67 SINGLE-STOREY TERRACED (%) 3.53 0.50 1.00 1.50 2.00 2.50 3.00 3.50 4.00 AVERAGE GROSS RENTAL YIELD (%) Gross Rental Yield It was observed that the average gross rental yield for Penang was higher for the strata segment compared to the landed sector. Whereas within the landed property segment, single-storey semi-detached houses recorded a higher average gross rental yield compared to terraced houses. Average gross rental yields for landed properties in Kedah and Perlis were noticed to be higher than Penang. This may be attributed to the faster appreciation rate of house prices in Penang compared to the other 2 states in recent times; in which the incremental in rental yields has not caught up with the appreciation rate of house prices. While single-storey terraced houses in Perlis had a higher average gross rental yield than semi-detached houses. 34

NUMBER OF TRANSACTIONS NUMBER OF TRANSACTIONS Residential market in Penang Figure 32: Number of residential transactions by price range in Penang (Q1 2014) (NAPIC, 2014). 1,200 3 1,000 25.00 800 2 600 400 15.00 1 WEIGHTAGE (%) 200 5.00 0 (A) 0-50,000 (B) 50,001-100,000 (C) 100,001-150,000 (D) 150,001-200,000 (E) 200,001-250,000 (F) 250,001-300,000 PRICE RANGE (RM) (G) 300,001-400,000 (H) 400,001-500,000 (I) 500,001-1,000,000 (J) 1,000,001 - ABOVE Q1 2013 Q4 2013 Q1 2014 W (Q1 2013) W (Q4 2013) W (Q1 2014) Figure 33: Number of residential transactions by house type in Penang (Q1 2014) (NAPIC, 2014). 1,200 1,000 800 600 400 200 0 25.00 2 15.00 1 5.00 WEIGHTAGE (%) HOUSE TYPE Q1 2013 Q4 2013 Q1 2014 W (Q1 2013) W (Q4 2013) W (Q1 2014) 35

AVERAGE PRICE PER TRANSACTION (RM IN MILLION) Residential market in Penang Figure 34: Residential average price per transaction by house type in Penang (RM in million) (Q1 2014) (NAPIC, 2014). 4.50 80 4.00 70 3.50 60 3.00 50 2.50 2.00 1.50 1.00 0.50 0.30 0.21 0.51 0.33 0.79 1.27 0.61 0.20 0.52 0.22 0.10 0.08 1.89 40 30 20 10-10 CHANGES (%) HOUSE TYPE Q1 2013 Q4 2013 Q1 2014 YOY (%) QOQ (%) In this finale, the number of transactions for Gems will be further broken down into individual states; mainly Penang, Kedah, and Perlis. Penang The highest number of transactions was recorded in the price range of RM 500,001 1,000,000; which accounts for 18% of the total transactions in Penang. The second was RM 50,001 100,000 at 14%. Mid-price range of RM 300,001 400,000 was at third with 12%. The price range of RM 100,001 150,000 came in at 4 th with 11%. As for other categories, every single one of these price range has less than 10% each from the total transactions in Penang. In previous quarters, it was noticed that the price range was slightly skewed to the left, which put more emphasis on upper-mid price range. However, in Q1 2014; this trend was reversed, which put more weightage on lower price range. The most preferred house type in Penang was terrace houses which made up more than 30% of the total transactions in Q1 2014. This was followed by condominiums and apartments which represents 19% of the total transactions. Flats were third with 18%. All of the other house types were less than 10% each. Number of transactions for all strata properties was capped at 44%. Generally, almost all house types recorded positive YOY changes for average price per transactions. Some of the biggest advancers were cluster and detached houses. QOQ, half of the house types recorded positive growth. One of the notable gainer was cluster houses. However, when compared with QOQ changes, the rate of increment seems to be slowing down in the near term for all house types except for cluster houses. 36

NUMBER OF TRANSACTIONS NUMBER OF TRANSACTIONS Residential market in Kedah Figure 35: Number of residential transactions by price range in Kedah (Q1 2014) (NAPIC, 2014). 1,200 3 1,000 25.00 800 2 600 400 200 15.00 1 5.00 WEIGHTAGE (%) 0 (A) 0-50,000 (B) 50,001-100,000 (C) 100,001-150,000 (D) 150,001-200,000 (E) 200,001-250,000 (F) 250,001-300,000 PRICE RANGE (RM) (G) 300,001-400,000 (H) 400,001-500,000 (I) 500,001-1,000,000 (J) 1,000,001 - ABOVE Q1 2013 Q4 2013 Q1 2014 W (Q1 2013) W (Q4 2013) W (Q1 2014) Figure 36: Number of residential transactions by house type in Kedah (Q1 2014) (NAPIC, 2014). 1,600 1,400 1,200 1,000 800 600 400 200 0 45.00 4 35.00 3 25.00 2 15.00 1 5.00 WEIGHTAGE (%) HOUSE TYPE Q1 2013 Q4 2013 Q1 2014 W (Q1 2013) W (Q4 2013) W (Q1 2014) 37

AVERAGE PRICE PER TRANSACTION (RM IN MILLION) Residential market in Kedah Figure 37: Residential average price per transaction by house type in Kedah (RM in million) (Q1 2014) (NAPIC, 2014). 4.00 15 3.50 3.00 2.50 10 5 2.00 1.50 1.00 0.50 0.06 0.12 0.22 0.21 0.33 0.31 0.17 0.18 0.11 0.08 0.03-5 -10-15 CHANGES (%) HOUSE TYPE Q1 2013 Q4 2013 Q1 2014 YOY (%) QOQ (%) Kedah Most transactions in this state was concentrated within the price range of RM 200,000 and below (77%); with the most under RM 50,001 100,000 (23%). Other categories were less significant. As such, the price range was somewhat skewed to the right, which put more emphasis on lower price range. Unlike Penang, landed properties were dominant in the state of Kedah. The most transacted house type in Kedah was single storey terrace houses (25%), followed by low-cost and single storey semi-detached houses (20% each). Within the state, there was an enlarged appetite for single storey terrace, single storey semidetached, and low-cost houses. YOY changes for average price per transactions were mixed. Some of the biggest advancers were vacant plots, flats, and low-cost houses. QOQ, all house types recorded positive growth except for town houses, flats, and low-cost flats. None of the gainers recorded outstanding growth. When compared with QOQ changes, the rate of change seems to be subdued in the near term for all house types. 38

NUMBER OF TRANSACTIONS NUMBER OF TRANSACTIONS Residential market in Perlis Figure 38: Number of residential transactions by price range in Perlis (Q1 2014) (NAPIC, 2014). 120 100 80 4 35.00 3 25.00 60 40 2 15.00 1 WEIGHTAGE (%) 20 5.00 0 (A) 0-50,000 (B) 50,001-100,000 (C) 100,001-150,000 (D) 150,001-200,000 (E) 200,001-250,000 (F) 250,001-300,000 (G) 300,001-400,000 (H) 400,001-500,000 (I) 500,001-1,000,000 (J) 1,000,001 - ABOVE PRICE RANGE (RM) Q1 2013 Q4 2013 Q1 2014 W (Q1 2013) W (Q4 2013) W (Q1 2014) Figure 39: Number of residential transactions by house type in Perlis (Q1 2014) (NAPIC, 2014). 80 70 60 50 40 30 20 10 0 35.00 3 25.00 2 15.00 1 5.00 WEIGHTAGE (%) HOUSE TYPE Q1 2013 Q4 2013 Q1 2014 W (Q1 2013) W (Q4 2013) W (Q1 2014) 39

AVERAGE PRICE PER TRANSACTION (RM IN MILLION) Residential market in Perlis Figure 40: Residential average price per transaction by house type in Perlis (RM in million) (Q1 2014) (NAPIC, 2014). 12.00 1 8.00 6.00 4.00 2.00 0.06 0.15 0.28 0.26 0.36 0.32 0.16 0.07 0.19 35 30 25 20 15 10 5-5 -10-15 CHANGES (%) HOUSE TYPE Q1 2013 Q4 2013 Q1 2014 YOY (%) QOQ (%) Perlis Similar to Penang and Kedah, price concentration for Perlis was within the lower to middle ranges. Distribution of the value of transactions within Perlis was focused on the range of RM 400,000 and below (97%). The shape of the entire distribution was somewhat skewed to the right. There was a weightage redistribution from the range of RM 400,001 500,000 to RM 150,001 200,000 in Q1 2014. The most preferred house type in Perlis was single storey terrace houses which made up close to 30% of the total transactions in Q1 2014. This was followed by single storey semi-detached which represents 20% of the total transactions. Lowcost houses were third at 17%. Vacant plots and 2 3 semi-detached houses each account for 10% respectively. All of the other house types were less than 10% each. Number of transactions for all strata properties was nil in Q1 2014. Generally, YOY changes for average price per transactions were positive for all house types. Notable advancers include cluster, low-cost, and 2 3 storey terrace houses. However, when compared with QOQ changes, the rate of increment seems to be diminishing in the near term. 40

References Department of Statistics Malaysia. (2014) Statistical Releases, [Online], Available: http://www.statistics.gov.my/portal/index.php?option= com_content&view=article&id=472&itemid=111&lang=en&negeri=malaysia [15 Sep 2014]. JPPH. (2014) Property Market Report 2013, Putrajaya: Valuation and Property Services Department. NAPIC. (2014) Key Statistics, [Online], Available: http://napic.jpph.gov.my/portal [15 Sep 2014]. 41

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