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Tuesday, March 19, 2013

Bright prospects for Seberang Perai property market


Maintain neutral: We recently travelled to Seberang Perai and Penang
island to meet up with eight corporate and government bodies to gauge
the island’s latest property market trends and assess the potential
impact of the second Penang Bridge on Seberang Perai’s economy and real
estate market.

Overall, we are bullish on the prospects of south Seberang Perai’s
property market as we believe that the opening of the second bridge will
increase traffic flow and enhance economic activity, thereby lifting
property demand and prices.

On Penang island itself, we are generally positive on the medium range
condominium market (RM400 to RM800 per sq ft [psf]) but cautious on the
high-end condominium market (more than RM800 psf) in view of the
segment’s high competition and smaller pool of buyers.

The CONSTRUCTION [] of the second bridge is ahead of schedule. Its
opening is now targeted for September 2013 (from November 2013).
Construction is over 92% complete, with the final section of the
approach span to be connected by next month.

The construction of the Batu Maung interchange and Batu Kawan expressway
are on schedule but work on the Batu Kawan Trumpet interchange is
slightly behind schedule.

Upon commissioning of the second bridge, concession holder, Jambatan
Kedua Sdn Bhd, expects it to ease traffic off the first Penang bridge by
20% to 30%. This will translate into an initial daily traffic volume of
36,600 vehicles per day for the second bridge (the current daily traffic
volume on the first bridge is 140,400).

We expect the second bridge to have a major positive impact on the
development of south Seberang Perai. In Batu Kawan, Penang Development
Corp has sold 400 to 500 acres of industrial land and it has also called
for request for a proposal to build a premium outlet in that area.

We believe the enhanced economic activities and improved connectivity to
Penang island will have a positive impact on the demand for property in
south Seberang Perai and the prices as well.

Tambun Indah Sdn Bhd (not rated), a Seberang Perai-based developer with
over 540 acres of landbank in south Seberang Perai, is a good proxy to
the area’s property market. Over 2010 to 2012, Tambun Indah’s property
sales and net profit grew strongly, partly driven by the strong take-up
for its Pearl City project — a gated and guarded project in Simpang Ampat.

Generally, we observed that the take-up for Penang’s high-end
condominium market (more than RM800 psf) has slowed down as developers
are facing strong competition.

We believe that the latest launches, such as The Light Waterfront,
Southbay City and Seri Tanjung Pinang, only garnered a moderate take-up
rate of 40% to 50%.

The demand for the medium-end condominium segment (RM400 to RM800 psf)
is still robust. We understand that the Dijaya Corp Bhd-Ivory PROPERTIES
[] Group Bhd’s joint venture project, Tropicana Bay Residences, has
received strong interest.  — /Affin IB Research, March 18/

This article first appeared in The Edge Financial Daily, on March 19, 2013.

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