Land prices in Penang likely to rise next year

RM1,200 PER SQ FT: Increase partly due to state govt’s RM1,200 valuation being used as yardstick for future transactions

A land valuation of RM1,200 per sq ft for 44.5ha of reclaimed land in Penang by the state government is being used as a point of reference for land transactions, claims the Real Estate and Housing Developers Association (Rehda).

The association's Penang chairman Datuk Jerry Chan said yesterday land prices in the state are expected to rise next year.

This is partly due to the government's move of pegging land value so high in relation to the swap deal with Consortium Zenith BUCG, the developer of the proposed RM6.3 billion undersea tunnel and three highways.

The deal involves land starting from Tanjung Tokong to the sea-fronting Persiaran Gurney, which has been tagged at RM1,200 per sq ft, since the state does not intend to pay the developer for the multi-billion ringgit projects.

Stating that the said deal will now be the yardstick for land owners and developers when fixing prices on their properties, Chan said: "If the state takes that kind of valuation, what do you think other land owners and developers will do?

"And remember that the project construction cost (RM6.3 billion) was from six months ago, which has not taken into account additional costs due to the higher electricity tariff and the goods and services tax (GST). If costs goes up, so will property prices," he said at IJM Land Bhd's office.

Present was IJM Land northern region general manager Toh Chin Leong.

Chan said while Penang can expect to see fewer property projects launched in 2014, prices will not come down.

This, he said, is because banks and investors are already cautious about the property market.

Penang is unlikely to see any property bubble as the property market remains healthy, he said.

"We, however, need time to determine how some of the measures imposed by the Federal Government via 2014 Budget and the state government will affect the market."

Toh said property prices in Penang are on the rise due to various factors, including increased higher compliances cost, which has been increasing in the past four years.

"Cost contributions have increased three-fold as they now have to pay the government a default compensation of RM120,00 for each low-cost housing unit they did not incorporate into their project.

Developers also have to obtain a housing development licence by paying a deposit of three per cent of their project's estimated cost to show they have sufficient financial ability to begin building properties. - By Marina Emmanuel (Business Times)

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