Located off the north-western coast of Peninsular Malaysia, Penang Island is Malaysia’s most heavily populated island city with a population of 1.7 million. With a rising population and increasing car ownership in a small, compact island city, the State Government needs to plan for more options and for a more efficient means of transportation to relieve the daily traffic congestion, especially during morning and evening rush hours. Other factors, such as the influx of tourists and the dynamics of economic growth, also play a role in traffic congestion. 

Penang’s demand drivers
Despite being the second smallest state in Malaysia, Penang attracts one of the highest levels of manufacturing investment into the country. The state has successfully attracted light industrial activity since the Free Industrial Zone was set up in 1972. Part of this success can be attributed to the draw of Penang as one of the most liveable cities in Asia, attracting not only foreign tourists but also expatriates. The capital city, George Town, was listed as one of the top best places to retire abroad in 2016 by CNN Money. 

Fortunes in Penang are probably the least affected by the plunge in oil and palm oil prices. Manufacturing and services comprise the two biggest components of Penang’s economic activity. In fact, the weak Malaysian ringgit is likely to help manufacturing exports. Penang is known to be the electrical
and electronic hub.

Penang’s real estate performance
The outlook for Penang’s real estate in 2017 will be supported by the growth in the semiconductor, electronics and tourism sectors in Penang. While the demand for industrial property has been good, speculation has been kept at bay, as the state controls the pricing and supply of industrial land. There was a modest 5.0% rise in the transaction value of industrial property in 2015.

In terms of real estate performance, Penang bucked the trend for the nation, with commercial transaction values rising 19.0% in 2015 when that of the nation was falling. We note that the National Property Information Centre’s (NAPIC) commercial transaction values include those of pre-war shophouses, which have been performing better. Incoming shop unit supply in Penang in 2015 grew by a modest 4.3%. In the same year, Penang had the highest number of transactions among states, with transactions for shop units rising 131.0% to 3,237 in 2015. We believe quite a number of these units were purchased with the intention for activity related to tourist attractions.

Conclusion 
There is a great need to improve the transportation system in Penang, as the small island city faces increasing traffic congestion as the population increases. The PTMP is a proposal that many hope will be the answer to smoother travelling. The earlier implementation phases of the PTMP with the highest economic internal rates of return are the PIL highways and the LRT lines. Both of these will revive Penang Island’s real estate.

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