Scarcity of land has caused to the escalating prices of housing in Penang. The current average condominium price on the Penang island itself is RM450,000 while the median household income is RM52,884, which is equivalent to RM4,407 per household (Source: Penang Monthly, 2012). In fact, the house prices on the island have increased by 50% over the last 5 years.
However, the middle income groups have not experienced an increase in their wages, and the cost of living continues to rise on yearly basis, which biting into any income growth. As a whole, the ratio for Penang state is 5 (RM265010/RM52884), which has been risen from 4 in year 2006.
In comparison, the house price-to-income ratio for US was 3 until 2000, and it rose to 5.8 by 2006, before the subprime crisis. In UK the ratio reached 11 in 2008, just before the credit crunch. The above figures are obtained from October 2011 research on ‘Supply and Demand in the Penang housing market: Assessing Affordability‘ published by Penang Institute.
The chart highlighted that property prices in Penang Island increased quarter on quarter. Looking at the chart above, you will notice that the appreciation of property prices have been significantly higher since 2011 until 3rd quarter 2012.
The house prices are becoming more and more unaffordable for Penangites nowadays. It’s advisable to rebalance the planning powers in developing any projects.
In summary, the average house price in Penang has more than doubled in the past 5 years. Based on the past 5 years historical rates of growth, I can see that average price of house in Penang is projected to increase by further 10-20% this year.