Walking The Heritage Trail
Like the Sotheby’s, anything old has the potential to be valuable
Ever wondered if heritage buildings could co-exist with modern developments? Look to George Town, the state capital of Penang for an answer.
It is a capital city with the most number of pre-war buildings in the whole of Southeast Asia, many of which are still intact. Hence to many Malaysians, especially the Penangites, George Town is also known as Penang Heritage City.
Along with Melaka Historical City in 2008, UNESCO recognised and awarded Penang with a World Heritage Site status for its historic enclave that’s worthy of recognition and preservation. As a whole, this recognition consequently helped to raise awareness of the state’s rich culture in order to regain its lustre as the ‘Pearl of Orient’.
“The World Heritage List includes 962 properties in 157 places, of which 745 are cultural, 188 natural and 29 mixed properties. So owning a heritage building is not ‘just another property’; it is owning a piece of history,” said Prima Harta management team leader Raymond Loo.
Other heritage sites like the Great Wall of China or the Gunung Mulu National Park can only be visited, but you can own an actual heritage shop lot in George Town, which is a very rare and precious opportunity. Therefore, it is no wonder that many property investors are looking to invest in heritage buildings in the area.
In fact, the demand has been steadily increased over the past few years, ever since the declaration of George Town as one of the World Heritage Sites by UNESCO. The market is so in demand that it has surged to its highest levels in history from 2011 to 2013.
Heritage property hotspots
Investors particularly like to hunt for heritage houses along roads that are located within the Heritage Core Zone, so if you’ve ever explored some of the island’s popular tourist spots, names like Chulia Street, Love Lane and Armenian Street might ring a bell.
On top of that, the demands are improving in the Heritage Buffer Zone, where you’d find streets such as Prangin Lane, Kimberly Street, Lorong Carnarvon as well as heritage houses at Ceylon lane, Noordin Street and others.
Corporate companies have also taken advantage of the heritage scene in Penang, especially Beach Street that remains as one of the longest streets on the island and is well known as Penang’s banking district. This is where a lot of heritage buildings are now the headquarters of premier banks in the state, and a good example would the Royal Bank of Scotland’s (RBS) premises. When it was built in 1905, the building housed the Netherlands Trading Society and was later taken over by ABN-AMRO (a merger between Algemene Bank Nederland, Amsterdamsche Bank and the Rotterdamsche Bank) that was also used as an arts and culture centre. The RBS made it their home after a restoration project was completed in a record time of only 16 weeks.
The market rate currently sits around RM1,000 per s.f. to RM1,500 per s.f., while more popular areas like Chulia Street, Love Lane and Armenian Street are approximately RM2,000 per s.f., though Loo mentioned that there had been transactions that closed for more than RM3,000 per s.f. from his own records.
Due to the rent control act and high restoration costs, owners found little reason to invest in old and broken pre-war houses which they believed were unable to produce a reasonable ascending rental yield.
With the full abolishment of the act in 2000, it was then that heritage lovers started to pay attention to George Town’s pre-war buildings. Looking at the prospering tourism Penang enjoys today, it has not gone by with any regrets — with cafes and boutique hotels sprouting like mushrooms all over the state, investing in heritage buildings has brought fruitful returns to investors.
Many envy having the unique living experience in heritage houses as each building has its own character. Providing an atmosphere of elegance and unforgettable hospitality experiences, we’ve seen nothing but growth in George Town’s tourism sector and opportunities have risen out of the demand.
Yet like any other investment, there are pros and cons to consider.
Things to watch out for
According to Loo, the entry cost is very high when it comes to investing in heritage property and investors may find difficulty in obtaining a bank loan due to huge gaps between valuation reports and actual transaction prices.
Many investors were forced to pay up to 40 percent of initial deposit for the heritage property acquisition, not to mention the exorbitant maintenance cost of a heritage building! Needless to say, investors have to set aside huge budgets for restoration costs to restore the former glory of the buildings, and that cost will indeed increase for long-term maintenance.
What’s more, investors may not get the yield expected from the investment, as rental in Penang has not achieved the level as significant as the Klang Valley.
What are heritage investors interested in?
Economic factors such as low interest rates and the depreciation of the Ringgit have cut costs for many, especially foreign investors, and have encouraged them to expand their investment portfolio to Malaysia in the real estate field.
With rows and rows of heritage house to choose from, original and unrestored heritage buildings have been most welcomed by investors, especially if original features like the façade, staircase, air well and doors have remained unspoiled or untouched… The sale is now on!
On top of that, security factors such as Malaysia’s political stability and low living costs have benefitted the Malaysia My Second Home MM2H programme, where trends have shown that many foreigners preferred heritage buildings to high-rise condominiums in Penang.
According to the Heritage Director of the Penang Island Municipal Council (MPPP), Puan Noorhanis Binti Noordin, investors are giving more attention to heritage buildings as they see and acknowledge the importance and significance of heritage values after Penang had received UNESCO’s grand recognition in 2008.
MPPP, being a local authority, reviews development proposals and provides enforcement as provisioned by law. “Our objectives are spelled out very clearly in our Regulations and Special Area Plan for George Town World Heritage Site. Heritage building owners are strictly advised to conserve and preserve the authenticity of their buildings in its form and substance because well-conserved buildings will definitely increase in value,” shared Puan Noorhanis.
The governing body also provides various incentives such as heritage building maintenance grants for owners who conserve heritage buildings.
Besides this responsibility, MPPP along with other government agencies, NGO’s and local communities work very closely to conduct and organise cultural festivals and celebrations, conservation projects, educational programmes, courses, exhibitions and various activities in the World Heritage Site.
As presented by international asset consultants Henry Butcher (Penang), Director Dr. Jason Teoh gives us some insight into the state’s exemplary commercial heritage buildings…
Re-developed from a group of pre-war two-storey shop houses, this 45-room hotel covers a land area of 17,139 sq.ft., where a standard room size starts from 431 sq.ft. onwards.
The Seven Terraces
A newly-opened private hotel of only 18 suites, owners and award-winning hoteliers, Karl Steinberg and Christopher Ong (Winners of the 2007 UNESCO Award of Distinction for heritage conservation and regular Conde Naste Hot List nominees) are set to spice things up at Lorong Stewart with their romantic, beautiful and timeless retreat.
The Logan Heritage
Costing some RM6.8 million, this building has been restored to its former glory. It was built in the 1880s and spans across a land area of 32,150 sq.ft. Named after James Richardson Logan, a lawyer by profession, the building is currently owned by Oversea-Chinese Banking Corporation (OCBC) Bank.
1881 Chong Tian
With a history of more than 131 years, this thriving hotel stands as the first and only Chinese heritage hotel in the country. Having been established since the late 1800s, the hotel presents luxurious unique suites decorated with Chinese antiques.
Previously a dilapidated heritage building used as a stable, it has now become a boutique accommodation for flash packers.
If you love buildings with a historical touch and love preserving sentimental values, there is always the option to invest in heritage buildings, so focus on UNESCO awarded sites in Malaysia such as George Town, Penang, as well as Melaka Historical City.
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