Buying a House in Penang to Retire To

loading Aerial view of Balk Pulau.

I HAVE TO admit, I have not always liked Penang. I had been somewhat fond of it, but this had been more for sentimental reasons; I met my wife there as an undergraduate, and many of our closest friends we had first met at university, at USM.

But as we inch closer to retirement, we begin toying with the idea of spending our autumn years on the Island. Having ensconced ourselves in KL throughout our careers, we have no desire to continue living here once we hang up our boots. Penang has everything we want for a retirement haven – affordability, outdoor adventure, heritage and culture, delicious food and a laidback lifestyle.

But can we afford to put down roots there?

So, the first thing I do is to pay a visit to a banker acquaintance. He advises me that based on my salary and age (I was already 50), I can only afford a property priced at, at most, RM600,000. The maximum loan I am eligible for is RM540,0001; and this means that I need to have separately at least RM100,000 for the 10% down payment, legal fees, stamp duty, other transaction costs and a bit more for renovation works.

Read also: Penang through the Eyes of Young Resident Foreigners
Armed with this budget, I scour the numerous property websites. Having lived in KL’s high-rises, we now set our sights on an expansive house instead. I also figure that this is a better asset class; there is always higher demand for a house, compared to that for a high-rise. Nowhere is this truer than in Penang where prices for high-rise properties have been going south.

Will it be possible to find a double-storey house on the Island for below RM600,000? By now, prices of Penang’s landed properties have reached dizzying heights. A 40-year-old, single-storey terrace house in Sungai Dua alone is fetching a ridiculous RM800,000!

But find this we do – in the hidden hamlet-cum-durian haven of Balik Pulau. Surrounded by idyllic villages, lush orchards, rolling hills and hidden coastlines that are good for plenty of outdoor adventure and picnics by the beach, we find pockets of small housing estates with double-storey terrace houses priced between RM500,000 and RM600,000. And mind you, it is not easy to find freehold, landed properties on the Island within this price range.

There is, however, one drawback: its pastoral seclusion. There are only two routes to Balik Pulau from George Town – the first, via Paya Terubong and the second, via Teluk Kumbar.2 On good days, both trips take about 40-50 minutes to reach George Town. The nearest town Bayan Baru is about 20 minutes away. But we surmise that since we are moving to Balik Pulau as retirees, we would have all the time in the world for driving.

As part of our fact-finding mission, we speak to several Penangites about their impression of the town. Many of them are not terribly enthusiastic, with one even suggesting that we buy in Batu Kawan instead! We decide to investigate further on our own.

Our search narrows down to four housing estates around Balik Pulau with houses priced just below RM600,000. We also browse through websites and blogs for any negative news on the developments and the property developer.

We discover that it is essential to talk to someone familiar with the properties around the area. We are lucky to find a young and knowledgeable fellow who makes his living transacting Balik Pulau properties. Perhaps it is because of his youthful innocence, but he is honest enough to educate us on the pros and cons of each housing estate. He even estimates the amount of rental each area would command.

After viewing more than 10 houses over a six-month period, we finally identify one that we want. It is an intermediate unit measuring 20ft x 64ft – shorter and narrower than normal. There is another row of houses fronting it, a back lane separating the backyard and a fence belonging to a residential school. So, no chance of a condominium sprouting up overnight there! The area is a decade old, and the entire housing estate comprises 200-odd two-storey terrace houses and semi-detached bungalows.

To better understand the problems faced by the residents, we speak to the neighbours. The Facebook page of the residents’ association also reveals an active, multi-racial neighbourhood community which pleases us. Although it is a secondary sale, the unit is unoccupied and devoid of the barest of fittings. The owner has been keeping it for investment purposes. The porch leaks and the main electrical wiring has been stolen. The agent warns us that these are inherent problems with some of the houses in this development.

Compared to several other units we had viewed earlier, and based on condition, location and price, this particular unit is the best one yet. We make an offer before leaving the premises.

The Process Begins…

A few days later, the offer is verbally accepted by the seller. The sale has to be formalised next. A 1% earnest deposit or booking fee must be paid to the seller’s agent. Both buyer and seller may appoint an agent to represent them, but more importantly the agency agreement must be signed with a registered agent or negotiator.3 Dealing with a registered agent ensures that you can lodge a complaint with the authorities in the event of any dispute or complaint.

Also, prior to the signing, you should insist on at least verifying the details of the property by either sighting a copy of the property title or the previous sales and purchase agreement.4

Once the booking fee has been deposited, it is time to appoint a Sales & Purchase (S&P) lawyer to draw up the agreement. Since we are domiciled in KL, we appoint a lawyer here who has extensive contacts with other lawyers in Penang. It is an advantage if the S&P lawyer is also on the panel of your mortgage bank as this saves much time and expense, not to mention the headache, of dealing with two sets of lawyers.

Immediately after paying the booking fee, we start sourcing for a housing loan. Through friends, we are referred to a branch manager of a bank in Balik Pulau, who is familiar with the area and is able to advise us on the valuation of the house.5 Communicating with a bank in Penang from our base in KL is not a problem since all documents or administrative matters can now be easily conducted via email or executed at the nearest bank branch in KL.

Using the details of the property in my booking form, the bank loan is approved well before the S&P Agreement is even executed. The bank approves a housing loan equivalent to 90% of the house price and even includes something extra for the loan agreement legal fees, valuation and insurance fees.

We convey this happy news to the seller’s agent and jokingly ask him to inform the seller that there is no chance of us rescinding the sale now! There is a covenant in the S&P that stipulates all payments for the purchase must be completed within three months from when the S&P is executed, otherwise the seller is entitled to penalty payments from the buyer. In my case, I make it with one day to spare.

Once the sale is finalised, it is time to go to Penang to collect the keys and register the property in our name. There are two places we need to visit to get these done, one is the Penang Island City Council (MBPP) at Komtar for the property assessment tax and the other is the Southwest District and Land Office in Balik Pulau for the payment of quit rent.

The house needs some refurbishing before it can be rented out, so we contacted a few friends in Penang for names of contractors they know and trust. After interviewing a few and getting quotations, we split the renovation work into two parts – one for the electrical, and another for the building. But first, the water and electricity supply has to be connected. I pay my contractors to sort this out.

Frequent site supervision is impossible but thanks to WhatsApp, we are sent periodic pictures and videos of the works in progress. Of course, in between, I pay the contractors a surprise visit just to keep them on their toes!

Once the renovation is completed, I hand the keys over to the real estate agent6. The agent informs me that I can earn more if I sublet the house to students from the surrounding colleges and higher educational institutions. However, students are likely to thrash the place and since this is the house we intend to retire in, I need it to be maintained in pristine condition, so I ask that my unit be rented to a family instead.

After about a month, the agent finds us a tenant – a family man with his brood of three. The agent assures me that he has sized up the tenant and can vouch for his good character. Both the landlord and tenant have their own obligations towards the property. The tenant has to take care of the property and to “encourage” him to do so, the landlord should pay him the occasional visits. One can retain the services of the real estate agent to do this, all for a fee of course, but I prefer to do periodic visits myself.

And luckily for me, the KL-Butterworth Electric Train Service (ETS) affords me a cheap, comfortable and convenient way to make a day, albeit a little rushed, trip over. I just need to catch the 8.00am ETS from KL Sentral to arrive in Butterworth by 12.30pm. Then, via a combination of ferry, bus and taxi, I make my way to Balik Pulau. After a quick inspection, I rush back to Butterworth Sentral to catch the 6.30pm return train to KL. I am safely home before midnight.

Since my purchase, we have seen two separate announcements of future real estate developments in Balik Pulau. While the place could use some development, I hope the town will remain the way it is for a long time to come.

1 Based on 90% of the house purchase price of RM600,000.
2 The third route is via Teluk Bahang but this route is dangerous and time consuming.
3 Real estate agents or negotiators are registered with the Board of Valuers, Appraisers, Estate Agents and Property Managers. Registered real estate agents or real estate negotiators have their own registration numbers – this is usually on their name tag or call cards. You may search the agent’s registration number on the board’s website.
4 This is to ensure the owner still has the title with him. If the property is still mortgaged to the vendor’s bank, the sale and purchase process will take a little longer to complete.
5 The loan amount is based on the bank’s valuation of the property and not on the purchase price.
6 For his service, the agent deducts a month’s rent from the two-month security deposit.

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