George Town — a ghost town of the future?
After the sub-prime crisis that triggered the 2008 recession in the US and much of the Western world, the risks involved with overvalued properties fell under the spotlight. Speculation in the international press has widely discussed the possibility of China’s property bubble bursting and slowing down the world economy. How does this relate to Penang?
There is the suspicion that heritage property in George Town is overvalued. This is a difficult issue to address, as it is hard to define how property could be “overvalued”. Rather than focusing on the economic perspective (best left to the economists!) it would be interesting to examine the sociological impacts of the recent rapid changes that are taking place in George Town’s heritage enclave.
The main concern is that the skyrocketing prices of heritage houses are not based on real economic growth within the community, but are a by-product of a booming tourism industry and of speculation. One of the symptoms is a misbalanced market value and rent return. The value of properties in George Town is so high that in order to get a return from rent after renovations (which can potentially be a very costly procedure), a new owner would need to significantly raise the rent. There are exceptions, including tourism-related businesses (boutique hotels, high-end restaurants and souvenir shops) or the extremely wealthy.
Presently, George Town is not seen as an attractive place to live for people with young families.
The current population of the heritage enclave is slowly ageing and there is not enough fresh blood pouring in. Many of the small businesses in the heritage area operate on low rent agreements with temples and other benevolent landlords. It is highly likely that they would not be able to afford an increase in rent if a new owner bought out a house and renovated.
This pattern partly explains the slow and painful extinction of uncles making chick blinds, leather mongers, old style pharmacies and aunties with sewing machines. Yes, the times are changing and new businesses are needed to satisfy the demands of society, but unfortunately the old is not being replaced with the new. Graphic design firms, interior design offices, bookshops, trading companies and photography studios would make welcome additions to the heritage area; instead the old has been largely exchanged for new shining boutique hotels, souvenir art galleries or mansions for foreigners.
In a sense, George Town properties can be considered overvalued because the pricing does not match local income patterns and such properties are simply not affordable for many Penangites.
What does a significant gap between local income levels and property prices mean? There aremany foreign examples, where whole towns along the Greek, Spanish and Italian coast share the same destiny. Spain has clusters of towns along the Costa de Sol filled with UK expats. Inflated property prices have prevented locals from moving in and they become cheap labour for hotel chains, property developers, restaurants and bars, even cinemas and shopping malls (many of these are owned by foreigners who tend to bring in expat management).
Talking to people on the streets reflected the mixed feelings everyone has about these changes. Tan Kai Sheun, a young artist from Kedah who moved to Penang half a year ago, explained how he enjoys the increased pace of life in George Town. Even though buying a property here is beyond Tan’s and many other young Malaysians’ means, he still manages to rent space in central George Town quite cheaply. This is partly because most of his landlords are also his art collectors. Why George Town? Is it a good place for young artists? Tan says Kuala Lumpur has a more lively art market, but George Town has a special appeal and a certain laidback lifestyle that makes it so special. While Tan enjoys the current revival of George Town, he laughs that there should be a limit to the boutique hotels and Italian restaurants per street. “So far, this is a beautiful place to live and create art in,” said the young artist.
While some young creative people are slowly moving in, a lot of the old establishments are becoming a thing of the past. Ho Bing pork noodle stall on Penang Road will move next month and the Hakka food stall on Carnarvon Street will close by the end of the year. In the case of the latter, the owner’s family had rented the property for over 40 years. The landlord recently sold the property to developers, but it is still not clear what will be built here. Asked if she felt sad, Carene Lim just shrugged, “This is how it goes…”
The moral of the story? Overvalued properties indicate that there is a deep rot somewhere in the economy and that tourism is a mixed blessing. Economic dependency on tourism is not necessarily sustainable in the long run as the control of incoming tourist flows is often beyond the host community. Many visitors flock to George Town because it is seen as an “undiscovered” gem; many are fascinated by the liveliness of the streets, hawkers, craftspeople and other experiences that are considered “authentic”. However, if the change in George Town continues unmanaged and there are more heritage hotels than family homes, visitors may eventually think of George Town as just another “unauthentic” and “touristic” destination, and will go somewhere else instead. It is easy for overdevelopment and greed to kill the cash cow.
It should be noted that a continuous flow of tourists does not necessarily guarantee the prosperity of the community either. Most of the time it helps the already wealthy to boost their profits using the assets that they own, while the rest of the inner city’s population is in danger of being pushed away. Many of the jobs that tourism creates are low paid service jobs, including waiting tables, cleaning hotels and working in retail, that do not benefit the community much. The rise in prices results in lower living standards for the local population.
These are some of the long-term effects of an economic dependency on tourism and could be avoided through careful planning. Tourism itself is a business, not manna falling from the sky.
Tourism is a mixed blessing and Penangites need to know what they are signing up for. At the moment the development that is taking place in Penang has grim long-term perspectives if not restructured and given some careful direction. There is a clear need for more studies on how the World Heritage Site status of George Town will affect the everyday lives of the local community and how the money that pours in from tourism can balance the impact.
What George Town needs is a plan and a vision, or one day it will wake up to discover that it has been transformed into a tourist ghost town.
This article is taken from the August 2012 issue of Penang Monthly (www.penangmonthly.com).