Foreigners, mostly from Singapore, are snapping up and refurbishing scarce units of pre-war shophouses in the heritage enclave of George Town before renting them out at five times the previous rate.
This has sparked complaints by locals who feel pushed out by commercialism in George Town, which enjoys World Heritage Site status.
According to The Star, new owners have raised monthly rentals to between RM7,000 and RM10,000 (S$2,300 and S$3,300), from the prevailing rate of RM1,300 prior to 2010.
A row of shops close to Komtar, the skyscraper in the centre of George Town, has been dubbed "Little Singapore" because their new facade is similar to that of refurbished pre-war shophouses in the Republic.
A check by The Straits Times found some Penangites are currently charging about RM4,000 in rent.
Skyrocketing rents have led non- governmental organisation (NGO) George Town Heritage Action to lobby for rent control to prevent local residents and old businesses from being driven away. Only 3,853 pre- war properties in George Town are recognised as heritage buildings.
The NGO's co-founder Mark Lay was quoted by The Star as saying that laws similar to the Rent Control Act, which was repealed in 1997, are needed to control the spike in rents.
"The unique living heritage that George Town acquired as a British Straits Settlement is leaving the city because it has become too expensive to live in," he said.
Cheah Kongsi, a family trust which owns about 100 pre-war shophouses, has kept rents at between RM1,500 and RM2,700 as its policy "is to support the living heritage by keeping rentals low".
Said its chairman Peter Cheah: "Private property owners have the right to benefit from their assets. But for the kongsi, we believe in keeping the city's Unesco World Heritage Site status sustainable."
Penang Chief Minister Lim Guan Eng, who has faced flak over the spiralling cost of housing, previously said foreign ownership could not be stopped as "it is an open market".
"But they (foreign investors) are also putting in the money for building restorations that most Malaysians (building owners) don't want to do," he was quoted as saying in The Malaysian Insider last December.
One of the most aggressive buyers is World Class Land, whose Malaysian subsidiary was reported to have bought over 60 pre-war shophouses for about RM122 million in recent years. World Class Land is the property arm of Singapore-listed jewellery firm Aspial Corporation.
Property consultant Michael Geh was quoted by The Star as saying that World Class Land spent about RM500,000 per unit for refurbishment. Mr Geh said high renovation and restoration costs have been a push factor for owners of these buildings, leading them to sell.
"The high cost of heritage conservation creates opportunities for rich foreigners to come in and buy en bloc," he said.