HLIB Research expects a long-term uptrend for the property sector, driven by three themes.
PETALING JAYA: Property has been one of the outperforming sectors and stocks within the circle are still attracting investor interest year-to-date.
Hong Leong Investment Bank (HLIB) Research expects a long-term uptrend for the sector, driven by three themes.
“We think that a multi-year property upcycle is now set in motion, driven by the rise in industrial developments, providing developers a new avenue of growth and alleviating pressure on residential developments,” the research house said in a property sector report yesterday.
It noted that Malaysia has benefited from the US-China trade war. This was evidenced from the rise in foreign direct investments since 2021 with industrial developments being among the first to benefit as multinational corporations (MNCs) set up their facilities.
“In 2024, this segment is being further propelled by the data centre boom, which opens up more ways for developers to monetise their land,” it said.
It noted that currently, seven out of eight developers under the research house’s coverage either have industrial exposure or plans to venture into it.
Secondly, it said the decentralisation of economic development and the rise of second tier cities, would provide development opportunities in new areas and relieve overbuilding pressure in the Klang Valley.
“Industrialisation and investments have spread to Johor, Penang, Sarawak and Kedah. This decentralisation has led to more evenly distributed foreign investments and economic growth.
“Penang has emerged as a key electrical and electronics hub and a rising second-tier city, while Sarawak is focusing on renewable energy.”
Meanwhile, Johor has seen renewed interest due to infrastructure projects like the Johor Baru-Singapore Rapid Transit System and announcement of the Special Economic Zone. As for Kedah, the state is benefiting from spillover demand from Penang with significant investments from MNCs like Infineon and Intel.
The third theme is rising land value, giving large landowners multiple avenues to monetise their land.
“Industrialisation and rising economic activities in Johor, Penang, Sarawak and Kedah are boosting land value.
“Other than this, industrial land near transport nodes and those suitable for data-centre development due to good infrastructure are also appreciating in value,” noted HLIB Research.
Maintaining an “overweight” call on the sector, it said the current cycle is unlike the 2009 to 2014 period that was driven by speculative demand and policies like developer interest bearing scheme and low real estate property gains tax.
The Kuala Lumpur property index has surged by an impressive 93.5% from its post-Covid trough on Oct 14, 2022 to its recent peak on July 18, 2024 – outperforming the FBM KLCI which recorded a gain of 18.2% during the same period.
According to HLIB Research, the property index’s recent high is 23.9% short of the previous cycle peak recorded on Aug 18, 2014.
