Optimistic outlook for property stocks
PETALING JAYA: Despite the record-breaking transaction value recorded in 2023 in the property sector, the KL Property Index, which is made up of listed shares of property companies, has remained relatively flat.

The index closed at about 918 points yesterday, six points higher compared to the 912 opening points recorded on March 6, the day when the National Property Information Centre (Napic) released its statistics on last year’s property market.

Analysts, however, expressed optimism about the outlook for property stocks on the KL Property Index following the latest Napic results, citing several factors contributing to positive sentiment in the sector.

These include favourable monetary and government policies as well as the spillover effects from major infrastructure projects like the high-speed rail (HSR), rapid transit system (RTS), and mass rapid transit 3 (MRT3).

Speaking with StarBiz, RHB Research analyst Loong Kok Wen said these factors, coupled with the anticipated improved economic growth, are expected to sustain the positive momentum in the property market.

“Generally, developers are aiming for higher sales targets and higher launches this year,” she said, adding that overall, there should not be any negative earnings growth.

Another analyst with a local brokerage also believes that developers are poised for a stronger performance in 2024.

“In addition to favourable monetary and government policies, Malaysia’s resilient growth, supported by increased domestic demand and improved labour market conditions, is anticipated to impact the property sector positively,” she told StarBiz.Similarly, she believes the imminent end of the central bank’s interest rate hike cycle, potential land value boosts from major infrastructure projects and the establishment of special financial hubs and economic zones would collectively contribute to this positive sentiment.

“Furthermore, we expect the implementation of homeowner-friendly policies to add another layer of appeal to the sector,” she added.

Moving forward, the analyst anticipates the above mentioned factors to sustain a positive market momentum for the upcoming months.

“With robust unbilled sales and a solid balance sheet, developers seem well positioned to embrace a promising 2024,” she said.

When asked about the impact of the high cost of living on the property market, Loong said that post-Covid-19, various countries witnessed a surge in inflation as economies reopened.

However, as of 2024, she said inflation is stabilising, signalling a gradual adjustment to the new norm, not only in Malaysia but globally.

“I’m not blindly optimistic, I know inflation is a threat but people are spending, as evident in malls,” she noted.

As for the weakening ringgit, Loong said it will have a direct impact on investor sentiment.

However, she said the impact is not significant on the property market as construction materials are locally sourced.

Despite the weakening local currency, she believes the demand for property is expected to persist, driven by the fact that people refrained from spending during Covid-19.

“The (property) demand is now fuelled by the savings accumulated during that (Covid) period,” she said.

Loong named UEM Sunrise Bhd , Sunway Bhd and IOI Properties Group Bhd (IOIProp) as her top picks within the sector, citing their exposure to Iskandar Malaysia in Johor as the main factor.

She said UEM Sunrise remains the best proxy for Johor’s thematic play, followed by Sunway, given their sizeable exposure to the state’s property market.

She said Sunway is also expected to list its healthcare unit in 2026 or 2027, representing a value monetisation exercise, while IOIProp is strengthening its recurring income from the property investment side.

Last week, Napic reported that Malaysia’s property transaction value soared to RM196.83bil in 2023, representing a 9.91% year-on-year (y-o-y) surge from the previous record set in 2022 at RM179.07bil.

The positive growth trend is driven by a higher increase in transaction values in all sub-sectors, namely the residential at 7.1%, commercial (17.5%), industrial (13.1%), agriculture (4.6%) and development land and others (13.8%), compared to 2022.

Newly launched residential units also saw an increase of 4.4% to 56,526 units with a better sales performance of 40.4% from 36% in 2022, the department said.

As for the number of transactions, it was largely flat at 399,008 in 2023, a 2.54% increase from 389,107 in 2022, with the bulk 62.8%, or 250,586 units, coming from the residential sub-sector.

There were 25,816 overhang units worth RM17.68bil in 2023, reflecting a 7% reduction in volume and a 4% decrease in value compared to 2022, where there were 27,746 overhang units worth RM18.41bil.

The Malaysian House Price Index, meanwhile, reached a predicted 216.5 points in 2023, corresponding to RM467,144 per unit, reflecting a moderate annual growth of 3.2% from the 2022 index of 209.8 points, which had an average price of RM452,617.

Positive annual growth was observed across all major states, with Johor leading at 6.2%, followed by Penang (3.8%), Selangor (2.9%) and Kuala Lumpur (1.8%).
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Despite the record-breaking transaction value recorded in 2023 in the property sector, the KL Property Index, which is made up of listed shares of property companies, has remained relatively flat.