KUALA LUMPUR: The revival and launch of mega projects, especially the rail and road network infrastructure, will increase mobility and stimulate economic activities and property market along the route, analysts said.
They believe the Malaysian property market will continue to improve in 2023 but in a modest term.
Using the East Coast Rail Link as an example, AmResearch analyst Khoo Zing Sheng said the areas in and surrounding its stations in Kapar, Puncak Alam, Gombak and Bentong would grow to be highly sought-after residential neighbourhoods for people working in Klang and other Selangor industrial districts.
Khoo also thinks that with the gradual return of buyers from Hong Kong and mainland China in 2023, the foreign acquisitionsof Malaysian real estate would improve.
He said the market expects China to progressively reopen its international border from Jan 1 this year.
The main factors affecting consumer sentiment on the demand side would continue to be the rising interest rates and escalating prices, Khoo told the New Straits Times.
"However, we believe the weaker consumer sentiment could be mitigated by still relatively firm economic growth and employment outlook following the reopening of international borders.
"Despite the various negative headwinds in the property sector, the property transaction value for residential property in the nine months of 2022 improved by 35 per cent year-on-year due to a lower base in 2022.
"Generally, we believe the Malaysian property market will continue to improve in 2023, but in a modest term. Selective developers with strategic land banks in prime locations such as in the city centres and matured towns, and strong reputation will continue to maintain their positive sales momentum in 2023," he added.
Sunway Bhd (fair value: RM2.29) is AmResearch's top "Buy" pick, given the great brand recognition created by its incredibly successful landmark developments and growing healthcare industry, underpinned by significant unbilled revenues and an exceptional order book.
Lagenda Properties Bhd (fair value: RM1.64) is also favoured by AmBank Research due to its emphasis on underserved and cheap landed home developments in second-tier states with a sizable population of B40 and M40 income categories.
Khoo also singled out Mah Sing Group Bhd (fair value: RM0.86) for its ability to create inexpensive housing in advantageous locations, as well as for its astute execution and quick turnaround business model.
On the supply side, AmResearch believes developers will scale up their new property launches in 2023 as compared to 2022 with the stabilisation of building material costs.
"We believe that most building material costs have reached their peaks in the second quarter of the calendar year 2022 following the easing of supply chain disruptions, coupled with the tightening of monetary policy by the Federal Reserve," said Khoo.
Steel price in the central peninsula slid 28 per cent to RM3,132 per tonne in October 2022 from a peak of RM4,344 per tonne in April and May 2022.
AmResearch predicts that since construction activity expanded as a result of the recovery in the labour market, there will be a plentiful supply of under-construction properties entering the market in 2023.
Meanwhile, Maybank Investment Bank Bhd (Maybank IB) expects external challenges including tighter monetary policy, supply chain disruptions, and labour shortage problems to persist into 2023.
Maybank IB thinks that because of the uncertainties, and also because they are wary of the demand for real estate since higher interest rates will affect purchasers' affordability, developers may postpone their debuts in the upcoming year.