AS the US Fed finally starts cutting interest rates, regional institutional funds, developers and property buyers and investors would be deploying more capital into real estate.
Malaysia, a prime destination of data centre (DC) investments due to its strategic location, should continue to see more land and DC transactions, while local and foreign property buyers and investors are more likely to buy properties in high-growth areas – given the stabilising Ringgit and interest rates.
“As falling interest rates are generally favourable for real estate investment trusts (REIT) we believe more developers may now consider listing their investment properties under REITs,” said RHB Research (RHB) in the recent Malaysia Sector Update Report.
The recent sale of AirTrunk, the largest DC group in the Asia-Pacific, for an enterprise value of AUD24bil (USD16bil) is said to be the biggest private equity deal this year.
This may indicate that regional capital is starting to be deployed back to the real estate sector, given the lower global interest rate environment ahead.
Since the last property upcycle in 2011-2013, developers have started to see buyers queuing up overnight or in the early morning at their project launches again.
The recent soft launch of shop lots by UEM Sunrise (UEMS) and terrace homes by Sunway saw overwhelming demand, with 3-4x oversubscriptions on the pre-launched units.
“We believe this trend will continue, given the renewed interest in the Iskandar Malaysia property market, with the Rapid Transit System, influx of FDIs, JohorSingapore special economic zone (JS-SEZ), and high standard of living in Singapore being key catalysts behind demand,” said RHB.
The tabling of Budget 2025, the signing of the JS-SEZ definitive agreement and potential revival of the Kuala Lumpur-Singapore High Speed Rail are the key events ahead. The recent correction represents a good opportunity to re-enter.
Since the last property upcycle in 2011-2013, developers have started to see queues forming overnight or in the early morning at some of their new property launches again – especially those located at strategic areas, for example Nusajaya.
Considering that global interest rate is likely to decline over the next 1-2 years, RHB believes this buying trend will continue, given the renewed interest in the Iskandar Malaysia property market, with the Rapid Transit System, influx of foreign direct investments (FDI), JS-SEZ and high living standard in Singapore being key demand catalysts.
The strong prospects for property transactions as the nation enters the rate cut cycle may have been underestimated.
The tabling of Budget 2025 by the government next month, the signing of the JS-SEZ definitive agreement in November/December, as well as the potential revival of the Kuala Lumpur-Singapore High-Speed Rail (HSR) are the key events ahead.
The recent correction in the equity market as well as the profit-taking in the property sector have brought the sector valuation to a 48% discount to revalued net asset value.
RHB’s top picks are unchanged, which are SDPR, Mah Sing, UEMS and Sunway. RHB continues to focus on companies that still have pipeline DC-related involvements and strategic exposure to the industrial development segment.
UEMS and Sunway are the key Iskandar Malaysia property plays. They will be the prime beneficiaries if major tax or economic incentives related to the JS-SEZ or the HSR project are announced. – Sept 20, 2024
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