RHB Research has maintained its Overweight rating on Malaysia’s property sector, arguing that the current market slowdown is likely to be short-lived as underlying demand remains resilient despite geopolitical uncertainties and domestic political developments.
The research house continues to name Eco World Development Group Bhd as its top sector pick, while highlighting major corporate exercises such as real estate investment trust (REIT) listings, property asset transactions and landbank acquisitions as key catalysts for the sector.
RHB said developers under its coverage have maintained both their project launch pipelines and sales targets, signalling confidence that property demand will remain fundamentally healthy.
The research house noted that demand has softened, particularly in the low- to mid-priced residential segment, amid ongoing geopolitical tensions in the Middle East and heightened political uncertainty following recent state elections.
However, it expects the weakness to be temporary for several reasons.
Industrial property demand remains robust as local and foreign companies continue expanding their operations, supporting employment and income growth.
Meanwhile, demand for high-end residential properties continues to be driven by owner-upgraders, investors and foreign buyers.
RHB added that the low- to mid-priced housing segment is typically more sensitive to changes in market sentiment and expects demand to recover once geopolitical tensions ease and the domestic political landscape stabilises.
The research house said the outcome of the recent state elections could influence investor perceptions of the Unity Government’s political stability, potentially weighing on the broader equity market and property stocks.
Historically, Malaysia’s property sector has traded within a narrow range ahead of general elections as investors adopt a cautious stance amid policy uncertainty.
Nevertheless, RHB believes these concerns are sentiment-driven rather than reflective of underlying demand fundamentals.
RHB remains particularly optimistic about the outlook for Iskandar Malaysia, citing several upcoming developments expected to support the state’s property market.
The Government is anticipated to unveil the Johor-Singapore Special Economic Zone (JS-SEZ) Investment Blueprint and Master Plan following the state elections, while the Johor Bahru-Singapore Rapid Transit System (RTS) Link is scheduled for completion in December.
The research house expects continued investment in manufacturing facilities and data centres by both domestic and foreign companies to underpin demand for industrial land, landed residential developments, commercial properties and selected high-rise projects across Johor.
It identified UEM Sunrise Bhd and Eco World Development Group Bhd as among the listed developers best positioned to benefit from these long-term growth drivers.
RHB noted that the property sector is currently trading at an average 55% discount to revised net asset value (RNAV), although recent share price gains in IOI Properties Group Bhd and Sunway Bhd have lifted overall sector valuations.
The research house said the rerating in these two counters over the past three to six months has largely supported the sector’s valuation, while most other property developers continue to trade at relatively unchanged levels.
Given the attractive valuations, resilient underlying demand and the potential for recovery once macroeconomic and political uncertainties subside, RHB believes the Malaysian property sector continues to offer compelling investment opportunities over the medium term.
