Boston, MA -- (SBWIRE) -- 05/24/2013 -- The Malaysia Real Estate report examines the commercial office, retail, industrial and construction segments throughout the country in the context of rising headwinds. With a focus on the principal cities of Kuala Lumpur, Johor Bahru and Kota Kinabalu, the report covers the rental market performance in terms of rates and yields over the past 24 months, and examines how best to maximise returns in the commercial real estate market while minimising investment risk.

Our latest round of in-country interviews (conducted in December 2012) suggests that the market is not yet saturated, and investment may continue to increase as players look to more stable markets than the US and eurozone. Nevertheless, our in-country sources have reported increasing fears of oversupply in the market and a small portion of our rental indicators are already noting a tangible effect.

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A big driver for growth in construction is the government's Economic Transformation Programme (ETP), launched in December 2010. The government identified 131 projects with a total investment value of MYR794.5bn (US$215mn). At the end of 2011, 46 projects with an investment value of MYR95bn (US $31mn) had been confirmed. MYR36.6bn (US$12mn) of this is for investment in the Mass Rapid Transport (MRT) programme and MYR28bn (US$9mn), or 30%, is for investment in the oil, gas and energy sector. Investment in tourism includes the development of the MYR600mn (US$196mn) Marina Island Pangkor 2nd International Resort and Entertainment Island, which includes waterfront property development. In April 2012 it was reported that the ETP had exceeded its 2011 target, achieving 23% of its Key Performance Indicators.

Key Points

- We believe that recent measures implemented by Hong Kong and Singapore to cool property prices will pressure the Malaysian government to extend its own set of cooling measures in H213. Meanwhile, our view on the Malaysian property market remains unchanged. We continue to see previous measures by the government to cool the property market and the growing supply of new units over the coming quarters driving overall property prices lower in 2013.
- We believe we are seeing the peak of the current construction cycle in Malaysia, with construction real growth reaching 18.3% year-on-year (y-o-y) in Q312 (July-September), lower than the 22.2% y-o-y in Q212. Therefore, even though we have revised up our full-year estimates for 2012 to reflect the Q312 data - construction real growth reached an estimated 15.5% y-o-y in 2012 (previously 11.5% y-o-y) - we expect Malaysia's construction sector to grow at a slower rate in the medium term, with real growth forecast to reach 7.2% in 2013. This outlook is primarily because we expect headwinds from a weakening global economy to grow in severity and dampen demand for residential and non-residential buildings.

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