Optimism surrounding property sector continues

PETALING JAYA: Malaysia’s property sector is expected to extend its recovery momentum into the final quarter of 2026, buoyed by improving buyer sentiment, supportive interest rate conditions, and foreign fund inflows that have reignited interest in property counters.

After a strong showing in the third quarter, MBSB Research observed that optimism surrounding the sector has continued to build, particularly following the July 2025 overnight policy rate (OPR) cut, which has enhanced housing affordability and spurred loan activity.

“The gains in KL Property Index were largely underpinned by optimism from the OPR cut by 25 basis points (bps) in July 2025 as property sector is one of the beneficiaries of lower interest rate,” the brokerage noted.

The KL Property Index had a stellar run in September, gaining 4.4% and outperforming the FBM KLCI’s 2.3% advance. The index also climbed 6.2% in the third quarter, beating the broader market’s 5.2% rise.

Among the top performers were KSL Holdings Bhd (plus 98.2%), Plenitude Bhd (plus 55.3%), Symphony Life Bhd (plus 54.8%), Country View Bhd (plus 33.3%), and Tanco Holdings Bhd (plus 27.7%).

According to MBSB Research, valuations are now “returning to long-term mean”, with the price-to-book ratio of the KL Property Index standing at 0.66 times, in line with its historical average.

“Nevertheless, we see more upside to KL Property Index as valuation of property companies remains reasonable while above-mean valuation should be warranted given the positive backdrop for the property sector,” it added.

The brokerage remains upbeat about the broader outlook, citing ongoing demand and structural catalysts.

“We remain positive on the outlook for the property sector as buying interest on property is stronger while catalysts such as the Johor–Singapore Special Economic Zone (JS-SEZ) and Rapid Transit System (RTS) link will continue to serve as catalysts to the sector,” MBSB Research highlighted.

It pointed out that Mah Sing Group Bhd, Matrix Concepts Holdings Bhd, and UOA Development Bhd as its top picks, noting that their exposure to the affordable housing segment and regional expansion plans position them well for sustained sales momentum.

“For Mah Sing and Matrix Concepts, we see that its exposure to the affordable property market segment should sustain new property sales outlook while the extension of Home Ownership Campaign until Dec 31, 2027, bodes well for the companies’ new sales prospect,” it said.

“We see the maiden launch of UOA Development’s project in Johor will support new sales in 2026 while dividend yield of UOA Development is attractive at 5.5%,” it added.

Foreign participation has also emerged as a crucial driver.

“The performance of the KL Property Index has strong corelation with foreign funds flow year-to-date with correlation coefficient of 0.9, indicating a significant and positive relationship between return of KL Property Index and foreign funds,” the research house said.

It noted that renewed buying in September coincided with the highest foreign inflows of RM184mil, as investors turned optimistic on catalysts such as the JS-SEZ and the RTS Link project.

“Going forward, the performance of KL Property Index is expected to sustain by the prospect of inflow of foreign funds as MBSB Research views that we may see foreign funds returning to our shore with the US rate cuts.”

On the financing front, demand has firmed.

“Loan application remains stronger in the first eight months of 2025,” said MBSB Research, noting that total loan applications reached RM435.2bil (an increase of 1.9% year-on-year).

“We think that the recovery in buying interest was partly attributed to the OPR cut in July 2025,” it added.

Although approved loans fell marginally, it noted that “bank lending requirement remains stringent”, keeping approval rates modest at 43.4% for the first eight months of the year.