Staying guarded on property

WHILE many analysts remain hopeful about the construction sector, which includes property development, industry players are staying cautious.

They believe that several factors, including strategic planned launches, could paint a clearer path in 2026.

With Bank Negara Malaysia (BNM) looking likely to keep its overnight policy rate (OPR) at what it deems a business-conducive 2.75% for the whole of 2026, investors are curious as to whether this could have a bearing on demand for developed properties.

Last week, Hong Leong Investment Bank (HLIB) Research cautioned that residential job flows may soften in the second quarter as developers and contractors adopt a more cautious stance.

Mixed bag of external factors

“We think the current ‘wait-and-see’ approach by both developers and builders will lead in a softening residential job flow in the coming quarter,” it said.

The research house’s report further said that cost pressures are another area of concern, particularly following the recent surge in commodity prices linked to geopolitical tensions.

It predicts that the surge in commodity prices driven by the blockade of the Strait of Hormuz is likely to exert increasing cost pressures on the construction sector, with higher diesel costs and potential knock-on effects on materials such as cement and steel.

On the other hand, HLIB Research anticipates margin pressures to remain manageable, with only a slight dent on a full-year basis, pointing to improved contract structures such as cost-plus arrangements that help mitigate cost volatility.

Rakuten Trade head of equity sales Vincent Lau maintains an “overweight” call on the domestic property development market, explaining that the outlook should improve towards the second half of 2026, based on his view that the Middle East confict is on its last legs.

Middle East +1

Speaking to StarBiz 7, he acknowledges that OPR level remains accommodative, with BNM standing ready to act should there be need for recalibration, before also pointing out that several developers are continuing to register solid sales, such as Mah Sing Group Bhd and LBS Bina Group Bhd.

With the Malaysian economy still steady, and the expectation that data centre jobs will keep up at least for the next two years despite the spike in energy prices, Lau is confident about the prospects for the property development industry.

“We believe that Malaysia may benefit from a ‘Middle East +1’ effect following the conflict, as investors may look to forgo properties in the conflict region and look possibly to South-East Asia, which is seen to be safer geopolitically,” he says.

Kenanga Research said last week that data centres remain the construction sector’s anchor for 2026, underpinned by persistent demand and sustained capital expenditure commitments from global technology firms.

“We expect the data centre boom to persist for at least the next two years, which could result in construction projects worth about RM21bil each year,” the research house said.

Situation on the ground

Meanwhile, Chin Hin Group Property Bhd group chief executive Chang Tze Yoong says the company has begun to observe a gradual improvement in enquiries following BNM’s OPR lowering in July last year, although he recognises this is also dependent on factors such as project location and launch timing.

“While the current interest rate environment can support buyer sentiment and project feasibility, it is only one part of the overall demand equation.

“Factors such as product positioning, affordability, and broader market conditions continue to play a significant role.

“As such, we expect it will take time for improved sentiment to translate into project launches and sales performance,” he tells StarBiz 7.

On whether a sustained and conducive OPR can benefit margins, Chang explains that financing is only one component of the overall cost structure.

Other factors like raw material prices, labour, and regulatory requirements remain key considerations.

“Developers are likely to continue exercising cost discipline, which may keep margins competitive in the near term,” he says.

As such, he observes that developers are being selective rather than aggressive in their launch strategies, with many adopting a phased approach, focusing on projects in strategic locations with established demand.

“Residential projects continue to drive demand, with pricing remaining competitive, while opportunities in other segments are evaluated more selectively based on market conditions,” says Chang.

Lending support to the strategic outlook, Mah Sing founder and group managing director Tan Sri Leong Hoy Kum reiterates that the group is maintaining discipline, and its launches are carefully planned based primarily on demand visibility, take-up rates of current projects and project readiness.

For 2026, he says Mah Sing has lined up RM3.45bil worth of new launches, focusing on products aligned with current market demand in key growth corridors in the Greater Klang Valley, Johor and Penang.

“Following the recent debut of M Aria (Sentul) and M Aurora (Old Klang Road), upcoming launches include M Mira (Setapak), M Hana (Puchong), M Cora and M Amaya (Penang), as well as M Tiara 2 and our industrial launch of MS Industrial Park @ Kulai (Johor).

“New phases of existing developments will also be rolled out, namely M Legasi (Semenyih), M Sinar Tower B at Southville City (Bangi), M Grand Minori and Meridin East (Johor),” Leong reveals.

In addition, he reports that Mah Sing’s unbilled sales are recognised progressively over the construction period, in line with stages of completion, providing clear earnings visibility and supporting near- to medium-term revenue sustainability.

As at Dec 31, 2025, he says the group’s unbilled sales stood at RM3.24bil, providing earnings visibility for at least the next eight to 10 years.

“While lower mortgage rates may correlate to stronger property demand, our launches remained within the planned RM3.45bil for the financial year ending December 2026, based on the aforementioned factors.

“We expect construction margins to remain relatively stable, supported by ongoing cost management and execution efficiencies,” says Leong.