KUALA LUMPUR: The property sector, which was an outperformer in 2023, is expected to normalise this year as much of the sector's tailwinds diminish this year.
The Kuala Lumpur Property Index recorded an impressive return of +34.5 per cent (vs. KLCI Index return of -2.7 per cent) in 2023.
"We observe that all property stocks under our coverage recorded good positive returns, indicating that this was in fact a sector wide re-rating. "Also notable is that stocks such as Sunway Property Bhd, OSK Holdings Bhd and Matrix Concepts Holdings Bhd achieved their all-time high stock price during 2023," Hong Leong Investment Bank Bhd research (HLIB research) said in its note.
This year however pace of billings is expected to normalise with moderate growth in new launches and sales.
HLIB research said the accelerated billings seen in 2023 was a result of developers catching up on progress to avoid Liquidated Ascertained Damages (LAD) payment.
It noted that this impact should dissipate and normalise in 2024.
"Secondly, the higher sales in 2023, in our view, was partly due to some buyers shifting from secondary to primary market as more new products were available in the latter. "We do not think property demand has changed much in 2023 given that the domestic economy had only seen moderate growth in gross domestic product (GDP)
"The moderate growth is expected to continue in 2024 with a projected four to five per cent GDP growth based on Bank Negara Malaysia's estimate," it said in a note.
As developers scaled up launches significantly in the domestic market in 2023, HLIB Research said these products will take some time for the market to absorb. As such, the firm said developers are unlikely to raise its launches significantly in 2024.
HLIB research has maintained its "Neutral" rating on the property sector, previously downgraded from "Overweight" in Dec 2023.
Despite an overall neutral view on the sector, the firm believes several property stocks under its coverage have the potential to outperform, namely Sunway Property, OSK Holdings, Sime Darby Property Bhd, and IOI Properties Group Bhd.