KUALA LUMPUR: The property sector is continuing its upward trend into 2024, according to CLSA Research's latest report on the 'Malaysia Property Sector.'

Using the FBMKLCI property index (KLPRP) as a measure, the firm indicates that the sector has reached about two-thirds of its peak in the through-the-cycle trend.

Initially skeptical at the close of 2023, CLSA had a change of perspective following a visit to Johor in March 2024. Since the second half of 2023, the property market has been propelled by several factors, including the surge in industrial property due to trade and supply chain diversions, advancements such as the Johor-Singapore Special Economic Zone (JSSEZ), and the influx of data centres into Malaysia, notably in Johor, it said.

CLSA said that while the Johor property euphoria hailed more than 10 years ago, what is different this time is the reality of the Rapid Transit System (RTS), the influx of data centres and the sheer sentiment of having Malaysia's ruler hail from the state, it said.

"Newsflow on data centres have been hitting headlines throughout the year so far, citing Johor as the largest data centre market in Malaysia now, as multinational corporations with regional presence pour investments into the state," the firm said.

CLSA witnessed increased landbanking activities by property developers like Eco World Development Group Bhd and Mah Sing Group Bhd, which boosted confidence in the sector's potential.

The firm's outlook favours industrial property over residential development, particularly emphasising Eco World and AME Elite Consortium Bhd.

Eco World is set to launch Eco Business Park VI, while AME Elite is thriving with its iPark@Senai Airport City industrial park and the upcoming iTech Valley.

During their March visit to Johor, CLSA also observed UEM Sunrise Bhd's joint venture project with Capitaland Development in Nusajaya Tech Park, hosting data centres such as GDS.

CLSA also noted more and more property developers entering the industrial property space, such as SP Setia Bhd, which appears to be reigniting its industrial property angle with proposed developments at Setia Alaman (Selangor) in 2024, Tanjung Kupang (Johor) in 2025, and Setia Fontaines (Penang) in 2026.

Regarding Sime Darby Property, CLSA said that while the property company embarked on its industrial property journey two years ago, its earnings are diluted because of its associate/joint venture structure.

"What is left on the table are the finalisation of details for the JSSEZ expected by the third quarter of 2024, other infrastructure developments in Johor, including the Johor LRT, and the eventual revival of the high speed rail, which could then propel the sector to its peak, in our view," it said.

On the Penang market, CLSA said that it remains very much a more tech-centric play for trade and supply chain diversion.

"There could be a shift of appetite to Penang-related developers, though we believe this will take time given the newsflow on the Penang LRT, but the dynamics are very different from Johor," it said.