KUALA LUMPUR: Analysts are bullish on Malaysia's property sector, projecting strong capital inflows and renewed buying interest as global interest rates start to decline.

RHB Research has reaffirmed its "overweight" rating on the property sector.

It said that anticipated rate cuts by the US Federal Reserve (US Fed) are likely to boost investments from institutional funds, property buyers, and developers.

The firm highlighted Malaysia, particularly its high-growth regions, as an attractive market for both local and foreign buyers.

Malaysia's strategic location positions it as a prime destination for data centre (DC) investments, with further land and DC transactions expected.

RHB said that a stabilising ringgit and interest rates are likely to draw more property buyers to these high-growth areas.

This week, the US Fed lowered interest rates by half a percentage point, marking an aggressive start to its monetary easing cycle.

Lower US interest rates typically benefit riskier assets, including those in emerging markets, as investors move away from the weakening US dollar and bond yields in search of better returns.

RHB sees Johor as a prime market, adding that major infrastructure projects like the Johor-Singapore Rapid Transit System (RTS) and the Johor-Singapore Special Economic Zone (JS-SEZ) are expected to further stimulate demand, alongside rising foreign direct investments (FDIs) in the region.

In its property outlook report, the firm highlighted strong demand for recent property launches, particularly in Nusajaya, Johor.

"Since the last property upcycle in 2011-2013, developers have started to see queues forming overnight or in the early morning at some of their new property launches again—especially those located at strategic areas, for example, Nusajaya," it said.

Projects by UEM Sunrise Bhd and Sunway Bhd saw overwhelming interest, with units oversubscribed three to four times.

"Considering that the global interest rate is likely to decline over the next one to two years, we believe this buying trend will continue, given the renewed interest in the Iskandar Malaysia property market, with the RTS, influx of FDIs, JS-SEZ, and high living standards in Singapore being key demand catalysts."

The research firm anticipates this trend to continue, especially with growing interest in the Iskandar Malaysia property market.

RHB's top picks in the property sector include Sime Darby Property Bhd (target price: RM2.00), Mah Sing Group Bhd (TP: RM2.26), UEM Sunrise (TP: RM1.60), and Sunway (TP: RM5.00).

"The strong prospects for property transactions as we enter the rate cut cycle may have been underestimated. The tabling of Budget 2025 by the government next month, the signing of the JS-SEZ definitive agreement, and the potential revival of the Kuala Lumpur-Singapore High-Speed Rail (HSR) are the key events ahead.

"The recent correction in the equity market as well as the profit-taking in the property sector have brought the sector valuation to a 48 per cent discount to RNAV (the recent peak was at 40 per cent discount to RNAV).'"