The research house said this implies better earnings sustainability, with larger volumes of affordable products.

Kenanga Research said that there was a meaningful uptick in the number of affordable homes priced between RM300,000 and RM500,000, which was explained by a stronger emphasis by developers to inject supply into the markets to cater to first-time home buyers and young working adults.

“We see similar improvements for serviced apartments with the 3Q24 number of unsold units at 20,200 units, compared with 22,200 units in 3Q23, with higher priced homes being absorbed by the market,” said Kenanga Research.

Citing data for the third quarter of 2024 (3Q24) from the National Property Information Centre, the research house observed a steady decline in unsold residential units to 22,000 from 25,800 a year earlier.

“Industrial products also remain a focus amid rising competition as more developers enter the space,” the research house said in a note to clients yesterday.

It added that selected players participating in data-centre projects will only see earnings accretion in the medium term and thus has yet to be fully priced in by investors.

The research house said, as a whole, the Malaysian property sector had shown growing indications of stabilisation and gradual recovery even as it continued to navigate long-standing challenges such as oversupply and affordability gaps.

According to Kenanga Research, the country’s household debt-to-gross domestic product ratio currently stood at 83.8%, compared with pre-lockdown levels of around 88%, which suggested that households still had room to rebuild borrowing capacity.

Furthermore, it said the absence of changes in the overnight policy rate for more than 18 months had provided much-needed stability to the interest rate environment, allowing buyers and developers to adjust to earlier hikes.

“However, inflationary pressures persist, particularly with the potential rationalisation of the RON95 fuel subsidy, which could tighten consumer spending power and slow property demand.

“Despite this, the appreciating ringgit has offered some relief, easing import costs for materials and improving overall sentiment. The combination of these factors suggests that while hurdles remain, the property sector is showing resilience and is better positioned for recovery compared with prior quarters,” the research house added.

Kenanga Research pointed out that a steady increase in units under construction in 3Q24 signalled that developers were launching more aggressively in anticipation of a pick-up in market demand in the near term.

Moreover, it said Penang appeared to be the state with the highest sequential increase with supply at 8,121 units following the continuing growth of the manufacturing and semiconductor sectors there.

The research house said it was now “neutral” on the property sector, identifying its top picks as Mah Sing Group Bhd, due to its strong focus on affordable homes priced below RM500,000 which are in high demand among first-time homebuyers, and Sime Darby Property Bhd, which is expanding its recurring income streams, providing greater earnings stability and long-term growth potential.