The medium-term outlook for Malaysia's building industry
Published on 15/07/2015
Major residential and commercial building projects and the development of affordable and high-rise housing are set to drive growth in Malaysia's construction industry over the medium term.
While some emerging construction markets are still struggling in the wake of the global economic downturn, Malaysia's appears to be in a healthy position, with spending expected to rise over the years ahead.
A strong construction sector would not just be welcome news for contractors and the Malaysian economy, of course. One of the biggest beneficiaries would be the building materials trade, including overseas firms looking to export to Malaysia. The south-east Asian country relies on imports for some of its most important building materials, with glazed ceramics, tiles and building bricks all in high demand.
Reports paint a positive picture of construction in Malaysia
Examining the prospects for Malaysian construction between 2014 and 2019, market research firm Technavio revealed the industry saw a compound annual growth rate of 8.92 per cent over the study period.
Furthermore, a new report from Kenanga Research, the research arm of Kenanga Investment Bank, says the sector is built on solid foundations, with construction contractors revealing their order books are looking strong for the next two to three years.
Most Malaysian contractors either met or surpassed earning expectations this year, with the likes of Mitrajaya Holdings and Eversendai Corporation even reaching record highs, reports the Borneo Post. Some - including Mitrajaya, IJM and MMC Corporation - even have enough orders to last them for the next five years, according to Kenanga.
When it comes to attracting new orders, the report claims prospects are looking equally bright, driven by demand from both the building and infrastructure sectors. In particular, contracts for a number of new affordable housing and high-rise apartment jobs are expected to be awarded over the coming three to six months.
Large projects have a part to play in driving construction growth
In 2013, Malaysia's construction spending hit $32 billion - more than many of its Asian contemporaries, including Bangladesh, Pakistan, the Philippines and Vietnam.
Given the scale of the market, it is unsurprising that Malaysia is home to numerous major construction projects, all of which will help to deliver sustained growth over the years ahead.
One of the most significant is KL118, formerly known as Warisan Merdeka, which will be the tallest building in Malaysia - and the sixth highest in the world - when construction finishes in 2020. This $1.3 billion mixed-use development, which is being financed by fund management company Permodalan Nasional Berhad, will eventually comprise 400,000 sqm of residential, hotel and commercial space, including a shopping complex and office buildings.
Another of the country's most significant construction projects is the 1Malaysia Housing Programme. This government-backed initiative aims to massively increase the availability of affordable housing in dozens of key development areas across the country. Project leaders are aiming to deliver 250,000 properties by the end of the year, having already received more than a million applications from prospective homeowners.
With these and other projects already underway, and many more in the pipeline, Kenanga Research is positive about the construction sector's medium-term future.
"Going forward, we expect the momentum to continue with most of our coverage companies meeting our estimates, driven by healthy order books [and] improved margins, as well as being on track to meeting our replenishment assumptions," the report declared.