Malaysia's construction rebound

Malaysia's healthy growth -- driven by the semiconductor sector, data centers, tourism flows and the "connector economy" phenomenon lifting ASEAN as a whole -- is finally being reflected in a post-Covid construction pickup.

We've charted the correlation of property and construction stocks on the Kuala Lumpur exchange with new starts for residential property and retail space. The long 2021-24 doldrums stand out. So far, construction starts trail the mid-2010s boom, though the enthusiasm in the equity market is comparable to a decade earlier. (If historic patterns hold, spillovers from the wave of foreign investment could stimulate residential development even further.)

Our granular data allows us to explore regional and sectoral hotspots in our subsequent charts. The pickup in construction starts in the tourism and semiconductor hub of Penang is notable.

An interesting phenomenon is the boom in serviced apartments in Johor. This is linked to the construction of a rail link to neighboring Singapore that is about to make life easier for cross-border commuters.

For new condos, Kuala Lumpur and its suburbs in Selangor state remain important, despite the capital's broad decline in residential property prices. In the commercial sector, construction of retail space is seeing a gradual pickup.

Finally, it's notable that few developers are taking a chance on building hotels, despite Malaysia's tourism outperformance in the region. Heightened competition from alternative accommodation platforms such as Airbnb could be a factor.

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