RHB Overweight On Property Despite Recent Sell-Down

RHB Investment Bank Bhd (RHB Research) has maintained its OVERWEIGHT rating on the real estate sector, viewing recent market disruptions as temporary and reiterating that the sector's core story remains intact. The research house continues to favour Sime Darby Property Bhd and Sunway Bhd as its top picks.

RHB Research noted that the mild sell-down and profit-taking activities seen in the past two weeks were largely triggered by factors such as the overhang ahead of Budget 2026, the dissolution of the Sabah state assembly, and rising trade tensions between the US and China. It believes sentiment will gradually recover, with developers likely to report stronger earnings in the third quarter of 2025.

The research house said Budget 2026 appeared neutral to the sector as it offered no significant new measures. However, it highlighted the extension of full stamp duty exemptions for first-time home buyers for houses priced up to RM500,000 until 31 December 2027, as well as a flat 8% stamp duty for foreigners, up from 4% previously. While the higher rate may affect sentiment among foreign buyers, RHB Research said demand for high-end properties, particularly in Iskandar Malaysia, is unlikely to be severely impacted given the region's ongoing infrastructure and economic catalysts.

The dissolution of the Sabah state assembly earlier this month is expected to result in some near-term uncertainty. According to RHB Research, the upcoming state election, which must be held within 60 days, could weigh on sentiment temporarily. However, it expects confidence to return once the political situation stabilises, supported by the sector's resilient fundamentals.

Developers remain optimistic about the second half of 2025, RHB Research said, noting that property sales tend to strengthen during this period as companies ramp up project launches. It observed that the Iskandar Malaysia property market continues to show robust demand, particularly for township developments, mid-range high-rise residential units, commercial spaces, and industrial properties. Tier-1 developers such as Eco World Development, Sime Darby Property, and Mah Sing Group Bhd are also actively seeking new landbanks in Johor, Negeri Sembilan, and Selangor for future developments.

RHB Research added that the industrial property segment continues to thrive, supported by the trade tensions between the US and China. It said foreign direct investments are increasingly flowing into Southeast Asia, with developers reporting higher enquiries from East Asia-based multinational companies looking to establish production hubs or warehouses in Malaysia.

At current levels, the sector is trading at a 53% discount to its revalued net asset value (RNAV), hovering between +1 standard deviation and its long-term historical mean. RHB Research described valuations as more appealing now and believes the prevailing negative sentiment will ease as demand remains steady, aided by a stable interest rate environment and sustained investment inflows.