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Slow 2015? Not for construction.

When I was still with my previous company, many developers told me that they always face the potential of delay due to the shortage of construction workers. It was the booming years a few years ago. Fast forward a few years later and the construction sector is still booming. The reason? Well, remember the property market was hot until 2012 and only started slowing down in 2013? Well, those projects which started in 2011 and 2012 and even 2013 is still ongoing or only just about to finish (2011 projects). Thus, the effects of the slowdown in the property development has not yet been felt and probably would not be felt because the affordable properties are still hot and all the new launches are concentrated in this area. Just look at the announcements from all the bigger developers from Eco World to IJM to Mah Sing and even SP Setia. This is the same case for smaller regional based developers too.
According to a report in a local English daily, the strong momentum would continue because of a few mega infrastructure projects under the 11th Malaysia Plan. Maybank Investment Bank Research (Maybank IB) said that it believed the mega projects would continue even with deficit concerns. The only hiccup would be a likelihood of a slower projects from the property developers. Of course the current negative sentiment from the plunging oil price would probably cause some delays in the award of new projects. However, it believed that the really major ones including Klang Valley Mass Rapid Transit (KVMRT) 2, KVMRT 3, the Penang Integrated Transportation Plan, Klang Valley highways, and the Pan Borneo Highway would still proceed.
Personally, I think the construction sector has a secured long term future because Malaysia’s MRT project has yet to complete. With the continuous urbanisation, more people meant more cars and thus heavier jams. These would have to be continuously mitigated through even more highways especially to connect newer areas to the city centre. This will always be true for Malaysia because I seriously could not imagine majority of all the senior managers taking public transport at this moment. Perhaps when push comes to shove they would but until that happens I think the highways better be ready. Even looking at just Penang, jams are happening frequently and when it’s bad, it’s worst than Klang Valley. Reason? There are no alternative roads. Jam means just wait and wait and wait when it is within Penang island.
So, for those thinking of buying some ‘safer’ stocks to hold, either for potential re-rating and thus appreciation or even some dividends, instead of property counters, why not buy construction counters instead? Maybank IB said, it likes ‘Gamuda’. Seeing is believing. On all the projects, look for the name of the construction company. When you see a repetitive name in many projects, those would the company that you should buy. For these observations, you may not need any analysts. Happy buying.
written on 15 Jan 2015
Next suggested article: KL as a Mega-City

Property Investment always start with knowledge. Equip ourselves with more here.

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Charles Tan The Founder The Writer Kopiandproperty
Charles Tan

Charles is Founder of kopiandproperty.com He writes from his investment experience for the the past 20 years in investments including property, stock, unit trust and more as well as readings and conversations with many property gurus in the industry. kopiandproperty.com is an independent property blog which is not affiliated to any media company, property developer or even real estate agencies.

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