The axing of the mega project will have a negative bearing and drive down buyer sentiments, including foreign buying interests in the area
By NUR HANANI AZMAN / Pic MUHD AMIN NAHARUL
PROPERTY projects within the vicinity of Bandar Malaysia are likely to come under threat from the cancellation of the Kuala Lumpur (KL)-Singapore high-speed rail (HSR).
JF Apex Securities Bhd head of research Lee Chung Cheng said the cancellation will have a negative bearing and drive down buyer sentiments, including foreign buying interests in the area.
“As we are witnessing now, the construction and property counters are facing some selling pressure today,” he told The Malaysian Reserve (TMR) yesterday.
The HSR project was terminated after Malaysia and Singapore failed to reach an agreement on changes proposed by Malaysia before the project agreement lapsed on Dec 31, 2020.
In a joint statement by Prime Minister Tan Sri Muhyiddin Yassin and his Singapore counterpart Lee Hsien Loong on Jan 1, the leaders said the Malaysian government had proposed several changes to the HSR project due to the impact of the Covid-19 pandemic on the Malaysian economy.
“Both governments had conducted several discussions with regard to these changes and had not been able to reach an agreement. Therefore, the HSR agreement lapsed on Dec 31,” it said.
Major property developers in the past banked on the development of the HSR project to push sales of residential and commercial properties in some of the main catchment areas.
In September 2020, Ekovest Bhd, in an exchange filing, stated it received an exclusive offer to enter into negotiation with Iskandar Waterfront Holdings Sdn Bhd to undertake the development of the Bandar Malaysia project.
Malaysian Resources Corp Bhd (MRCB) in 2017 entered into a non-binding memorandum of understanding with Wondrous Vista Development Sdn Bhd and TRX City Sdn Bhd to develop an integrated transportation terminal at Bandar Malaysia, housing the KL-Singapore HSR line’s terminus.
Ekovest shares fell 4.5 sen or 8.65% to 47.5 sen and Iskandar Waterfront City Bhd fell seven sen or 12.17% to 50.5 sen, while MRCB fell 2.5 sen to 45 sen.
The axing of the mega project is expected to further dim the local property sector, said JF Apex’s Lee.
The termination of the HSR project also reinforces AmInvestment Bank Bhd’s ‘Underweight’ stance on the local construction sector.
The research house reiterated the earnings outlook for players in the sector is weak.
Analyst Joshua Ng said the government will have very limited room for fiscal manoeuvre in 2021 given the elevated national debt, even before the pandemic.
Ng said the government’s fiscal position has been weighed down further by the economic impact of the pandemic (including reduced petroleum revenues) and the massive relief spending to cushion the economic impact of the pandemic.
“Under these circumstances, we believe the government is unlikely to roll out new public infrastructure projects in a major way over the short term, including the Mass Rapid Transit Line 3 (RM22 billion-RM23 billion).
“We foresee the tabling of the 12th Malaysia Plan (which, among others, will earmark mega public infrastructure projects to be implemented in 2021-2025), scheduled in March 2021, to turn out to be a non-event,” he said.
A transportation consultant YS Chan said regardless of HSR, all mega projects are adversely affected by the Covid-19 outbreak, which has set back the economies of many countries with a notable exception of China.
He said the Bandar Malaysia project involves a lot of investments from both developers and potential buyers from China, but demand for overseas investments has turned cold after restrictions on travel and residence, such as Malaysia My Second Home, are imposed.
“The Exchange 106 has stood out like a sore thumb since its completion, as demand for office space has evaporated. In recent months, executives everywhere have been forced to and have learned to do business online such as using Zoom for meetings.
“The Merdeka 118 is likely to be a white elephant and occupied almost entirely by Permodalan Nasional Bhd group,” he told TMR.
Chan said Tun Razak Exchange (TRX) will fare slightly better as many buildings are nearing completion, but will have difficulty finding tenants, as premium office space and address are no longer in vogue.
“Likewise, there is an oversupply of condominiums in KL as many are vacant in Mont Kiara and KL City Centre,” he added.
Hence, he suggested the government continue to spend on mega projects to spur the economy, such as extending the West Coast Expressway; now being built from Taiping to Banting to continue towards Port Dickson, Melaka, Muar, Batu Pahat and Johor Baru.
“The expressway can pass through these towns using flyovers and will benefit the local economy.
“The HSR route is actually far from these towns and requires a long road trip between the station and town centre,” he added.
However, he said the cancellation has minimal impact as no party has been awarded construction and companies with land- banks around the proposed HSR stations have yet to develop new townships nearby.
MIDF Research head of research Imran Yassin Mohd Yusof, however, expects the cancellation of the HSR project will likely have no bearing on the decision of other projects.
“We opine projects with high impact will probably continue to be considered given the high multi- plier effect it will have on the economy. Similarly, it is too early to tell the impact it will have on the property sector,” he told TMR.
He said there are many other factors that should be considered.
“We do not believe the cancellation of the HSR project will affect the market as much, given that it might not have been priced in the first place. This is based on the fact that it had been delayed since 2018.
“We believe there are other catalysts that could drive the construction sector for this year, especially given the large development expenditure budgeted by the government,” he concluded.