Malaysia building sector to contract temporarily in 2019

However, the sector will grow in the long term as more projects achieve completion.

Malaysia's building sector is expected to see a short-term contraction in 2019 but is tipped to stage a recovery by 2020 as several infrastructure projects come online, Fitch Solutions reported.

The total value of work done in the residential and non-residential sectors shrank by 1.1% and 9.3% YoY respectively in Q1 2019.

In Q1 2019, housing prices posted its slowest pace of growth since 2014 at 1.3% YoY, and the housing price index retreated for the first time in 20 quarters to 194.6 from 195.4.

Sales value of residential and non-residential buildings sector is expected to contract 0.9% and 0.8% respectively in 2019, but will grow 2.6% and 2.1% in 2020.

Also read: Can Malaysia revive its weakening construction sector?

In the short term, the construction of affordable housing projects is expected to slightly compensate for the contraction, with the National Housing Policy aiming to construct 100,000 low-priced homes by the end of 2019 and one million houses in ten years.

In the long term, Fitch expects that the completion of massive infrastructure projects like West Coast Expressway and Pan Borneo Highway will help push the sector into recovery.

Projects like the East Coast Rail Link is also expected to be completed by 2026, the Klang Valley Integrated Transit System (KVITS) is tipped to take shape over the next decade, and the MRT Sungai Buloh-Serdang-Putrajaya Line is expected to begin operation by 2021.