Download construction industry prospects 2017

CHAPTER 4
CONSTRUCTION
INDUSTRY
PROSPECTS
2017
80
81
82
83
87
95
99
99
World Economy
World FDI
World Trade
Malaysia Economic Prospects 2017
Construction Demand Prospects
New Construction Projection
Estimated Value of Work Completed
for 2016/2017
Estimated Value of Renovation
Work
80
CHAPTER 4 CONSTRUCTION INDUSTRY PROSPECTS 2017
Introduction | World Economy
CHAPTER 4 CONSTRUCTION INDUSTRY PROSPECTS 2017
World FDI
CONSTRUCTION INDUSTRY
PROSPECTS 2017
WORLD FDI
INTRODUCTION
and the strengthening of developing Asian economies.
The Malaysian economy faced an environmentally
challenging year in 2015 as a consequence of weak
global momentum, low prices in major national
commodity, diminishing value of the Ringgit against
major world currencies and the rise in consumer
goods’ prices. The situation did not adversely impact
growth of the resilient Malaysian economy, due to
various revitalisation measures through the Economic
Transformation Programme (ETP) and Government
Transformation Programme (GTP). The Malaysian
economy grew remarkably by 5.0% (2014: 6.0%) driven
by domestic demand which is indicated by constantly
high construction sector expenditure. A total of 6,885
construction projects valued at RM124.4 billion were
registered in 2015.
The drop in prices of crude oil and other commodities,
the rise of US dollars and the economic pressures
faced by several large market economies like China,
India and some East Asia countries and the Pacific has
adversely impacted worldwide import demand. A 3.1%
growth in world economy for 2015 is seen as less than
robust following a deliberated execution of revitalising
measures and fiscal policies amongst the developed
countries within the European Union (EU). High capital
outflow, uncertainties in the world monetary market
plus the geopolitical unrest in West Asia have agitated
investor sentiments and world trade.
Construction activities catalyses demand in other
economic sectors, where it is estimated construction
commands the utilisation of 96 products from
other sectors whilst employing 9.3% of our national
workforce through its various linkages. Hence, the
construction sector is capable of assuming the role
of an expeditious and effective economic driver
particularly in times of a slowdown. It is irrefutable
that the high construction sector expenditure has
become one of the contributors towards the positive
development of the manufacturing and services
sectors.
Country
2015
2016
2017
3.1
3.2
3.5
Developed Countries
1.9
1.9
2.0
USA
2.4
2.4
2.5
European Union
1.6
1.5
1.6
Germany
1.5
1.5
1.6
France
1.1
1.1
1.3
Japan
0.5
0.5
-0.1
World
United Kingdom
2.2
1.9
2.2
6.6
6.4
6.3
Europe
3.5
3.5
3.3
Asia
5.4
5.3
5.3
ASEAN-5
4.7
4.8
5.1
China
6.9
6.5
6.2
India
7.3
7.5
7.5
Rapidly Developing Countries
WORLD ECONOMY
The International Monetary Fund (IMF) forecasted a
slowdown in world economy by approximately 3.2%
for 2016 (2015: 3.1%) resulting from the low growth
in developed economies other than the USA, and
the slowdown in developing and rapidly developing
economies. However developing and rapidly developing
countries are forecasted to experience strong growth
of 6.4% in 2016 and 6.3% in 2017. As a result, the
world economy is expected to recover to 3.5% in 2017
spurred by moderate growth in developed economies
Change (%)
Source : World Economic Outlook (WEO) April 2015, IMF
World Economic Outlook (WEO) April 2016, IMF
Conference Trade Development (UNCTAD) foresee
that a continuous high growth momentum would be
less sustainable. Much lower FDI growth is forecasted
for 2016 on the prospects of a fragile global economy;
erratic world monetary market movements; weak
demand especially from developing countries; and the
West Asia geopolitical tensions that have hampered
investor sentiments. However, moderate growth
across developed economies will offer positive growth
prospects to the global economy, and the diminishing
local currency values against the USD wil promote
fresh FDI flows. Worldwide investments are projected
to expand by 4.5% in 2016 and 7.2% in 2017 by the
Economist Intelligence Unit (EIU).
World Foreign Direct Investment (FDI) leapt to 36.5%
at an estimated value of USD1.7 trillion in 2015
(2014: 6.2%; USD1.3 trillion). Contributing to the high
growth are cross border Mergers and Acquisitions
(M&A), compared to the marginal 0.9% increase in
new investments. A large portion of FDI found their
way into markets of developed countries (55.1%).
Developing Asian countries remained the highest FDI
beneficiaries at approximately 32.2% on the regional
level, an increase of 15.0% and the ASEAN region saw
a decrease of 7.0%. As the high increase of FDI in
2015 has been the result of M&A’s, the United Nations
Table 4.2 World Largest FDI Beneficiaries by Economic Region
Economic Region
Total World FDI
Table 4.1 Forecast of Major World Economies
Growth
81
Value (USD billion)
2014
2015
Proportion (%)
2014
Change (%)
2015
2014
2015
1,245.0
1,699.0
100.0
100.0
6.2
36.5
Developed Economies
493.0
936.0
39.6
55.1
-17.0
89.9
North America
146.0
429.0
11.7
25.2
-51.7
193.5
European Union
254.0
426.0
20.4
25.1
8.1
67.6
Developing Economies
703.0
741.0
56.5
43.6
3.8
5.3
55.0
38.0
4.4
2.2
-1.8
-30.9
170.0
151.0
13.6
8.9
-10.5
-11.2
475.0
548.0
38.1
32.2
11.2
15.5
49.0
22.0
3.9
1.3
-46.7
-54.1
Africa
Latin America and the Carribean
Asia
Transitional Economies
Source : Global Investment Trend Monitor No.19 January 2015, UNCTAD
Global Investment Trend Monitor No.22 January 2016, UNCTAD
Table 4.3 World Largest FDI Beneficiaries by Countries
Country
Value (USD billion)
Proportion (%)
2014
2015
1,245.0
1,699.0
100.0
100.0
6.2
36.5
86.0
384.0
6.9
22.6
-46.0
346.5
Hong Kong
111.0
163.0
8.9
9.6
54.0
46.8
China
128.0
136.0
10.3
8.0
0.8
6.2
Netherlands
42.0
90.0
3.4
5.3
91.0
114.3
United Kingdom
61.0
69.0
4.9
4.1
15.0
13.1
Singapore
81.0
65.0
6.5
3.8
45.0
-19.7
India
34.0
59.0
2.7
3.5
22.0
73.5
Total World FDI
USA
2014
Change (%)
2015
2014
2015
Source : Global Investment Trend Monitor No.19 January 2015, UNCTAD
Global Investment Trend Monitor No.22 January 2016, UNCTAD
CONSTRUCTION INDUSTRY REVIEW AND PROSPECT 2015/2016
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CHAPTER 4 CONSTRUCTION INDUSTRY PROSPECTS 2017
World Trade
WORLD TRADE
According to World Trade Organization (WTO), the
world trade for 2016 is expected to grow at 2.8%, a
moderate rate similar of that for 2015. Following the
plunge in commodity prices and the strengthening
of USD in 2015, the value of commodities decreased
by 13.0% to USD16.5 trillion (2014: USD19.0 trillion),
despite increased in the volume of commodities.
This has also affected the Chinese economy, causing
a slowdown. Additionally, the trade protection and
monetary policies in some European countries had
deviated from achieving the ultimate objective of
promoting world trade. This phenomenon have
prolonged into 2016, resulting in risky trade momentum
that would reduce demand from most developing and
CHAPTER 4 CONSTRUCTION INDUSTRY PROSPECTS 2017
Malaysia Economic Prospects 2017
rapidly developing economies, of which majority are
the main exporters of commodities. The persistent low
commodity prices, especially crude oil, had adversely
affected income of these countries. The continuing
increase in the value of USD which has prolonged since
mid-2014 has made imports expensive. However,
this scenario is perceived as stable throughout
the subsequent years making world imports to be
reasonably forecasted at 5.4% (2015: -12.4%) whilst
exports to rise to 4.8% (2015: -13.0%). The world trade
for 2017 is expected to be much better with higher
demand from developing Asian countries and new
rapidly developing countries following their strong
domestic economic growths. World trade is forecasted
to expand to 3.6% in 2017 with imports and exports to
increase to 6.8% and 6.0% respectively.
Table 4.4 World Main Exporters and Importers by Economic Regions
Value (USD trillion)
Country
Exports
Imports
2014
World
2015
Proportion (%)
2014
2015
Change (%)
2014
2015
18.4
16.0
100.0
100.0
-0.5
North America
2.5
2.3
13.6
14.4
4.2
-8.0
Central & South America
0.7
0.5
3.8
3.1
0.0
-28.6
European Union
6.2
5.4
33.7
33.7
1.6
-12.9
Commonwealth of Independent (CIS)
0.7
0.5
3.8
1.2
-12.5
-28.6
Africa & Middle East
1.8
1.2
9.8
7.5
-5.3
-33.3
Asia
5.9
5.5
32.1
34.4
1.7
-6.8
-12.4
World
-13.0
18.6
16.3
100.0
100.0
0.5
North America
3.3
3.1
17.7
19.0
3.1
-.6.1
Central & South America
0.7
0.6
3.8
3.7
-12.5
-14.3
European Union
6.1
5.3
32.8
32.5
1.7
-13.1
Commonwealth of Independent (CIS)
0.5
0.3
2.7
1.8
-16.7
-40.0
Africa & Middle East
1.6
1.3
8.6
8.0
14.3
-18.7
Asia
5.9
5.0
31.7
30.7
0.0
-15.2
Source : April 2015, Press Release 739, WTO
April 2016, Press Release 768, WTO
Table 4.5 World Main Exporters and Importers by Countries
Value (USD trillion)
Economic Region
Exports
2014
Total Exports
2015
Proportion (%)
2014
2015
Change (%)
2014
2015
18.9
16.5
100.0
100.0
1.0
-13.2
China
2.3
2.3
12.4
13.8
6.0
-2.9
USA
1.6
1.5
8.6
9.1
3.0
-7.1
Germany
1.5
1.3
8.0
8.1
4.0
-11.0
Japan
0.7
0.6
3.6
3.8
-4.0
-9.5
Netherlands
0.7
0.6
3.6
3.4
0.0
-15.7
Value (USD trillion)
Economic Region
Import
2014
Total Imports
2015
Proportion (%)
2014
2015
83
Change (%)
2014
2015
19.0
16.8
100.0
100.0
1.0
-12.2
USA
2.4
2.3
12.7
13.8
3.0
-4.3
China
2.0
1.7
10.3
10.0
1.0
-14.2
Germany
1.2
1.1
6.4
6.3
2.0
-13.0
Japan
0.8
0.7
4.3
3.9
-1.0
-20.2
United Kingdom
0.7
0.6
3.6
3.7
4.0
-9.4
Source : April 2015, Press Release 739, WTO
April 2016, Press Release 768, WTO
MALAYSIA ECONOMIC
PROSPECTS 2017
Driven by a sustainable domestic demand with support
from a moderate external demand, Malaysia achieved
a 5.0% economic growth in 2015. The small Malaysian
market is very much in need of foreign markets to
spur higher growth for continuous development. The
wide foreign markets does not only provide benefits in
creating greater demand for local industries, but would
also attract inflows of foreign capital whilst promoting
local investments as well as high technology transfers.
Malaysia’s external trade reached RM1.5 trillion in
2015, which translates to 134.0% of the GDP. In 2015,
Malaysia ranked 23rd as exporter country in the
world with exports value of RM778.0 billion; and was
positioned 25th as importer country in the world with
imports value of RM686.0 billion; from trading with 200
countries. In 2015, Malaysia received RM36.1 billion in
FDIs (2014: RM35.3 billion).
The current world economic challenges will
undoubtedly influence the momentum of Malaysian
economic growth. Malaysia is expected to be able
to withstand these difficult times in 2016, buffered
by the effectiveness of the economic transformation
strategies and the persevering financial system.
Consumer spending and private investments will
continue to drive domestic demand for economic
growth. Private consumption is expected to be
much lower at 5.1% (2015: 6.0%) resulting from the
low commodity prices; depreciation of the Ringgit;
economic uncertainties; rising cost of living; and
the world financial market uncertainties. Inflation is
expected to hover between 2.5% and 3.5% in 2016
(2015: 2.1%) from the aftermath of the Goods and
Services Tax (GST) implementation; the low Ringgit
exchange rate; and price rationalisation measures on
several controlled items. Though inflation is expected
to increase, its impact is offset by low fuel prices and
careful household expenditure to counter the rising
costs.
The weakened prices of major commodity especially
crude oil and natural gas, has impacted on government
revenue. The government has recalibrated the 2016
Budget by reducing operational expenditure by RM9.0
billion from its initial allocation of RM215.2 billion,
and taken prudent expenditure measures in ensuring
targeted fiscal deficit remains at 3.1% of GDP. These
measures are expected to lower public consumption to
2.0%. Against the backdrop of economic uncertainties,
the business sentiment has been on a cautious mode.
Despite this, domestic investments by private sector
are expected to continue, although in lesser amounts.
Private investment is estimated to dampen to 5.5%
(2015: 6.4%). Public investment will see moderate
growth at 1.1% (2015: -1.0%), largely to finance ongoing infrastructure projects.
Malaysia’s external trade grew by 1.2% to reach RM1.5
trillion in 2015. Ringgit depreciation and low commodity
prices were offset by export diversity. Exports and
imports managed to rise by 1.9% and 0.4% respectively
amidst global economic uncertainties (Table 4.6).
Demand for Electrical and Electronic (E&E) is forecasted
to increase in tandem with intense development
in digital and high tech industries in developed
economies (Table 4.7). The economic uncertainty is
expected to prolonged in 2016, due to the low oil prices
which in return will affect the government’s revenue.
The average production cost for crude oil is about
USD60.00 per barrel, in contrast to current hovering
prices of between USD38.00 and USD50.00 per barrel.
CONSTRUCTION INDUSTRY REVIEW AND PROSPECT 2015/2016
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CHAPTER 4 CONSTRUCTION INDUSTRY PROSPECTS 2017
Malaysia Economic Prospects 2017
CHAPTER 4 CONSTRUCTION INDUSTRY PROSPECTS 2017
Malaysia Economic Prospects 2017
Table 4.6 Main Export Markets and Import Sources of Malaysian Products
RM billion
Country
2014
2015
1,448.3
1,465.6
346.4
765.4
779.9
185.2
108.7
108.5
26.3
China
92.3
101.5
20.8
Japan
82.6
73.8
17.3
USA
64.4
73.7
19.1
Thailand
40.2
44.4
11.0
682.9
685.6
161.2
115.5
129.4
30.6
Singapore
85.9
82.1
17.5
USA
52.4
55.3
14.0
Japan
54.7
53.6
13.7
Thailand
39.6
41.7
10.4
82.5
94.3
23.9
Trade Value
Exports
Total Export Value
Singapore
Imports
Total Import Value
China
Trade Balance
Q1 2016
2014
2014
2015
1Q 2016
5.8
(100.0)
6.3
(100.0)
8.4
(14.2)
-4.8
(12.0)
4.3
(10.8)
11.0
(8.4)
0.7
(5.2)
5.3
(100.0)
8.6
(16.9)
7.1
(12.6)
3.3
(7.7)
-3.0
(8.0)
2.6
(5.8)
15.7
1.2
(100.0)
1.9
(100.0)
-0.2
(13.9)
10.0
(13.0)
-10.6
(9.5)
14.4
(9.4)
10.4
(5.7)
0.4
(100.0)
12.0
(18.9)
-4.4
(12.0)
5.5
(8.1)
-2.0
(7.8)
5.3
(6.1)
14.3
0.4
(100.0)
1.1
(100.0)
2.7
(14.2)
1.5
(11.2)
-20.6
(9.3)
13.0
(10.3)
5.8
(5.9)
-0.4
(100.0)
7.4
(19.0)
-6.4
(10.9)
8.5
(8.7)
3.0
(8.5)
8.3
(6.4)
12.2
Source : Trade Performance, 2014, 2015 & January - March 2016, MATRADE
Table 4.7 Exports and Imports of Major Malaysian Goods
2014
Exports
% Change
(% Proportion)
RM billion
Country
2015
Q1 2016
Export Value
765.4
779.9
185.2
E&E Products
256.1
277.9
66.5
Chemicals & Chemical Components
51.4
55.1
13.7
Petroleum Products
70.4
55.5
11.1
Oil Palm & Oil Palm Based Products
48.3
45.6
10.0
Machinery & Equipment
30.0
36.1
9.8
2014
2015
1Q 2016
6.3
(100.0)
8.1
(33.5)
8.2
(6.7)
2.9
(9.2)
5.2
(6.3)
10.7
(3.9)
1.9
(100.0)
8.5
(35.6)
7.2
(7.1)
-21.2
(7.1)
-5.6
(5.8)
20.3
(4.6)
1.1
(100.0)
3.6
(35.9)
6.2
(7.4)
-12.6
(6.0)
8.7
(5.4)
22.5
(5.3)
Imports
% Change
(% Proportion)
RM billion
Country
% Change
(% Proportion)
Import Value
2015
Q1 2016
682.9
685.6
161.2
190.7
201.3
50.2
Chemicals & Chemical Components
62.1
65.0
16.1
Petroleum Products
80.0
63.5
10.8
Machinery & Equipment
57.0
59.4
14.6
Manufactured Metal
41.7
44.1
9.2
1,448.3
1,465.6
346.4
E&E Products
Trade Value
85
2014
2015
1Q 2016
5.3
(100.0)
6.2
(27.9)
11.1
(9.1)
8.7
(11.7)
4.4
(8.3)
2.5
(6.1)
5.8
(100.0)
0.4
(100.0)
5.6
(29.4)
4.7
(9.5)
-20.6
(9.3)
4.2
(8.7)
5.7
(6.4)
1.2
(100.0)
0.4
(100.0)
8.7
(31.1)
3.9
(10.0)
-27.0
(6.7)
4.3
(9.0)
-17.9
(5.7)
0.4
(100.0)
Source : Trade Performance, 2014, 2015 & January - March 2016, MATRADE
In 2016, gross imports is predicted to increase in
parallel with the rise in new investment as well as
expansion and diversification in manufacturing
activities, especially those pertaining to export oriented
products. It is anticipated that Malaysia will achieve
a positive trade surplus for 2016. World trade is
forecasted for recovery in 2017 driven by high income
economies and improved economic growths in
developing and rapidly developing countries such as
China, India, Russia and Brazil.bNational commodity
prices are expected to rise as an effect of the dry ElNino spell which had hampered oil palm and rubber
production. At the advent of 2017, crude oil prices are
projected to reach USD50.00 per barrel. The Malaysian
trade value is predicted to increase with the exploitation
of a much wider market under the bilateral and
multilateral free trade agreements privileges. Exports
are estimated to be close to the targeted 4.7% under
the 11th Malaysia Plan (11MP).
Based on strong economic fundamentals, Malaysian
economy is expected to grow 4.5% in 2016. Slightly
brighter prospect for the Malaysian economy is
anticipated in 2017, alongside an expected improved
global economy. The improved world economy
will push further exports and private investment,
especially in the manufacturing and services sectors. A
stabilised domestic expenditure will create confidence
in business sentiment. The commodity prices are
expected to be higher in the world market. The inflation
rate will be under control, following self-adjustments
made by households in adapting to increased prices.
There will be excess capacity to make way for improved
national economy.
The government has devised several measures to
increase disposable incomes of consumers through
cash disbursements; reduction of income taxation;
raises in civil servants’ salaries; minimum wage
enforcement; and the reduction in Employees Provident
Fund (EPF) contributions thus enhancing consumer
spending. Public investment is expected to expand with
the government’s recommendation for Government
Link Companies (GLCs) and Government Investment
Link Companies (GILC) to re-invest their offshoreacquired earnings into high impact domestic projects.
Strategies implemented a decade ago will continuously
strengthen the foundation of the Malaysian economy;
the positioning of international reserves; secure internal
liquidity; and a well-managed national liability level will
develop Malaysia’s resilience and competitiveness in
facing sudden future changes in the global economic
landscape. Impending fiscal and monetary policies
that would be implemented during difficult times are
definitely meant to boost growth. Therefore, the 2017
national economy prospects will be encouraging and
assuring with a projected growth rate of 5.0% (Table
4.8)
CONSTRUCTION INDUSTRY REVIEW AND PROSPECT 2015/2016
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CHAPTER 4 CONSTRUCTION INDUSTRY PROSPECTS 2017
Malaysia Economic Prospects 2017
CHAPTER 4 CONSTRUCTION INDUSTRY PROSPECTS 2017
Construction Demand Prospects
CONSTRUCTION
DEMAND PROSPECTS
Table 4.8 Malaysian Economy Growth Forecast by Economic Activity
Change (%)
Economic Activity
Public Expenditure
Consumption
2015
2015 a
Quarterly 1
a
2.1
Annually f
2017 t
0.4
1.6
3.3
4.3
3.8
2.0
3.7
-1.0
-4.5
1.1
2.7
Private Expenditure
6.1
4.5
5.2
7.2
Consumption
6.0
5.3
5.1
6.4
Investment
6.4
2.2
5.5
9.4
External Trade
1.2
0.4
4.7
4.7
Gross Exports
1.9
1.0
2.4
4.6
Gross Imports
0.4
-0.4
4.9
4.8
Inflation Rate
2.1
3.4
2.5 – 3.5
2.9
5.0
4.2
4.0 – 4.5
5.0 - 6.0
Agriculture
1.0
-3.8
-0.3
3.5
Mining
4.7
0.3
3.5
1.3
Manufacturing
4.9
4.5
4.1
5.1
Services
5.1
5.1
4.4
6.9
Construction
8.2
7.9
7.9
10.3
Investment
Gross Domestic Product
Source : BNM 2015 Annual Report
Quarterly Bulletin, Q1/ 2016, BNM
Note : a actual f forecast t target
The expected conducive environment that would
strengthen trade and investment will instigate positive
growth in economic sectors, with the exception
of agriculture sector that is undergoing price
uncertainties. The manufacturing and services sector
will continue to lead growth whilst the construction
sector will maintain its catalystic performance. The
construction sector is anticipated to grow by 7.9% in
2016, following the on-going public mega infrastructure
and government social projects, which are yet to be
awarded. Additionally, the commencement of the
mega Pan Borneo Highway project; development of
new townships; and the extension of the public rail
transport during the 11MP will also contribute to the
construction sector growth. It is predicted that the
construction sector will derive huge benefits from
project development activities over the 5 years duration
of the 11MP. In the second quarter of 2016, being the
first year of 11MP, CIDB recorded 2,179 projects valued
at RM59.0 billion. Infrastructure projects are currently
the highest contributor towards construction sector
demand.
Government Development Projects
International economic organisations concurred with
the assurance of positive prospect in the Malaysian
economy for 2016 and 2017. The resilience of the
Malaysian economy is proven by strong growth in 2015
amidst challenges arising from an uncertain global
economy. This growth indicated that the Malaysian
economy will continue to improve moderately at around
4.0% to 5.0% in 2016 and 2017.
Table 4.9 Malaysian Economy Growth Forecast
by Economic Analysis Organisations
Organisation
Malaysian Government
Malaysian Institute of Economic
Growth (%)
2016
2017
4.0 - 4. 5 5.0 - 6.0
4.2 4.5 - 5.5
Research (MIER)
Economic Intelligence Unit (EIU)
4.5
4.5
International Monetary Fund (IMF)
4.4
4.8
World Bank
4.4
4.4
Asian Development Bank (ADB)
4.2
4.4
The 11MP commenced in 2016 with an estimated
development allocation of RM260.0 billion. Themed
Anchoring Growth on People, the five year 11MP is
the final phase towards becoming a developed and
inclusive nation by 2020. In line with the importance
placed on a people-centric economy, the government
has set multi-dimensional goals; encompassing
targeted macroeconomics, as well as socio-economics
such as income distribution and people’s welfare.
The government has been making large investments
in enhancing the people’s welfare with a commitment
towards achieving a People’s Wellbeing Index Level of
1.7% in comparison to 1.1% during the 10MP. Welfare
is generally related to the status and quality of life that
encompass aspects of economy, social, physical and
psychological that benefits society such as quality
healthcare; affordable housing; improvement in
safety and public order; easier mobility of population
and product; upgrading of emergency services;
intensification of social integration and unity; and a
wider participation in sporting activities.
87
Under the people’s wellbeing enhancement
programme, opportunities in construction works have
been identified. Listed below are the various nationwide
construction project development programmes which
have been planned for the next 5 years to improve the
people’s wellbeing:
a)
b)
c)
d)
e)
f)
g)
h)
165 1Malaysia clinics;
Care centres for children with special disabilities;
7 self-contained life centres for the disabled (OKU);
6 new hospitals and 3 hospitals for upgrading;
Repair of 400,000 houses;
80 new schools (primary and secondary schools);
2 new MARA Junior Science Colleges (MRSM); and
Several residential schools.
The main agenda of the 11MP continues on priorities
of rural dwellers and low-income households. Efforts
are being made to ensure everyone would enjoy the
national development and economic wealth. The
government is dedicated in achieving Vision 2020 via
strategies that would strengthen the national economy
to ensure sustainable growth.
Infrastructure Projects
Under the 11MP, among the strategies taken is
the implementation of high impact projects with
reasonable cost. In this aspect, the existence of
good infrastructure is important in providing regional
networks and connectivity for the wellbeing of the
people, and act as a catalyst in the socio-economic
development. Access to basic amenities such as
transportation, communications, electricity, clean
water supply and sewerage treatment systems are
selected targets for achievement in the next 5 years.
By year 2020, the government has targeted for 99.0%
households to enjoy clean and treated water supply;
95.0% of populated areas to have access to broadband
services; 80.0% to be covered by an interconnected
sewerage system, and to reduce the loss of treated
water to 25.0%. Efficient infrastructures enable
people and goods mobility, reducing the cost of doing
business, and subsequently increase the nation’s
productivity and competitiveness. This development
does not only expand physical capacity and its
network outreach, but also to enhance performance,
productivity and service capacity levels to equal that of
developed countries.
CONSTRUCTION INDUSTRY REVIEW AND PROSPECT 2015/2016
88
CHAPTER 4 CONSTRUCTION INDUSTRY PROSPECTS 2017
Construction Demand Prospects
Various infrastructure projects had been identified to
attain the desired targets and objectives. Amongst the
infrastructure projects to be developed and constructed
are:
a) Construction of 4 new highways;
b) Construction of 52.2km MRT2 line from Sungai Buloh-Kajang-Putrajaya;
c) LRT3 line linking major cities to Klang, a distance
of 36km;
d) Electrified double tracking involving construction of 197km parallel tracks from Gemas to Johor Bahru;
e) Upgrading of road from North Port to Pulau Indah Expressway;
f) Expansion of international broadband (bandwidth) capacity and coverage;
g) Wider coverage of High Speed Broadband (HSBB2) and Suburban Broadband (SUBB) for all state capitals and high-impact growth zones;
h) Construction of new plants and upgrading of existing water treatment plants to increase supply reserves in excess of 10.0% at all plants;
i) Construction of centralised and regional sewerage treatment plants, and also enhancement of small plants’ efficiency and effectiveness as well as discharge efficiency;
j) Gas pipeline from the Malaysia-Thailand Joint Development Territory;
CHAPTER 4 CONSTRUCTION INDUSTRY PROSPECTS 2017
Construction Demand Prospects
k) Construction of new and upgrading of power plants to generate 7,626MW of electricity and a power distribution system;
l) Construction of 3,000km surfaced rural roads;
m) Port expansion; and
n) Construction of new and extension of existing airports.
Property includes residential, commercial and industrial
buildings. Property demand in 2016 is forecasted
to be poor due to the current economic challenges.
Based on current global scenario, developers would
be more cautious in initiating new launches whilst
prospective purchasers adopt a “wait and see” stance.
However, the property market will experience spill over
effects of the 11MP projects, especially from mega
transportation projects; affordable housing policy;
first home scheme; and people’s housing programme.
According to NAPIC’s 2015 Annual Property Market
Report, the property market transactions shrunk by
5.7% to 362,105 transactions in 2015 (2014: 384,060
transactions). Value-wise, the same trend was seen in
2015 with a reduction of 8.0% to RM149.9 billion (2014:
RM163.0 billion).
Table 4.10 Property Market Transactions
Property Type
No. of
Transactions
2014
Change (%)
Value
(RM billion)
2015
2014
No. of
Transactions
2015
2014
2015
2014
No. of
Value
Transactions (RM billion)
2015
2015
Residential
247,251
235,967
82.0
73.5
0.4
-4.6
13.9 -10.4
65.2
49.0
Commercial
35,528
31,776
31.6
26.4
3.6
-10.6
-11.2 -16.5
8.8
17.6
8,100
7,046
14.5
12.0
-0.38
-13.0
17.9 -17.2
1.9
8.0
93,144
87,239
34.4
38.0
1.1
-6.3
10.5
24.1
25.3
2.8 108.1 700.0 -64.3
-
Industrial
Land
Others
Total
37
77
0.14
0.05
384,060
362,105
163.0
149.9
0.8
-5.7
6.2
6.9
-8.0
100.0
Source : Annual Property Market Report 2014 & 2015, NAPIC
Note : - Negligible value
Residential Property Demand
Residential property transactions contributed 65.2%
(235,967 transactions) in terms of numbers and
49.0% (RM73.5 billion) in terms of value towards total
According to the NAPIC’s Property Market Report
2015, there were 70,723 newly launched units and
168,672 units under construction. Out of these, 58.6%
of the newly launched units and 40.8% of those under
construction were unsold. Sales in 2015 were much
lower at 41.4% in comparison to 45.4% in 2014. A
study on the New Property Launch Plan for 1H2015 by
the Real Estate and Housing Developers Association
(REHDA) shows that unsold units had increased to
78.0% compared to 64.0% in 2H2014.
The main factors for the decline in sales performance
are:
The weak momentum in the market pushed private
developers to react by slowing down construction and
new launches. The number of construction starts were
much lower in 2015 (139,189 units) than the previous
years (2014: 204,183 units). This measure would allow
time for the market to absorb existing unsold units.
a) The existence of an overly cautious sentiment
amongst purchasers following uncertainties
in the domestic and foreign economies. The
world economy remains erratic and employees’
Table 4.11 Market Performance of Residential Property
Market Share
Value
(RM billion)
termination by large corporations has begun.
Records show that 9,530 employees were
terminated in 2015 (2014: 10,431 employees), and
this trend is expected to continue into 2016. The
financial and insurance industries saw the highest
terminations;
b) Difficulties in securing financing. This follows
measures undertaken by financial institutions in
tightening qualifying terms for housing loans in
their effort to control household credit limits and
curbing market speculations. The conscientious
lending policy implemented by financial institutions
saw numerous housing loan applications being
rejected. Outcome from the same study by REHDA
showed high declined loan applications for not only
high-priced residential units but also those with
prices around RM250,000 (29.0%) and RM500,000
(35.0%); and
c) High property prices that are beyond the means of
most purchasers from the low and medium income
group.
homes priced at RM300,000 and below saw the
highest demand at 64.4%; residential properties priced
between RM400,000 and RM500,000 registered 5.7%;
those priced between RM500,000 and RM1.0 million
commanded 10.7%; while luxury homes registered
19.2%. The residential property market momentum
is expected to be rather challenging in 2016 in view
of future supply entering the market, and increasing
number of unsold units at all stages of supply.
Property Demand
89
property market transactions in 2015 (2014: 247,251
transactions; RM82.0 billion). Both transaction by
numbers and value indicate a decline of 4.6% (2014:
0.4%) and 10.4% (2014: 13.9%) respectively. Affordable
Supply Stage
Proposed Units
2014
2015
Unsold Units
(% Proportion )
Change (%)
2014
2015
New Launch
86,997
70,273
39.5
-19.2
Completed
46,307
51,042
-13.9
10.2
148,659
168,672
10.8
13.5
22,916
16,095
0.7
-29.8
171,146
769,788
4,848,030
673,235
204,183
188,757
892,099
4,928,883
642,405
139,189
17.4
13.0
2.6
13.4
34.1
10.3
15.9
1.7
-4.6
-31.8
Under Construction
Unbuilt
Construction Start
Upcoming
Ready Stock
Planned Supply
New Supply
2014
47,506
(54.3)
9,733
(21.0)
53,476
(36.0)
13,471
(58.8)
n.a.
n.a.
n.a.
-
2015
41,184
(58.6)
11,316
(22.2)
68,760
(40.8)
10,074
(62.6)
n.a.
n.a.
n.a.
-
Unsold Units
(% Change)
2014
2015
19.5
-13.3
-28.1
16.3
2.8
28.6
-0.4
-25.2
-
-
Source : Annual Property Market Report 2014 & 2015, NAPIC
Note : n.a. – no available data
CONSTRUCTION INDUSTRY REVIEW AND PROSPECT 2015/2016
90
CHAPTER 4 CONSTRUCTION INDUSTRY PROSPECTS 2017
Construction Demand Prospects
Under the 11MP, 606,000 housing units have been
planned for the low and medium income households,
with a further 47,000 units to be built or repaired for the
underprivileged. In 2016 Budget, the government has
planned for 180,200 units through affordable home
ownership programme such as:
a)
b)
c)
d)
e)
100,000 units under the Projek Perumahan Awam 1Malaysia (PPA1M) Scheme;
32,100 units under the Projek Perumahan Rakyat (PPR) Scheme;
5,000 units transit homes by the Projek Perumahan 1Malaysia (PR1MA) and PPA1M;
1,500 housing units for orang asli;
22,200 housing units for the second generation
settlers shall be built by Federal Land Development
Authority (FELDA), Federal Land Consolidation and
Rehabilitation Authority (FELCRA) and the Rubber
Industry Smallholders Development Authority
(RISDA);
f) 5,400 affordable housing units will be built by Sime Darby Property and Kwasa Land;
g) 10,000 units Rumah Mesra Rakyat will be built by Syarikat Perumahan Negara Berhad (SPNB);
h) 2,000 affordable housing units for armed forces will be built by the Armed Forces Fund Board (LTAT); and
i) 2,000 affordable housing units for the Royal Malaysian Police (RMP).
The government has recommended private developers
to offer more affordable houses in their projects, thus
offering several incentives to reduce initial costs, and
helping prospective first-time homebuyers to reduce
their financial burden. Amongst the government
incentives and aid offered are:
CHAPTER 4 CONSTRUCTION INDUSTRY PROSPECTS 2017
Construction Demand Prospects
a) Facilitation aid fund for up to 25.0% of construction cost;
b) Deposit payment on the first purchase of an affordable home;
c) RM20,000 subsidy on purchase of one unit of Rumah Mesra Rakyat; and
d) PR1MA house sold at 20.0% below current market price.
The involvement of private companies and government
agencies in the affordable housing projects will
trigger higher market demand. The outlook for 2017 is
more positive with the improvement of the domestic
economy parallel to a projected world economy
recovery. It is anticipated that the government would
continue to fork out various means of financial
assistance, subsidies and incentives to stimulate the
housing sector, particularly construction of affordable
housing. This would assist to develop and boost the
domestic economic growth and encourage households
in owning a home.
Commercial Property Demand
Commercial property covers shop buildings and
retail complexes. Demand for commercial properties
is estimated to be resilient, driven by township
developments, population density, household incomes
and volume of tourist arrivals. 2015 saw a drop in
recorded transactions by 10.6% to 31,776 transactions
(2014: 35,528 transactions) with a value decline by
16.5% to RM26.4 billion (2014: RM31.6 billion) (Table
4.10). Market prospects remains challenging in 2016
when new units are launched. Future market entry for
shops is estimated to be 96,664 units, a rise by 17.3%
(2014: 82,390 units) whilst the number of unsold units
continue to escalate at all stages of supply as well as
unbuilt units (Table 4.12).
Table 4.12 Market Performance of Shop Buildings
Supply Stage
Proposed Units
2014
2015
Unsold Units
Change (%)
2014
Proportion (%)
2015
Completed
12,230
16,858
-4.8
37.8
Under Construction
21,460
28,252
34.7
31.6
2,383
3,628
-11.7
52.2
20,512
21,345
14.2
4.7
Unbuilt
Construction Start
2014
2015
4,324 4,972
(35.3) (29.5)
7,987 12,882
(37.2) (45.6)
1,257 2,459
(52.7) (67.8)
n.a.
n.a.
Change (%)
2014
2015
-7.5
15.0
32.2
61.3
-30.0
95.6
-
-
Property Type
Upcoming
Ready Stock
Planned Supply
New Supply
Proposed Units
Unsold Units
Change (%)
2014
2015
2014
82,390
406,105
74,818
28,824
96,664
415,754
73,254
16,343
Proportion (%)
2015
17.2
3.5
25.7
70.4
91
17.3
2.4
-2.1
-43.4
2014
2015
n.a.
n.a.
-
Change (%)
2014
n.a.
n.a.
-
2015
-
-
Source : Annual Property Market Report 2014 & 2015, NAPIC
Note : n.a. – no available data
The same trend was seen in retail spaces in
commercial complexes with an increase of 10.2%
(2015: 1.5 million per square metre; 2014: 1.4 million
per square metre), expanding available retail space to
6.5%. This does not affect occupancy rate since there
is an improvement in absorption of these additional
spaces (2015: 26.0%; 2014: 20.3%) and a drop of
completed units to 9.2%. The current occupancy rate
at 82.4% is acceptable, better than the previous year
(2014: 81.8%). Unoccupied spaces are expected to be
higher in view of a large volume in new spaces entering
the market, and the sharp rise of new units being built
at 68.7% (Table 4.13).
The government has taken initiatives to provide various
incentives to the tourism industry in an effort to attract
30.5 million tourists in 2016 to a budgeted income of
RM103.0 billion; whilst by 2020, a total of 36.0 million
tourists are targeted bringing in an income of RM168.0
billion. Therefore, developers are confident in continuing
to offer more retail spaces ahead of the proposal to turn
Malaysia into a regional shopping hub. The targeted
spending per tourist in retail is between RM1,000.00
and RM1,605.00 per square feet.
Currently, there are 128 premises at the KLIA Mitsui
Outlet Park (MOP) in Sepang, covering 24,000 square
metres of retail spaces. KLIA MOP aims to have 260
premises by 2021 and plans are underway for the
expansion of Phase 2 and 3, with operations expected
to commence in 2018 and 2021 respectively. In 2021,
retail space at KLIA MOP is expected to increase over
44,000 square metres. Retailers are enthusiastic on the
notion that shopping activities will be an element of a
modern lifestyle. The additional of new hypermarkets,
large supermarkets and departmental stores are in
line with the liberalisation of large retail subsector
implemented in 1995, offer potential demand for retail
space. A foreign based retailer from Abu Dhabi, is
anticipated to establish 10 hypermarkets throughout
Malaysia in the first 5 years commencing 2016, with an
initial investment of RM1.3 billion (USD300 million).
Table 4.13 Market Performance of Commercial
Complex
Supply Stage
Ready Stock
Occupancy Rate (%)
Vacant Space (%)
Completed
Take-Up Rate (%)
Absorption Rate (%)
Construction Start
2014
(sq m)
2015
(sq m)
12,978,499 13,828,953
Growth (%)
2014 2015
4.3
6.5
1.7
0.6
81.8
82.4
2,364,218
2,432,499
-4.3
2.9
711,004
645,878
57.4
-9.2
20.3
26.0
7.6
5.7
6.5
5.7
3.6
-0.8
368,190
621,165
40.0
68.7
Upcoming
1,365,509
1,505,201
8.8
10.2
Planned Supply
1,037,169
1,029,596 114.5
-0.7
New Supply
950,539
467,335 220.6 -50.8
Source : Annual Property Market Report 2014 & 2015, NAPIC
Developers will attempt to sell unsold units and secure
tenants for vacant spaces. They will be very careful
to start planning and commencing new projects. It
is estimated that there were 73,254 shop units and
1,667,750 square metres of retail space in commercial
complexes at the planning stage at the beginning of
2016.
The commercial market has a vibrant outlook in
2017 with the expected completion of the public
transportation infrastructure such as the Mass Rapid
Transit (MRT) and Light Rail Transit (LRT) expansion
projects. The property prices along the service routes
will increase and stimulate the development of new
CONSTRUCTION INDUSTRY REVIEW AND PROSPECT 2015/2016
92
CHAPTER 4 CONSTRUCTION INDUSTRY PROSPECTS 2017
Construction Demand Prospects
commercial and housing areas. At the same time, the
11MP economic and social projects progressing into
their second year will be intensified and boost private
commercial projects.
Industrial Property Demand
The industrial property segment refers to factories
and warehouses. Industrial properties derives from
realisation of both domestic and foreign investment.
The market prospect for 2016 is expected to ease,
arising from the slow momentum of domestic and
external demand. Such environment causes trade and
consumer sentiments to weaken, thus investors are
wary to commit fresh investments.
At the end of 2015, there were 2,061 unsold industrial
CHAPTER 4 CONSTRUCTION INDUSTRY PROSPECTS 2017
Construction Demand Prospects
properties across all stages of supply. This represents
only 2.0% of available industrial property stock in the
market. A total of 12.0% (243 units) of the unsold units
were of ready built supply; 84.0% (1,731 units) were
offered as units under construction; and 4.0% (87 units)
were yet to be built. This scenario signals that the
current market is about to experience an oversupply
situation. In response, developers reacted by slowing
down construction starts and planned supply. New
supply shrunk by 65.1%, while planned supply
shrunk by 43.1%. Sales suffered a decline except for
units under construction which increased to 41.6%
(2014: 36.9%). The weakened demand for industrial
properties is presumed to be temporary in tandem with
current economic scenario and domestic investment
performance.
Table 4.14 Market Performance of Industrial Buildings
Supply Stage
Proposed Units
2014
Completed
Under Construction
Unbuilt
Construction Start
Upcoming
Ready Stock
Planned Supply
New Supply
Unsold Units
Change (%)
2015
2014
Proportion (%)
2015
563
583
-42.7
3.5
2,114
2,965
30.4
40.2
235
106
-43.0
-54.9
3,411
11,254
97,704
17,534
3,161
2,284
11,206
103,868
9,981
1,104
75.7
25.6
2.4
1.4
4.8
-33.0
-4.3
6.3
-43.1
-65.1
2014
2015
226
(40.1)
1,335
(63.1)
148
(63.0)
n.a.
n.a.
n.a.
-
243
(41.7)
1,731
(58.4)
87
(82.1)
n.a.
n.a.
n.a.
-
Change (%)
2014
2015
-47.1
7.5
55.4
29.7
-43.1
-41.2
-
-
Source : Annual Property Market Report 2014 & 2015, NAPIC
Note : n.a. – no available data
The commerce-friendly government administration
restructuring strategy and the liberalisation of
several industries will provide an immense leeway
for commercial expansion. This strategy and the
investment incentives being offered are aimed at
lowering cost of doing business to make Malaysia the
preferred destination for FDIs. Malaysia is the 10th
destination in the Asia Pacific for major FDIs by US
based information technology company IHS Inc; 4th
Business Friendly country by Financial Times (UK) in its
2014 FDI Report; 18th in a list of 189 business friendly
economies in the World Bank’s Doing Business 2016
Report (DB2016); 6th place as an attractive investment
destination in the world in The Baseline Profitability
Index (BPI) 2015 by The Foreign Policy Magazine; and
ranked 18th in the Global Competitiveness Report
(GCR) from 20th in the previous year. These positive
reputation adds value and advantages in garnering FDI
inflows.
A large proportion of industrial property demand comes
from the Small and Medium-Sized Industries (SMI),
which forms 95.0% of Malaysian industries. These
SMIs play an important role in the transformation of
the national economy. Majority of the SMI activities
are domestic oriented that complement as well
as complete the supply chain and national output.
Stimulus packages will be continuously reviewed
to ensure a stable investment in SMI growth.
Subsequently, the SMI Master Plan 2012 – 2020 was
established to provide guidelines on SMI growth until
2020. The SMI industry is being developed premised
on technology and innovation as one of the sources
of new growth. An assortment of incentives and
aids in terms of funds, technical and marketing were
offered by various government agencies to assist
and stimulate SMI growth. During the economic
transformation years, the private sector also grew
at high investment ratio. By 2020, 92.0% of private
investment is targeted for sustainable growth. The
government is steadfast in maintaining the momentum
set in the last 5 years to attain high-income nation
status. The public and private sector will continue to
complement each other in playing their roles, with
private sector leading in attracting investment into
Malaysia while the government focus on developing a
conducive and business friendly environment.
Private investment is expected to rise by 5.5% (2015:
6.4%) to RM212.7 billion, which is lower than the
11MP projection of RM291.0 billion in 2016. Malaysian
Investment Development Authority (MIDA) has
approved 4,887 projects for proposed investments
valued at RM186.7 billion in 2015, a decrease of
22.1% (2014: RM239.7 billion). Investment in the
manufacturing and services sectors accounted for
98.0% of proposed investment with the possibility of
creating 180,249 jobs, and potentially create a major
demand for industrial buildings.
Vigorous implementation of investment in the 5
economic corridors will reinforce demand for industrial
buildings. For instance, Iskandar Malaysia has
relentlessly attracted foreign investment by providing
amenities in large industrial space and offering a range
of investment incentives. The same can be said for
Selangor, Penang and Melaka; each needing sound
investment for continuous state development. Interstate competition in attracting foreign and domestic
investment has prompted the emergence of more
industrial zones to benefit potential investors. This
will support demand for industrial buildings mainly,
and other properties in general. The Refinery and
Petrochemical Integrated Development (RAPID) project
is the largest investment in the oil and gas industry and
alongside the development of the KLIA Aeropolis as a
93
logistics hub; all these combined will be the main driver
of industrial buildings demand.
The world economic prospect for 2017 is projected to
be healthier than in 2016. The positive development
will benefit Malaysia’s economy which has long been
a profitable investment destination. The Trans-Pacific
Partnership Agreement (TPPA) will facilitate a wider
market access to spur external demand in 2017. The
improvement in world trade balance following a world
economic recovery will encourage producers to expand
production in response to increasing external demand
at the advent of 2017. The high investment growth will
enable the absorption of existing property supply in
the market. Unsold units in the market are reserves for
fulfilling short-term growth demand due to non-elastic
property supply.
Office Property Demand
The prospect for office space is seen as less
encouraging in view of prolonged oversupply situation,
with the exception of offices located in smart buildings
and green buildings. At the end of 2015, there were
10.6% vacant office spaces. Another 2.2 million square
metres of office space will be on the market whereby
520,718 square metres were completed to raise
existing office space stock by 2.9%. On the other hand,
planned supply shows a decline by 28.6% to 409,948
square metres. In 2015, newly approved proposals
continue to rise by 11.8% to 341,463 square metres
(2014: 305,523 square metres).
Table 4.15 Market Performance of Office Space
Supply Stage
Ready Stock
Occupancy Rate (%)
Vacant Space (%)
Completed
Take-Up Rate (%)
Absorption Rate (%)
Construction Start
Upcoming
2014
(sq m)
2015
(sq m)
19,553,129 20,131,812
Growth (%)
2014 2015
3.0
2.9
84.8
83.7
2.1
-1.1
2,971,362
3,287,842
38.9
10.6
520,718 213.2
17.3
443,792
23.3
7.5
4.4
13.0
183,395
1,735,743
8.7 -15.8
2.1
8.6
481,642 -36.9 162.6
1,667,750 -18.9
Planned Supply
573,997
409,948
New Supply
305,523
341,463 252.2
-3.9
3.8 -28.6
11.8
Source : Annual Property Market Report 2014 & 2015, NAPIC
CONSTRUCTION INDUSTRY REVIEW AND PROSPECT 2015/2016
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CHAPTER 4 CONSTRUCTION INDUSTRY PROSPECTS 2017
Construction Demand Prospects
A large portion of demand for office buildings comes
from professional services; oil and gas; finance and
insurance; product promotion; brokerage, educational
services; health services; etc. The services sector
contribution to GDP serves as an indicator whether a
country has reached developed nation status. In 2015,
the services sector contributed 53.5% towards GDP and
is projected to contribute at 54.0% in 2016. Meanwhile,
the services sector contribution towards GDP under the
11MP has been targeted annually at 56.5%. To boost
growth, intensive efforts are being made to increase
numbers of knowledgeable and skilled technical
workforce to support the services sector growth
towards Vision 2020.
Proposed investments in the services sector approved
by MIDA for 2016 stood at 4,150 projects valued at
RM108.2 billion. This reflects 58.0% of total approved
proposed investments, which has the potential to
create 112,194 jobs. The sluggish demand for office
space has been a result of the absence of new, large
services firms and the slow growth of existing firms.
This sector encompasses a multitude of services
such as foreign regional office placement; global
hub operations; auxiliary services; Multimedia Super
Corridor (MSC) companies; distribution; financial;
health; telecommunications; utilities; tourism; hotel;
education; transportation services; and properties.
Large portions of foreign investments are placement
of global and regional operations involving 201
companies with an investment value of RM8.2 billion
and 4,217 jobs. These global and regional operations
will provide professional services related to supply
chain management; financial management; and data
information services.
The Greater KL/KV programme aims to turn Kuala
Lumpur into an international class city and a desirable
destination for knowledgeable and high-income
earners. Various efforts are in place to attract more
Multinational Corporations (MNCs) from Fortune 500
and Forbes Global 2000 to establish their regional
operation offices here. In 2015, InvestKL successfully
attracted 10 MNCs to invest in Greater KL/KV and
aims to attract another 100 MNCs by 2020. The
establishment of more of MNCs offices in Malaysia will
create jobs and business opportunities that will drive
increased demand for workspace.
From 2011 to 2014, a total of 51 MNCs have set up
CHAPTER 4 CONSTRUCTION INDUSTRY PROSPECTS 2017
New Construction Projection
their offices in Kuala Lumpur with a total investment
of RM1.9 billion; employment of 4,700 workers; and
leasing office space covering an area of 4,859 square
metres. In 2015, a total of 201 international regional
offices were approved by MIDA with investments of
RM8.2 billion and offering a potential employment
of 4,712. These investment created a demand for
office space of approximately 5,000 square metres.
The steady expansion of the services sector until
2017 will provide new demand to absorb the excess
supply of office space in the market. Furthermore, as
planned supply began to slow down, it will allow the
market a chance to reduce the excess space. With an
encouraging absorption rate of new space of 13.0% in
2015, the oversupply situation will not be prolonged.
The sustained development of the services sector will
provide positive outlook on the property market for
office space in 2016 and 2017.
Hotel Property Demand
The hospitality industry prospect is very much related
to the tourism industry, in the provision of adequate and
quality accommodation. A total of 36.0 million tourists
are targeted annually by 2020. As for 2016, the industry
attempts to attract a total of 30.5 million tourists.
Despite many challenges, the tourism sector is seen as
resilient, as well as an important sector in contributing
to major foreign exchange earnings to support
economic recovery. In 2015, Malaysia received 25.7
million tourist arrivals, a decrease of 6.3% compared
to 2014 (27.4 million tourists). The decline in number
of tourist arrivals was due to the world economic
slowdown; the occurrence of the biggest floods in 30
years which affected several states in Malaysia in early
2015; the Ranau, Sabah earthquake in June 2015; travel
warnings to areas of Southeast Coast of Sabah; as
well as the continual impact of the missing MH370 and
MH17 flights. Despite these challenges, occupancy rate
in 2015 maintained at a rate of about 61.0%.
In anticipation of more tourist arrivals by 2020, as much
as 28,785 new hotel rooms will enter the market. The
existing stock of hotel rooms is expected to increase
by 2.3% to 208,747 rooms with the completion of 4,176
new rooms. Meanwhile, a total of 24,069 rooms will
enter the market in an upcoming supply. Based on the
assurance of a sustainable tourism industry, developers
were ready to increase the supply by 6.9% to 16,341
rooms (2014: 15,292 rooms). However, the new supply
in 2015 has declined by 30.2% (2014: 17.0%).
Table 4.16 Market Performance of Hotel
Supply Stage
Available Stock
Occupancy Rate (%)
Completed
Construction Start
Rooms
nation to share benefits of the country’s wealth.
Change (%)
2014
2015
204,091
208,747
0.53
2.3
62.6
61.0
9.1
-1.6
6,692
4,716
3,863
2015 2016
28.8 -29.5
4,340 -51.4
12.3
Upcoming
22,268
24,069
-8.9
8.1
Planned Supply
15,292
16,341
-5.8
6.9
6,219
4,342
New Supply
95
17.0 -30.2
Source : Annual Property Market Report 2014 & 2015, NAPIC
Government incentives and programmes such as
the Investment Tax Allowance incentive will continue
to play an important role in the development of
the tourism industry especially in encouraging the
establishment of more 4 and 5 star hotels. Various
promotions, festival and campaigns were organised
to attract tourists in order to achieve the target of 36
million tourists and reap the revenue of RM168.0 billion
by 2020. A sharp increase in tourist arrivals will surely
step up hotel occupancy rates and subsequently boost
the development of the hospitality industry.
NEW CONSTRUCTION
PROJECTION
The Malaysian economy sustained an annual growth
of 5.3% since the implementation of the 10MP in 2010,
driven by an increase in private investment. From
2011 to 2015, every sector of the economy recorded
encouraging average growth with the construction
sector registered the highest growth, fuelled by the
government’s socio-economic development projects
and private investment, especially in Entry Point
Projects (EPP). The value of construction projects
awarded during the 10MP period amounted to
RM680.0 billion compared to RM407.0 billion during
the 9MP. In the 11MP, the government will continue
to build the resilience and competitiveness of the
Malaysian economy in the face of uncertain external
economic landscape. Conducive business environment
and the increase in household income will enhance
consumer and business confidence in dynamic
business activities, thereby boosting economic growth.
Sustainable growth is an important prerequisite for the
The government is committed to continue building
basic infrastructure and social projects to improve
competitiveness in attracting and encouraging
implementation of new and quality investment. The
implementation of these projects will contribute
towards a high demand for construction works.
Value Of Government Projects
As an initial step towards realising 11MP, the 2016
Budget was announced in October 2015 with an
allocation of RM267.2 billion. In January 2016, the
government has recalibrated 2016 Budget in alignment
to current economic challenges and its diminished
revenues. This has taken into account the projected
weakness in the world economy, plummeting crude oil
prices and low Ringgit value. Development expenditure
was reduced by RM2.0 billion to RM50.0 billion and
operational expenditure was kept unchanged at
RM215.2 billion. Recalibration of the budget was
made as a fiscal consolidation measure by monitoring
expenditure so that budget deficit would not exceed
3.1% of GDP. At the same time, the government needs
to ensure there are adequate public funds to promote
economic growth and provide quality services for the
people. As such, the government has taken measures
in prudent and optimal spending to ensure that the
proposals in the people’s economic programmes are
not adversely affected.
In the 2016 Budget, the government planned to
develop a number of projects that would improve
the economic well-being of the people, especially
that of the rural population. An estimated RM68.0
billion of Ekonomi Rakyat projects are expected to
be constructed (Appendix 4.1). In general, not all
projects can be implemented as planned on 2016 due
to the administrative processes for site acquisition,
development approvals and the tendering process.
Taking into account the 2015’s unexecuted projects
and the projected 40.0% of the estimated total
expenditure of RM68.0 billion, it is forecasted that the
government projects to be implemented in 2016 will be
approximately at RM27.0 billion. The same amount is
also forecasted to be implemented in 2017.
CONSTRUCTION INDUSTRY REVIEW AND PROSPECT 2015/2016
96
CHAPTER 4 CONSTRUCTION INDUSTRY PROSPECTS 2017
New Construction Projection
Value of Infrastructure Work Projects
In 2016 Budget, several mega infrastructure
projects related to transport systems and facilities,
telecommunications and basic social infrastructure
were announced by the government. A total of RM81.5
billion is estimated for infrastructure projects as listed
in Appendix 4.2. These projects will be implemented
partly by government departments or agencies, and
the rest by GLCs and private companies through Public
and Private Partnership (PPP). The public transport
system expansion, the Pan Borneo Highway and the
West Coast Expressway are expected to contribute the
highest work value. It is estimated that RM33.0 billion or
40.0% of construction contracts will be commenced in
2016. From the 40.0% of the overdue projects from 2016
and new projects which will be implemented in 2017, it
is estimated that the value of infrastructure projects in
2017 will remain similar at RM33.0 billion.
Value of Residential Work Projects
In the previous 5 years, the residential market offered a
total of 1,295,700 units of residential whereby a total of
80,076 units were unsold. From these, the government
had built a total of 181,636 units under various
programmes of affordable housing for low-income
and middle-income households (B40). The scenario
provides an overview of an average market supply of
259,140 units per year. According to the Census Survey
of Income, Household Expenditure and Basic Amenities
Survey (HIS/ BA) 2014 conducted by the Department of
Statistics Malaysia, about 1.7 million of the 7.1 million
households across the country do not own a house.
In 2015, the number of households has increased by
100,000 to 7.2 million.
In 2015 NAPIC report, the stock of housing units
increased by 80,850 units compared to the estimated
1.8 million households that do not own a house.
Population for the next 3 years to 2017 is expected to
reach a total of 31.8 million people, with an estimated
7.4 million households. The number of households in
need of housing increased from 1.7 million in 2014 to
nearly 2.0 million whilst residential supply in the market
is estimated at 777,400 units. Taking into account the
requirement of one household per residential unit, the
country needs an additional 1.2 million housing units. In
2010, Greater KL/KV has a population of approximately
6.0 million people or 1.4 million households which
will increase to 10.0 million people or 2.3 million
households in 2020. Therefore, Greater KL/KV has
targeted 1.0 million housing units or 100,000 units per
year.
CHAPTER 4 CONSTRUCTION INDUSTRY PROSPECTS 2017
New Construction Projection
During the 10MP, the government had built a total of
277,200 housing units for low-income, middle-income
and underprivileged households, which were about
55,400 units per year. Under the 11MP, the government
plans to build a total of 606,000 residential units for
the low and middle income earners by 2020, which are
about 121,200 units a year. Under the 2016 Budget,
the government and GLCs will build a total of 184,200
units of affordable houses and quarters. Meanwhile,
an average of 259,100 residential units per year was
constructed based on the last 5 years from the NAPIC
Annual Property Market Report (1,295,700 residential
units), which represents 38.0% of the implementation
rate; 23.0% of planned supply; and 24.0% of start rate.
In 2015, there were 642,405 units under planning stage.
Based on the construction of residential units trend
specified in the NAPIC Annual Property Market Report,
154,000 new units is expected to be built in 2016.
Low number of starts is projected for 2016 due to the
measures by financial institutions in tightening lending
requirements, and also house prices that is considered
beyond the reach of most people. The average price of
Malaysian houses by NAPIC is about RM315,300.00 per
unit. According to the World Bank and the United Nations
(UN), the price of affordable housing is equivalent to 3
times the average median annual national household
income (median income). According to the HIS/ BA
2014, the average household income in Malaysia is
RM6,100.00 per month and the average median income
is RM4,600.00 per month. Based on this assessment,
reasonably affordable price would not exceed
RM220,000.00 per unit, in corresponding to the average
household income of RM6,100.00 per month. In 2016,
the residential properties priced below RM250,000.00
per unit comprised 60.0% of market offers. Current trend
shows developers are inclined to offer fully furnished
residential units with club facilities as attractions.
Generally, the price of a luxury residence between
RM500,000.00 to RM1.0 million per unit is beyond the
means of most households, especially middle-income
earners.
In reality, demand is constantly increasing in tandem
with the rise in population. The effectiveness of the
actual demand is directly correlated to reasonable
price; strategic location; and the eligibility of obtaining
the loan. Stringent bank loan facility requirement
and less strategic location are expected to curb the
developers from offering more high-priced houses. It is
expected the supply of affordable housing units will be
97
158,800 units will begin construction in 2017, from an
estimated 635,000 units in the pipeline at the end of
2016.
rapidly implemented under the government’s affordable
housing programme. Participation of private developers
will increase due to the availability of various incentives
provided by the government to reduce costs and
ease the financial burden of the initial purchasers.
The market will consolidate with price adjustments;
and residential prices will correspond to the current
income of most households. This consolidation is
expected to lead to more stable prices and increased
supply of affordable housing. The expected economic
improvement in 2017 will renew buyers and developers’
confidence, thus drive the demand for residential
property. The implementation rate will be higher
approximately by 25.0% in 2017. Therefore, around
Based on campaigns and sales promotions for new
residential, most link houses have between 1,000. and
1,700 square feet depending on the type of residence;
while multi-storey residential have between 600 and
1,200 square feet. In determining the projected value
of a residential unit, 1,350 square feet. for link houses
and 900 square feet for multi-storey residential are
taken into account as the standard areas per unit. The
supplies of link and multi-storey residential houses are
balanced at 50:50, as shown on Table 4.17.
Table 4.17 Projected Values for Residential Work Projects
Year
2016
2017
Type
No. of Residential
Houses (units)
Link House
Multi-storey
Total
Link House
Multi-storey
Total
Estimated Average Cost of
Construction per Unit (RM)
77,000
77,000
152,500
294,800
79,400
79,400
152,500
294,800
Value of Commercial Work Projects
Total Construction Value
(RM Million)
11,742
22,700
32,442
12,108
23,407
35,515
NAPIC; the average building construction cost for 2013
published by JUBM Sdn. Bhd which takes into account
rising costs of up to 2017; and the average standard
size of a hotel room issued by Malaysian Association
of Tour and Travel Agents (MATTA). It is forecasted the
projected construction value of commercial buildings is
RM12.0 billion and RM13.0 billion respectively for 2016
and 2017.
Commercial properties cover shops, shopping
complexes, office spaces and hotels. NAPIC predicted
a weak performance for this market segment except
for the hospitality industry, which is supported by the
tourism promotions and campaigns. Three indicators
have been used in estimating the value of commercial
work projects which is the starts trend recorded by
Table 4.18 Projected Values for Commercial Work Projects
Year
2016
2017
Property Type
Shops
Commercial Complex
Office Space
Hotel
Total
Shops
Commercial Complex
Office Space
Hotel
Total
Number or Size Starts
Estimated Average Cost of
Construction (RM)
18,208 units
373,743 sq m
172,998 sq m
3,709 rooms
498,300
4,800
5,500
132,000
18,845 units
404,017 sq m
147,913 sq m
3,828 rooms
498,300
4,800
5,500
132,000
Total Value (RM)
9,073
1,794
951
490
12,308
9,390
1,939
813
505
12,647
Source : Annual Property Market Report 2014 & 2015, NAPIC
Construction Cost Handbook Malaysia 2014, JUBM Sdn. Bhd.
CONSTRUCTION INDUSTRY REVIEW AND PROSPECT 2015/2016
98
CHAPTER 4 CONSTRUCTION INDUSTRY PROSPECTS 2017
New Construction Projection
Value of Industrial Work Projects
Most economic analysts foresee both the Malaysian
and world economies will face a difficult economic
environment for 2016. Malaysia had managed to
overcome challenges in 2015 with strong growth of
5.0%. Investments approved in the manufacturing
industry by MIDA increased by 4.0% to RM74.7 billion
in 2015. However, investment in the service industry
diminished by 29.9% to RM108.2 billion (2014: RM153.4
billion). This decline was due to cautious sentiments
on prospects of a world economic slowdown, which is
likely to prolong into 2016. Nevertheless, the total value
of these investments surpassed the 10MP target of
RM148.0 billion a year. The value of private investments
realised in 2015 amounted to RM198.7 billion (2014:
RM183.9 billion). Private investment accounted for
65.0% of total investments in 2015, propelled by the
implementation of the ETP and GTP mainly through
participation in the EPPs. MIDA has been targeting
RM121.5 billion of total investments for 2016. This
target is 24.0% lower than approvals value for 2015
(RM159.8 billion).
During the 10MP, the implementation rate for
manufacturing investment reached a high of 80.0%
in 2013 and a low of 58.0% in 2015. Based on MIDA’s
manufacturing investment data, roughly around 30.0%
of the manufacturing investments were meant for
construction of factories. Assuming implementation
trend at an average rate of 75% from MIDA’s targeted
manufacturing investments, the industrial property
construction works value is projected to be RM27.0
billion for 2016. If estimates were made based Bank
Negara Malaysia (BNM) forecast of 5.5% growth in
private investment for 2016, it would result in a work
value of RM38.0 billion for 2016. Therefore, the value
of construction work for 2016 would be estimated
between RM27.0 billion and RM38.0 billion. For 2017,
investment is targeted to RM236.0 billion based on
9.4% increment as targeted in the 11MP, or at least by
RM133.0 billion based on MIDA’s targeted amount for
2016. Therefore, the value of construction work would
be between RM30.0 billion and RM53.0 billion for 2017.
Value of Projected New Construction Works
The projected value for new construction works
does not include projects in various stages of
construction, projects at planning stages without
costs, and unconfirmed projects as of May 2016. Given
the growing uncertainties in the current economic
CHAPTER 4 CONSTRUCTION INDUSTRY PROSPECTS 2017
Estimated Value of Work Completed for 2016/2017 | Estimated Value of Renovation Work
environment, the 2016 forecast has been revised from
RM143.0 billion to RM131.0 billion. This value is 8.0%
lower than projections made in 2015. The contribution
of government projects for 2016 is forecast to be
around 20.0%.
It is expected that additional new projects under
the 11MP will be announced in 2017 Budget, which
includes commercial; private housing; and realisation
of investment committed to the economic corridors.
The value of construction work for 2017 is forecast at
RM138.0 billion. This projection is achievable in view
of implementation of mega infrastructure projects and
committed investment. The contribution of government
projects for 2017 is expected to be around 18.0%, in line
with the government’s aspiration to reduce the public
sector’s role in the economy.
Table 4.19 Projected Values for New Construction
Work Projects
Construction Category
(RM billion)
2016
2017
Government Development Project
27.0
27.0
Housing Project
32.0
35.0
Commercial Project
12.0
13.0
Industrial Project
27.0
30.0
Infrastructure Project
Total
33.0
33.0
131.0
138.0
The above projections are restricted to estimations
made on CIDB’s records and observations, based on
information obtained from mainstream resources and
various economic reports. Projections were based on
these assumptions:
a) A stable national political landscape;
b) No changes in macroeconomic and administrative policies;
c) An improved world environment with continued growth momentum;
d) Identified construction projects are implemented according as schedule;
e) Inflation remained low; and
f) Interest rates remained low.
Table 4.20 Comparison of the Projected and Actual
Value of Awarded Work
New Work Value (RM billion)
Year
Projected
2010
Actual*
72.0
91.0
2011
85.0
102.0
2012
120.0
131.0
2013
110.0
137.0
2014
120.0
173.0
2015
144.0
128.0
Note
: * Data as at May 2016
99
The value of completed work done or the construction
output indicates the progress of completed
construction work in any one year for a project. Using
a constant output developed by CIDB, the value of
work is estimated to be approximately RM149.0 billion,
an increase of 3.5% compared to the value of work
completed in 2015. In 2017, the value of the completed
work done is estimated to decrease by 2.0% to
RM146.0 billion due to slower implementation of new
work in 2016 and 2017 (Figure 4.1).
Figure 4.1 Projected Completed Work Value
until 2017
At the end of May 2016, the recorded value of awarded
projects in 2015 amounted to RM128.0 billion
compared to a projected RM144.0 billion, showing a
difference of 11.0%. Projections are likely to match the
actual value at the end of 2016 after taking into account
late projects notifications to CIDB. Projects awarded
in 2014 showed an actual value of RM149.5 billion
in March 2016, and this has increased by 16.0% to
RM173.0 billion in May 2016. It is observed that value
of project in 2015 will be likely increased by 15.0% to
20.0%. Based on these trends, the value of projects in
2015 after adjustments is estimated between RM147.0
billion and RM154.0 billion.
ESTIMATED VALUE OF WORK
COMPLETED FOR 2016/2017
The construction sector is forecast to grow by 7.9%
for 2016 (2016 Budget) and 10.3% for 2017 (11MP).
To achieve this targeted growth rate, the construction
sector will require around RM166.0 billion for 2016 and
RM183.0 billion for 2017 of new projects. Contribution
towards the projected work value is expected to come
from several mega infrastructure projects packages
that are under construction; the construction of new
highways; investments in RAPID’s oil and gas storage
services; and realisation committed investment in the
economic corridors. Residential projects proffering
consistent high-value construction work would
contribute towards raising demand for construction.
With the existence of relief schemes and attractive
incentives provided for buyers and developers, the
growth of residential property market is expected to be
consistent.
Note
: New Works data for 2010 to 2015 is until May 2016
ESTIMATED VALUE
OF RENOVATION WORK
It is a norm for new house owners to make
modifications on their houses for the purpose of
upgrading or expanding space; enhancing design
according to preference; and to improve safety. The
renovation work will vary depending on the category of
house and social status of the owner. It is estimated
that the cost of renovation can reach between 20.0%
and 50.0% of the purchase price, and sometimes
equalling the initial purchase price of old houses.
CONSTRUCTION INDUSTRY REVIEW AND PROSPECT 2015/2016
100 CHAPTER 4 CONSTRUCTION INDUSTRY PROSPECTS 2017
Estimated Value of Renovation Work
For the purpose of this report, the value of new houses
renovation is fixed at a minimum cost of 20.0%. Based
on NAPIC Property Market Report 2015, renovation
expenditure for new houses is estimated to be around
RM4.6 billion in 2016 and RM6.0 billion in 2017 (Table
CHAPTER 4 CONSTRUCTION INDUSTRY PROSPECTS 2017 101
Estimated Value of Renovation Work
4.21). Estimates on renovation works for old housing
units with transferred ownerships, shops, shopping
complexes, industrial units and office space could not
be made due to lack of data and information.
Table 4.21 Estimated Value of House Renovation Works
No.
Housing
*No. of Units
*Value
(RM million)
Estimated 20.0%
of Value (RM million)
2016
2017
5,658
2,900
600
-
47,592
18,500
3,700
-
50% units sold of units not constructed under
2013 projects
4,722
1,700
340
-
4
50% units sold for unsold units completed
under 2015 projects
5,658
2,900
-
600
5
50% units sold of units under construction
under 2015 projects
49,956
26,100
-
5,200
6
50% units sold of units not constructed under
2014 projects
4,358
1,700
-
300
4,640
6,100
1
50% units sold of unsold, project units
completed under 2015 projects
2
50% units sold of under-construction units
under 2014 projects
3
Projected Renovation Works Value
is forecast to experience a gradual recovery in 2017,
driven by improvements in developed, developing and
rapidly growing economies. World oil prices and other
commodities are forecast to increase and improve
balance of payments. Fiscal consolidation measures
through structural adjustments and institutional
changes by developed countries will also contribute
to strengthening the growth process of the world
economy.
Malaysian economy will also benefit from the
developing economic environment. Economic growth
will continue to be promoted by strong domestic
demand and recovery in external demand. Businessfriendly policies and environment, implemented under
the ETP and GTP, will offset probable shocks from
uncertainties within the world economy. Inflation
is very much under control following the provision
of government assistance, as well as households
making adjustments on their expenditures to meet the
rising cost of living. The involvements of government
agencies in supplying affordable housing, and strict
mortgage requirements by financial institutions have
been able to mitigate the increasing house prices.
Malaysia’s economic fundamentals will always be
on a firm footing. The economy is forecast to grow
strongly at least by 4.0% for 2016 and 2017. All
economic sectors are projected to grow positively,
except for agriculture sector. The construction sector
will continue to benefit from the implementation of
mega infrastructure projects; the rapid development
of townships; and increase in investment. The
construction sector is expected to have a sustainable
demand of approximately RM131.0 billion for 2016 and
RM138.0 billion for 2017.
Source : Annual Property Market Report 2014 & 2015, NAPIC
The government has allocated RM18.0 million to Bank
Rakyat as credit fund for Small Retailer Transformation
Programme (TUKAR) and Automotive Workshop
Modernisation Programme (ATOM). This fund is
allocated for the renovation of premises to upgrade
and modernise business of retail outlets and small
automobile workshops. Bank Rakyat offers loans
between RM20,000.00 and RM80,000.00 with an
annual interest rate of 3.0%. In 2015, a total of 302
retail stores and 188 automotive workshops were
renovated. This programmes targets 300 retail stores
and 180 workshops to be renovated each year for 2016
and 2017. Assuming a retail store spends RM30,000.00
and automobile workshop spends RM50,000.00 on
renovation works, total expenditure for renovation of
the premises is estimated to be RM18.0 million each
year for 2016 and 2017.
In 2016 Budget, the government made allocations of
RM500.0 million for the development and preservation
of educational facilities; RM155.0 million for
maintenance of public low-cost housing; and RM333.3
million for maintenance of ministries and government
departments buildings. Projected expenditure for
maintenance is estimated at RM988.3 million for 2016
and approximately the same amount for 2017. This
amount does not include repair and maintenance
expenses of federal, state and municipal roads. Overall,
the renovation, maintenance and repairs segment are
estimated to be between RM7.0 billion and RM8.0
billion per year.
Conclusion
The world economic outlook is expected to be sluggish
in 2016 with risks from the Russia-Ukraine geopolitical
tensions; Islamic State (IS) crisis in the Middle East;
the North Korean nuclear threat; Turkish-Russian
political tensions; and the market as a whole being
increasingly challenged by other external factors. The
world and regional factors including the slowdown
in the Chinese economy; oil prices; consistently low
world commodity prices; and the uncertainty of the
USD interest rate will together contribute towards a
challenging world environment. The world economy
CONSTRUCTION INDUSTRY REVIEW AND PROSPECT 2015/2016