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SUMMARY
Yes. KL serviced apartments are becoming a bad investment more often than they used to, mainly because new supply, weak net yields and intense competition are making average units much harder to justify. The better buildings can still work, but buying the category itself is no longer enough.
The most important change is hidden behind an apparently positive number. Kuala Lumpur’s completed unsold stock is falling, yet unsold units under construction and units still waiting to be built are rising. The old overhang is clearing while the next one is forming.
Demand has not disappeared. Kuala Lumpur remains Malaysia’s busiest serviced-apartment market, but transaction growth has slowed dramatically from the post-pandemic surge. That gives weaker projects less chance of being rescued by a rapidly expanding pool of buyers.
Price performance is becoming much more building-specific. Eaton Residence has barely moved from its 2021 average price, while Arcoris performed far better. In other words, owning in a growing city does not guarantee that a particular serviced apartment appreciates with it.
Rental demand has the same split. Areas tied closely to employment, rail and established expatriate demand can still perform well, while other supposedly prime locations are flat or even softer. “Central Kuala Lumpur” is far too broad to be an investment thesis.
Headline yields are also misleading surprisingly often. A unit advertised around 5% gross can quickly fall toward 3% to 4% before financing once vacancy, maintenance, sinking fund contributions and letting commissions are included.
Airbnb should be treated as optional upside rather than the foundation of the deal. Malaysian strata law already allows management corporations to restrict short-term rentals, so an apartment that only works financially as an Airbnb carries a structural risk that a normal long-term rental does not.
New launches are particularly exposed because investors are paying before they know the building’s real rent, maintenance costs, management quality or resale depth. Completion can also bring hundreds of nearly identical units onto the rental market at exactly the same time.
Small studios look especially vulnerable when their main selling point is yield. If hundreds of similar units chase the same singles and couples, both tenants and future buyers gain enormous negotiating power. Scarcity of convenience matters far more than scarcity of square footage.
The units that still make sense tend to be completed resales bought at sensible prices, genuinely walkable to jobs, rail or major retail, and capable of producing an acceptable return under a normal long-term lease. In this market, paying less for proven economics is usually more valuable than paying a developer premium for projected upside.
The practical conclusion is simple: KL serviced apartments are becoming bad investments when investors buy a generic unit and assume Kuala Lumpur’s growth will carry it. A good purchase now needs a clear reason why tenants and future buyers will choose that exact apartment when thousands of alternatives are available.
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Are KL serviced apartments getting riskier right now?
Yes. Kuala Lumpur serviced apartments are getting harder to justify as a default investment because future supply is building much faster than the stock of completed unsold units is clearing.
NAPIC's latest full-year data makes the tension unusually clear. Malaysia ended 2025 with 18,752 completed unsold serviced apartments, down 4.2% from 19,564 a year earlier. Kuala Lumpur improved too, from 4,202 completed unsold units to 3,964.
If we stopped there, the market would look healthier.
The pipeline says something very different. Unsold serviced apartments already under construction across Malaysia jumped from 30,279 units to 50,329 in one year, a 66.2% increase. Kuala Lumpur alone went from 8,166 to 9,619 units. Another 8,340 KL units were classified as unsold and not yet constructed.
So today's completed overhang is gradually being absorbed while a much larger batch is forming behind it. For an investor buying now and expecting to sell several years from now, that future competition is difficult to ignore.
| Serviced-apartment indicator | 2024 | 2025 | Change |
|---|---|---|---|
| Malaysia completed unsold | 19,564 | 18,752 | -4.2% |
| Malaysia unsold under construction | 30,279 | 50,329 | +66.2% |
| KL completed unsold | 4,202 | 3,964 | -5.7% |
| KL unsold under construction | 8,166 | 9,619 | +17.8% |
| KL unsold not constructed | 5,987 | 8,340 | +39.3% |
Is Kuala Lumpur actually oversupplied with serviced apartments?
Yes. Kuala Lumpur already has an enormous stock of serviced apartments, and developers are still adding heavily to the same market.
NAPIC counted 474,018 existing serviced apartments across Malaysia at the end of 2025. Kuala Lumpur, Selangor and Johor contained 411,189 of them, or 87% of the country's entire stock.
Those same three markets also accounted for 79% of incoming supply and 84% of planned supply.
Construction is still running hard. Malaysia recorded 44,344 serviced-apartment starts in 2025, up from 39,011 the year before. That was the highest annual starting figure in NAPIC's latest stock report.
We would therefore be very careful with the argument that today's falling completed overhang means scarcity is returning. Developers continue to build the greatest number of serviced apartments in precisely the markets where serviced apartments are already most common.
Oversupply does not mean every building will struggle. A unit beside TRX and a generic studio far from a major employment node can have completely different occupancy. But citywide scarcity is clearly not something an investor should pay a premium for.
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Has the KL serviced-apartment overhang actually improved?
Yes, completed KL serviced-apartment overhang has improved, but the improvement is much less reassuring once we include projects that are still being built.
Kuala Lumpur ended 2025 with 3,964 completed unsold serviced apartments, according to NAPIC, down from 4,202 a year earlier. Nationally, completed unsold stock also fell.
That is real progress.
The problem is the speed at which new unsold inventory has accumulated earlier in the development cycle. National unsold units under construction rose from 23,795 at the end of 2023 to 30,279 in 2024 and 50,329 in 2025. In two years, the number more than doubled.
Kuala Lumpur followed the same direction, although less dramatically. Its unsold under-construction stock rose to 9,619 units in 2025, while another 8,340 unsold units had not even started construction.
The old overhang is slowly shrinking while the pipeline grows. Today's market is healthier than the worst overhang headlines suggest, but not nearly as healthy as the completed-unit number looks on its own.
| Unsold serviced apartments | 2023 | 2024 | 2025 |
|---|---|---|---|
| Malaysia under construction | 23,795 | 30,279 | 50,329 |
| Malaysia completed | 20,825 | 19,564 | 18,752 |
| KL under construction | — | 8,166 | 9,619 |
| KL completed | — | 4,202 | 3,964 |
Are people still buying KL serviced apartments?
Yes. Buyers are still active in Kuala Lumpur serviced apartments, although the boom in transaction growth has clearly cooled.
Malaysia recorded 14,917 serviced-apartment transactions in 2025. That was up only 3.7% from 14,386 in 2024, but the longer trend remains strong: just 4,359 units changed hands in 2021.
The slowdown matters more than the absolute number. Transaction volume grew 56.5% in 2022, another 67.4% in 2023 and 26% in 2024 before slowing to 3.7% in 2025.
The first half of 2025 had already hinted at this change. NAPIC recorded 6,624 national serviced-apartment transactions, 2.6% fewer than a year earlier, even though transaction value rose 4.3% to RM5.16 billion.
Kuala Lumpur remained the country's busiest serviced-apartment market during that period, with 2,246 transactions, or 33.9% of the national total.
Investors have not abandoned KL serviced apartments. What has disappeared is the explosive transaction growth that followed the pandemic. Weak projects can stay weak for a long time when demand is only growing normally.
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Are KL serviced-apartment prices already falling?
No. Kuala Lumpur serviced-apartment prices are not broadly crashing, but several projects show how easy it is to own one for years and make very little on resale.
NAPIC's project-level data gives a useful example at Eaton Residence. Its reported average price was RM1.30 million in 2021, RM1.355 million in 2022 and RM1.385 million in 2023. It then fell to RM1.313 million in 2024 before recovering to RM1.339 million in 2025.
That leaves the average price only about 3% above its 2021 level after four years.
Arcoris did better. Its reported average rose from RM647,000 in 2021 to RM790,000 in 2025, an increase of roughly 22%.
The difference between those two buildings is more useful than any citywide slogan. Some serviced residences can appreciate. Others can spend years moving sideways even while Kuala Lumpur itself continues developing around them.
Flat prices are already painful for a leveraged investor. Legal costs, stamp duty, agent commissions, mortgage interest, maintenance and inflation continue accumulating even when the nominal selling price eventually matches the original purchase price.
| Project | 2021 average | 2025 average | Approx. change |
|---|---|---|---|
| Eaton Residence | RM1.300m | RM1.339m | +3% |
| Arcoris | RM647k | RM790k | +22% |
Are KL rents strong enough to make serviced apartments worth owning?
Sometimes. Rental demand is still supporting good KL serviced apartments, but rent growth is far too uneven to rescue an expensive purchase.
Knight Frank's latest Kuala Lumpur residential review shows urban professionals and expatriates continuing to support prime rental demand. KL City asking rents currently sit around RM3.50 to RM7.00 per square foot per month.
Several areas are still moving upward. Bangsar, Bangsar South, KL Sentral and Seputeh went from roughly RM2.30-RM5.50 per square foot in the second half of 2025 to RM2.40-RM5.60 in the first half of 2026. Cochrane, Chan Sow Lin and Maluri moved from RM3.60-RM4.30 to RM3.80-RM4.50.
Other areas barely moved. Mont Kiara remained around RM2.60-RM5.50. KL City itself was broadly stable. Damansara Heights softened from RM3.10-RM6.80 to roughly RM3.00-RM6.50.
Individual buildings show the same split. NAPIC reported average monthly rent at 3 Kia Peng rising from RM5,000 in 2021 to RM6,375 in 2025, while Arcoris moved from RM3,500 to just RM3,800.
So yes, good rental pockets still exist today. The trouble starts when an investor pays a premium assuming every central KL serviced apartment will get the same rent growth.
| Area / project | Earlier level | Latest level | Direction |
|---|---|---|---|
| 3 Kia Peng | RM5,000/month | RM6,375/month | Strong increase |
| Arcoris | RM3,500/month | RM3,800/month | Modest increase |
| KL City | RM3.60-RM6.90 psf | RM3.50-RM7.00 psf | Broadly flat |
| Bangsar / Bangsar South / KL Sentral / Seputeh | RM2.30-RM5.50 | RM2.40-RM5.60 | Up |
| Cochrane / Chan Sow Lin / Maluri | RM3.60-RM4.30 | RM3.80-RM4.50 | Up |
| Damansara Heights | RM3.10-RM6.80 | RM3.00-RM6.50 | Down |
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Are those 5% to 7% KL serviced-apartment yields actually real?
Sometimes, but the net return on a KL serviced apartment can end up several percentage points below the gross yield shown in the sales pitch.
Take a RM1 million unit renting for RM4,000 a month. The headline annual rent is RM48,000, which produces a 4.8% gross yield.
One vacant month reduces that to RM44,000. If an 800-square-foot unit pays RM0.45 per square foot per month in maintenance plus a 10% sinking-fund contribution, that removes roughly RM4,750 a year. A letting commission equal to one month's rent removes another RM4,000 when a new tenant is found.
We are already near RM35,000 before assessment, parcel rent, insurance, small repairs, appliance replacement, furniture wear and income tax.
The owner therefore starts around 3.5% before financing, and the true number can fall further. That's the number I would care about, not the one in the brochure.
This is why a resale buyer paying RM700,000 for an apartment that rents for RM4,000 can have completely different economics from somebody paying RM1 million for a new unit collecting exactly the same rent. The apartment may be identical from the tenant's perspective, while the investor's return is radically different.
| Illustrative RM1m serviced apartment | Annual amount |
|---|---|
| Rent at RM4,000/month | RM48,000 |
| Headline gross yield | 4.8% |
| Rent after one vacant month | RM44,000 |
| Illustrative maintenance + sinking fund | -RM4,752 |
| One-month letting commission | -RM4,000 |
| Income before other ownership costs | RM35,248 |
| Yield before financing, tax and other costs | About 3.5% |
Can KL serviced-apartment owners safely rely on Airbnb?
No. Buying a Kuala Lumpur serviced apartment on the assumption that Airbnb will always be allowed is a weak investment strategy.
Malaysia already has a clear legal precedent. Verve Suites in Mont Kiara was built on land designated for commercial buildings and serviced apartments, yet its management corporation adopted a house rule banning short-term rentals. The Federal Court upheld the management corporation's ability to impose that restriction under the strata-management framework.
A commercial title therefore does not give an owner a permanent Airbnb right.
That changes the risk dramatically for investors who use short-stay revenue to justify the purchase price. If a RM1 million apartment only looks attractive because projected Airbnb income is much higher than a normal twelve-month lease, a later restriction can break the original investment case overnight.
Before buying, we would want to see the building's current bylaws, AGM and EGM records, management policy toward short stays and evidence of how that policy is enforced. “Airbnb friendly” in an agent's message is nowhere near enough.
The safer KL serviced apartment is one that already works financially with an ordinary long-term tenant. Airbnb can then improve the upside rather than keep the investment alive.
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Does Kuala Lumpur still have enough tenants for all these serviced apartments?
Kuala Lumpur has plenty of tenant demand, but tenants are becoming much more useful to some buildings than others.
Knight Frank's latest review still finds demand from urban professionals and expatriates supporting the city's prime rental market. That fits what we see in the rent data around KL City, Bangsar South, KL Sentral, Cochrane and Maluri.
The important word is location. A serviced apartment does not attract tenants simply because it carries the right property label. Tenants care about the commute, actual walking distance to rail, nearby offices, food, retail, layout, furniture and whether the building feels pleasant to live in.
TRX is a good example. The district now has real offices, retail, MRT connectivity and daily foot traffic. A building that genuinely puts a tenant within walking distance of that ecosystem has a much stronger rental proposition than another project advertised as “near TRX” because it is several kilometres away.
Developers know this too. Knight Frank's current launch data shows new projects concentrated in KL City, TRX, Damansara Heights and Maluri.
The best demand nodes therefore attract both tenants and competing developers. Location still matters enormously, but investors have to go one level deeper and ask whether a specific building has an advantage inside that location.
Are new KL serviced apartments riskier than resale units?
Yes. A new KL serviced apartment is currently harder to underwrite than a comparable completed resale unit because too many important numbers remain theoretical.
With a completed property, we can inspect the building, check actual maintenance fees, see how crowded the lifts are, look at current rental listings, study previous transactions and find out whether owners struggle to get tenants.
A new launch gives us renderings and projections instead.
The biggest problem often arrives at completion. Hundreds of investors can receive vacant possession around the same time and immediately list similar units for rent. Owners with mortgages quickly discover that accepting RM3,200 today can feel preferable to waiting three months for RM3,500.
That discounted transaction then becomes the number future tenants use against every other landlord.
New launches can still work when the developer price is sensible and the project genuinely adds something scarce. These days, however, we would make the new project prove why it deserves a premium over completed buildings nearby.
For pure investment, resale increasingly has one major advantage: we can see what we are actually buying.
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Can you easily resell a KL serviced apartment later?
Sometimes, but generic KL serviced apartments can be frustratingly difficult to sell at the price owners expect.
The national serviced-apartment market remains active, so there is no broad liquidity crisis. The problem is competition within individual buildings and neighbourhoods.
Imagine selling a 700-square-foot two-bedroom unit in a tower where eight nearly identical units are already listed. The buyer can compare floors, views, furniture and asking prices within minutes. If several owners need to sell, price becomes the easiest way to stand out.
The same buyer can also compare your five-year-old apartment with newly completed projects offering fresh facilities and developer incentives nearby.
That makes resale quality surprisingly specific. A protected view, genuinely efficient layout, unusually good parking arrangement, strong management, low maintenance fee or direct station access can matter much more after completion than they did in the launch brochure.
Portal asking prices are particularly dangerous here. An owner listing at RM900,000 tells us what that owner wants. Registered transactions tell us what somebody actually paid.
For a serviced apartment, we would spend almost as much time studying competing resale listings as studying the unit itself.
Are small KL serviced-apartment studios the biggest trap?
Often, yes. Small KL serviced-apartment studios can produce attractive gross yields, but they become vulnerable very quickly when hundreds of similar units compete for the same tenant.
The appeal is obvious. Entry prices are lower, furnishing costs are manageable and central singles or couples can rent them.
The weakness is just as obvious once the building fills with investors. A tenant comparing ten 450-square-foot studios has almost no emotional reason to choose one landlord over another. Better furniture, slightly better view and RM100 less rent can decide the deal.
The same problem comes back when the owner sells.
A studio becomes much more interesting when the location itself is difficult to replicate: genuinely beside a major office district, attached to useful retail or exceptionally close to rail. Then the tenant is paying for convenience rather than square footage.
Without that advantage, a tiny investor unit is just easy to replace. In Kuala Lumpur's current supply environment, replaceable assets deserve lower prices, not higher yields on a brochure.
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Have financing and foreign-buyer costs made KL serviced apartments much worse?
They have made mediocre KL serviced apartments harder to justify, especially for leveraged and overseas buyers.
Bank Negara Malaysia has kept the Overnight Policy Rate at 2.75%, so borrowers currently have a more supportive base rate than before the cut from 3%. Mortgage debt is still expensive enough to consume most of the cash income from a modest-yielding apartment.
Return to our RM1 million example producing roughly RM35,000 before financing and tax. A RM700,000 loan costing around 4% means about RM28,000 of first-year interest before principal repayments. Very little operating income remains.
Foreign buyers face another problem. Malaysia's Budget 2026 changes raised the stamp-duty rate on transfers of residential property to non-citizens, non-permanent residents and foreign companies from 4% to 8% for qualifying instruments. The exact treatment of a serviced apartment should still be confirmed from its title and with a conveyancing lawyer.
At an 8% transfer-duty rate, acquisition friction becomes huge. An overseas investor cannot casually accept a 3% net pre-financing yield and assume eventual appreciation will cover everything.
Foreign-purchase thresholds can also push international buyers toward more expensive KL properties, where rental yields often compress.
Financing has not killed the market. It has simply made overpaying much more expensive.
Which KL serviced apartments are still worth buying today?
The KL serviced apartments still worth buying today are usually completed, well located, easy to rent long term and cheap enough that the return works without optimistic assumptions.
We would feel much more comfortable with an established resale unit whose actual rent, occupancy, maintenance fee and transaction history can be checked than with an off-plan studio sold using projected yields.
Real walking distance to employment matters. TRX, KLCC, KL Sentral, Bangsar South and other strong nodes can support demand, but the difference between five minutes on foot and fifteen minutes by car is enormous.
Layout matters too. A useful one- or two-bedroom apartment can reach couples, executives and longer-staying expatriates, while hundreds of tiny studios may all chase the same narrow renter pool.
Management quality becomes increasingly important as a building ages. Expensive pools, podiums, lifts and common areas look impressive at launch but eventually have to be maintained by owners.
And price remains the biggest filter of all. Buying a good building cheaply can compensate for several imperfections. Buying a mediocre building at a developer premium leaves almost no room for error.
| More attractive today | More dangerous today |
|---|---|
| Completed unit with observable rent | Off-plan unit based on projected rent |
| Genuine walk to MRT, jobs or major retail | “Near KLCC/TRX” mainly by car |
| Resale bought below launch pricing | Large developer premium |
| Useful one- or two-bedroom layout | Hundreds of similar micro-studios |
| Works with a long-term tenant | Needs Airbnb to hit the target return |
| Proven building management | High fees and uncertain upkeep |
| Few direct substitutes | Many identical competing units |
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So, are KL serviced apartments becoming a bad investment?
Partly true, and the average KL serviced apartment is clearly becoming a harder investment to defend.
There is no citywide collapse. Buyers are still transacting. Several prime rental areas are stable or rising. Completed overhang has fallen. Good buildings beside genuine employment and transport nodes can still rent well and appreciate.
But the easy investment case has weakened sharply.
Malaysia now has 474,018 existing serviced apartments and another 172,594 units in incoming supply. Kuala Lumpur, Selangor and Johor dominate both numbers. Unsold serviced apartments under construction jumped 66.2% nationally in 2025, while Kuala Lumpur ended the year with 9,619 unsold units already being built and another 8,340 still waiting to start.
At the same time, gross yields can shrink dramatically after vacancy, maintenance and agent costs. Airbnb access can disappear through strata rules. Financing can absorb most of a mediocre rental return. Foreign-buyer transaction costs have become heavier. And several established projects show that years of ownership do not automatically produce meaningful capital appreciation.
That changes how we would buy.
A RM1 million serviced apartment yielding 5% gross, surrounded by hundreds of substitutes and dependent on short stays looks weak today. A RM700,000 completed unit collecting similar rent, genuinely close to a major employment node and bought below its original launch price can still be a very good deal.
So KL serviced apartments are becoming bad investments when investors buy the category instead of the individual asset.
Currently, we would want the deal to work on a normal long-term lease, after realistic ownership costs, without assuming rapid capital appreciation. We would also want a clear reason why tenants and future buyers will choose that particular unit when thousands of alternatives exist.
If we cannot answer that last question convincingly, there are now too many serviced apartments in Kuala Lumpur to assume the market will solve the problem for us.
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OUR METHODOLOGY
This analysis tests whether Kuala Lumpur serviced apartments are becoming harder to justify as investments by looking at the parts of the market that directly affect an owner: completed overhang, future supply, transaction activity, resale prices, rents, operating yield, short-term-rental rules, financing and foreign-buyer costs.
We deliberately separate completed unsold apartments from units still under construction or not yet built. A falling completed overhang can make the market look healthier today while a much larger pipeline creates new competition during the years an investor actually expects to own the property.
We also avoid treating Kuala Lumpur as one homogeneous market. Broad city figures are compared with project-level price and rental histories because buildings such as Eaton Residence, Arcoris and 3 Kia Peng show that two serviced apartments in the same city can produce very different outcomes.
Headline rental yield is treated as a starting point rather than the investor's actual return. Our illustrative yield calculation subtracts ordinary frictions such as vacancy, maintenance, sinking-fund contributions and letting commissions before financing and tax.
For short-term rentals, we treat Airbnb income as less dependable than a normal long-term lease because a building's strata rules can materially change what an owner is allowed to do. The Federal Court precedent involving Verve Suites Mont Kiara is used to anchor that risk.
NAPIC is the main source for serviced-apartment stock, incoming and planned supply, unsold units, transactions, project-level prices and rents. The key official references include the NAPIC Property Market Report 2025, the NAPIC Property Stock Report 2025, the NAPIC Property Market Status Report 2025, and the NAPIC Kuala Lumpur price and rental tables.
For the current rental backdrop, we use Knight Frank Malaysia's Real Estate Highlights, First Half 2026. For financing, we use Bank Negara Malaysia's latest monetary-policy statement and its published OPR decisions.
Foreign-buyer acquisition costs are anchored to the Ministry of Finance Budget 2026 tax measures and LHDN's Budget 2026 tax Q&A. The short-term-rental section uses Allen & Gledhill's summary of the Federal Court ruling on Verve Suites Mont Kiara.
No single statistic determines the conclusion. We combine current supply, future competition, transaction momentum, real building-level performance, rental economics, regulation and financing, then judge whether an individual serviced apartment still works without relying on optimistic rent growth, permanent Airbnb access or rapid capital appreciation.
Buying real estate in Kuala Lumpur can be risky
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