Authored by the expert who managed and guided the team behind the Malaysia Property Pack
Everything you need to know before buying real estate is included in our Malaysia Property Pack
Malaysia's residential property market in August 2025 shows moderate price growth with healthy construction activity and steady demand from both domestic and foreign buyers. The market presents opportunities for investors and homebuyers, with notable trends in affordability, urbanization patterns, and evolving buyer behavior shaping the landscape.
If you want to go deeper, you can check our pack of documents related to the real estate market in Malaysia, based on reliable facts and data, not opinions or rumors.
Malaysia's property market forecast shows steady 3-4.5% annual price growth over the next 3-5 years, supported by urbanization and economic expansion.
Current challenges include 19-23% unsold inventory overhang and affordability pressures in major cities, balanced by declining interest rates and strong foreign investment interest.
| Key Metric | Current Status (2025) | Forecast Trend |
|---|---|---|
| Average Price Growth | 1.5-3% YoY | 3-4.5% annually (2026-2029) |
| Rental Yields | KL: 4.6-5.1%, JB: 5.4-5.9% | Stable to slight improvement |
| Mortgage Rates | 2.88-5.67% | Expected to remain supportive |
| Unsold Units | 19-23% overhang | Gradual improvement over 2-3 years |
| Foreign Investment | 5% YoY increase | Continued growth, led by China/Singapore |
| New Supply | 40,000-45,000 units launched | 120,000-150,000 units needed annually by 2030 |
| GDP Growth | 4.4% Q1 2025 | 4.5-5% annually (2026-2027) |
What is the current average price per square foot for residential properties in Malaysia?
The average residential property price per square foot in Malaysia stands at RM278 median nationwide as of September 2025.
Kuala Lumpur shows significant price variation by location, with city center properties averaging RM802 per square foot while areas outside the center command RM478 per square foot. This represents the typical urban price spread seen across Malaysia's major metropolitan areas.
Over the past 12 months, most residential segments experienced modest growth of 1.5-3% year-on-year. Kuala Lumpur high-rise apartments saw stronger performance with increases of 2.6-3.5%, while landed properties grew more conservatively at approximately 1.4%.
Price growth has been relatively stable compared to the volatility seen in previous years, reflecting a maturing market with steady but moderate appreciation. Regional variations exist, with secondary cities often showing different growth patterns compared to major urban centers.
It's something we develop in our Malaysia property pack.
How many new housing units were launched in Malaysia last year?
Malaysia saw over 12,498 new residential units launched in Q1 2025 alone, representing a dramatic 325% increase compared to Q1 2024 levels.
Extrapolating from quarterly data, the estimated total for the full 12-month period is approximately 40,000-45,000 new residential units launched nationwide. This surge indicates renewed developer confidence and market activity following previous market corrections.
However, absorption rates tell a different story. Only 10.8% of Q1 2025 launches have been sold through Q2 2025, reflecting buyer caution and slower market absorption despite the increased supply.
This disconnect between new launches and sales performance suggests developers are optimistic about medium-term demand while buyers remain selective, potentially creating opportunities for negotiation in certain segments.
The construction surge represents both opportunity and challenge - more choice for buyers but increased competition among developers for sales.
What are the current rental yields in major Malaysian cities?
| City | 2025 Rental Yield | 2020 Yield (Estimated) |
|---|---|---|
| Kuala Lumpur | 4.6-5.1% | 4.5-5.2% |
| Johor Bahru | 5.4-5.9% | 5.2-5.7% |
| Penang | 3.8-4.3% | 3.5-4.0% |
| Shah Alam | 4.2-4.8% | 4.0-4.5% |
| Petaling Jaya | 4.0-4.6% | 3.8-4.3% |
| Subang Jaya | 4.3-4.9% | 4.1-4.6% |
| Ipoh | 5.0-5.6% | 4.8-5.3% |
What are the current mortgage interest rates in Malaysia?
Current mortgage interest rates in Malaysia range from 2.88% to 5.67% per annum, depending on the loan type and promotional offerings.
Promotional rates for Islamic financing products start as low as 2.88-3.8% per annum, while typical effective rates for standard 30-year conventional loans range from 4.15-5.67% per annum. These rates reflect the competitive banking environment in Malaysia.
Bank Negara Malaysia's recent monetary policy has significantly impacted borrowing costs. The central bank cut the Overnight Policy Rate (OPR) from 3.00% to 2.75% on July 9, 2025, marking a notable easing in monetary policy.
This OPR reduction led to lending rates adjusting downwards by approximately 0.18-0.25%, providing immediate savings for existing floating rate borrowers and improved accessibility for new property buyers. The timing suggests authorities are supporting economic growth and property market activity.
Current rates remain historically attractive, making property financing more accessible for qualified borrowers compared to the higher rate environment of previous years.
What is the current oversupply situation in Malaysia's residential market?
Malaysia's residential property market currently faces a 19-23% unsold inventory overhang rate as of Q1 2025, representing a substantial improvement from the 63% peak experienced during COVID-19.
At the current absorption rate and assuming no new launches enter the market, clearing the existing unsold inventory would require approximately 10-12 quarters, or 2.5-3 years. However, this scenario is unrealistic given ongoing new project launches.
The overhang situation varies significantly by location and price segment. Urban areas with diversified economies typically show better absorption rates compared to areas heavily dependent on single industries or with limited employment opportunities.
Despite the overhang, the trend is positive. The significant reduction from pandemic highs indicates market recovery and gradual normalization of supply-demand dynamics. Developers are becoming more selective about new launches, focusing on locations with proven demand.
This oversupply situation creates opportunities for buyers to negotiate better prices and terms, particularly in developments with higher inventory levels.
Don't lose money on your property in Malaysia
100% of people who have lost money there have spent less than 1 hour researching the market. We have reviewed everything there is to know. Grab our guide now.
What percentage of property transactions involve first-time buyers versus investors?
Over 60% of residential property transactions in Malaysia during 2025 involve units priced below RM500,000, primarily acquired by first-time buyers seeking affordable homeownership.
Investor-driven transactions typically concentrate in the RM600,000-RM1 million bracket, particularly in urban areas with strong rental demand and capital appreciation potential. These investors often target properties in established locations with good connectivity and amenities.
The high-end luxury segment represents 19.6% of total transactions, reflecting significant investor and foreign buyer interest in premium properties. This segment shows different dynamics compared to the mass market, with buyers often motivated by portfolio diversification or lifestyle preferences.
First-time buyers dominate the market due to government incentives, affordable financing options, and the natural progression of Malaysia's growing middle class seeking homeownership. Many benefit from various first-time buyer schemes and lower down payment requirements.
The investor segment remains active but selective, focusing on properties with strong rental yields and growth potential rather than speculative purchases.
How has foreign ownership in Malaysian real estate changed recently?
Foreign ownership in Malaysian real estate has shown steady growth post-pandemic, with approximately 5% year-on-year increase since 2023.
China has emerged as the second-largest source of Southeast Asian property investment in Malaysia, with Chinese buyers increasingly active in Kuala Lumpur, Penang, and Johor. Singapore maintains its position as a leading foreign investor nation, followed by Middle Eastern countries, Japan, Korea, and the United Kingdom.
Chinese investors are particularly drawn to Malaysian properties for investment purposes and international education access, often purchasing near international schools or universities. The relative affordability compared to Singapore and Hong Kong makes Malaysia attractive for portfolio diversification.
Foreign investment patterns show preference for completed developments in prime locations rather than off-plan purchases, indicating more mature and risk-conscious investment behavior. Many foreign buyers also consider Malaysia's MM2H program and favorable exchange rates as additional investment incentives.
Government policies continue to welcome foreign investment while maintaining minimum purchase thresholds to protect the domestic market for local buyers.
What is Malaysia's economic forecast and its impact on housing demand?
Malaysia achieved 4.4% GDP growth in Q1 2025, with economists forecasting continued expansion of 4.5-5% annually over the next two years.
This economic growth trajectory supports resilient housing demand through job creation, income growth, and overall economic confidence. The expansion is driven by domestic consumption, infrastructure development, and Malaysia's strategic position in global supply chains.
Population growth projections indicate Malaysia will reach 36-37 million people by 2030, representing an annual growth rate of approximately 2.8%. This demographic expansion directly translates to increased housing demand across all segments.
Urbanization trends show the rate will exceed 80% by 2030, necessitating approximately 120,000-150,000 new housing units annually to meet growing urban demand. This represents a significant increase from current supply levels and suggests sustained construction activity.
The combination of economic growth, population increase, and urbanization creates a favorable environment for property investment, though regional variations will exist based on local economic drivers and infrastructure development.
How do current affordability ratios compare to historical averages?
| State | Current Ratio (2025) | Historical Average |
|---|---|---|
| Kuala Lumpur | 6.1 | 5.2 |
| Penang | 5.3 | 4.6 |
| Johor | 4.7 | 4.1 |
| Selangor | 5.8 | 5.0 |
| Perak | 4.2 | 3.8 |
| Melaka | 4.9 | 4.3 |
| Negeri Sembilan | 4.6 | 4.0 |
What is the current balance between cash and financed property purchases?
Approximately 28-32% of residential property purchases in Malaysia are completed with cash, remaining stable compared to the previous year.
The remaining 68-72% of transactions involve financing, with a mild increase in financed purchases due to recent interest rate cuts and government incentives for homebuyers. This shift indicates improved access to credit and buyer confidence in taking on mortgage debt.
Cash purchases are more prevalent in the luxury segment and among foreign buyers, who often prefer the simplicity and negotiating power that cash offers. Investment buyers also frequently use cash to secure better purchase prices and faster transaction completion.
The financing segment benefits from competitive bank offerings, government schemes for first-time buyers, and the recent OPR reduction that has made borrowing more attractive. Many buyers also utilize developer financing packages that offer competitive terms.
It's something we develop in our Malaysia property pack.
We did some research and made this infographic to help you quickly compare rental yields of the major cities in Malaysia versus those in neighboring countries. It provides a clear view of how this country positions itself as a real estate investment destination, which might interest you if you're planning to invest there.
What is the forecasted price growth for Malaysian residential properties?
Leading property analysts forecast average annual price growth of 3-4.5% CAGR for Malaysian residential properties over the next 3-5 years.
This growth projection is supported by several factors: continued urbanization, infrastructure investments, moderate economic expansion, and steady population growth. The forecast represents a normalized growth rate after the market corrections and volatility of previous years.
Regional variations are expected, with Kuala Lumpur and major urban centers potentially achieving the higher end of the growth range due to employment concentration and infrastructure development. Secondary cities may experience more moderate growth depending on local economic drivers.
The forecast assumes continued political stability, steady economic growth, and no major external shocks. Factors such as infrastructure projects like the High Speed Rail and various urban development initiatives could provide additional upward pressure on prices in benefiting areas.
It's something we develop in our Malaysia property pack.
Conclusion
This article is for informational purposes only and should not be considered financial advice. Readers are advised to consult with a qualified professional before making any investment decisions. We do not assume any liability for actions taken based on the information provided.
Malaysia's property market in 2025 presents a balanced opportunity for both investors and homebuyers, with moderate growth expectations supported by economic fundamentals.
While affordability challenges exist in major urban centers, declining interest rates and steady foreign investment interest create favorable conditions for market participation.
Sources
- Numbeo - Cost of Living in Malaysia
- Brickz - Malaysia Residential Transactions
- Global Property Guide - Malaysia Rental Yields
- IQI Global - House Loan Interest Rates
- AmInvest - OPR Cut July 2025
- StarProperty - Property Market Adjustments 2025
- IQI Global - NAPIC Malaysia Property Market Q1 2025
- DeVere Malaysia - Chinese Property Investment Rankings
- Global Property Guide - Malaysia Price History
- The Edge Malaysia - Property Market Analysis