Why are so many condos empty in Malaysia?

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

Who is the author of this content?

BAMBOOROUTES

A team specialized in real estate investing in APAC countries (Japan, Thailand, Indonesia, Australia, etc.).

We are a team of financial experts, legal professionals, developers, and local real estate specialists dedicated to helping people like you avoid mistakes when investing in real estate in a foreign place, particularly in Malaysia. If you'd like to learn more about us, you can check our presentation page.

How this content was created 🔎📝

At BambooRoutes, we explore the Malaysian real estate market every day. Our team doesn't just analyze data from a distance—we're actively engaging with local realtors, investors, and property managers in cities like Kuala Lumpur, Johor Bahru, and Penang. This hands-on approach allows us to gain a deep understanding of the market from the inside out.

These observations are originally based on what we've learned through these conversations and our observations. But it was not enough. To back them up, we also needed to rely on trusted resources

We prioritize accuracy and authority. Trends lacking solid data or expert validation were excluded.

Trustworthiness is central to our work. Every source and citation is clearly listed, ensuring transparency. A writing AI-powered tool was used solely to refine readability and engagement.

To make the information accessible, our team designed custom infographics that clarify key points. We hope you will like them! All illustrations and media were created in-house and added manually.

What is the current supply and demand situation for condos in Malaysia?

Malaysia's condo market shows a clear oversupply situation as of September 2025, with demand significantly lagging behind the number of available units.

Urban areas across Malaysia report vacancy rates between 19-23% for residential properties, with condos and high-rise units making up the majority of this overhang. The mismatch between supply and demand has persisted despite moderate national property price growth and ongoing absorption efforts by developers.

Major cities like Kuala Lumpur, Johor Bahru, and Penang face the most severe oversupply conditions. High-rise developments, particularly condos, represent the bulk of unsold completed units in these markets, indicating that developers continue to build properties that don't align with actual buyer preferences and purchasing power.

The oversupply situation has created downward pressure on rental yields and sale prices, making it increasingly difficult for both investors and developers to achieve expected returns on condo investments.

Current market data suggests that absorption rates remain slow, with many new developments taking significantly longer to sell out compared to historical averages in the Malaysian property market.

What factors are driving the high number of condos being built in the first place?

Developers consistently favor condo projects because they generate higher profit margins compared to landed property developments.

The primary driver is the developer preference for mid to high-end projects that offer better returns per square foot of developed land. Urban land scarcity in prime locations makes vertical development through condos the most economically viable option for maximizing development potential.

Malaysia's ongoing urbanization trend, with a growing middle class concentrated in major cities, initially created strong demand projections for high-rise living. Infrastructure development projects, including MRT expansions and improved road connectivity, have enabled developers to justify new condo projects in previously less accessible areas.

Foreign investment incentives have encouraged international developers and investors to fund large-scale condo developments, particularly targeting overseas buyers who prefer modern high-rise living over traditional landed properties.

The relatively lower initial capital requirements for condo purchases compared to landed homes made these developments appear attractive to a broader potential buyer base, leading developers to oversupply the market.

Are there specific regions or cities in Malaysia with more empty condos than others?

Kuala Lumpur leads in empty condos, particularly in the premium and luxury segments where oversupply is most pronounced.

Region/City	Severity Level	Key Characteristics
Kuala Lumpur	Very High	Premium/luxury segment overhang, high vacancy rates
Johor Bahru	Very High	Deep oversupply, especially Iskandar Malaysia area
Penang	High	Notable vacancy in new high-rise developments
Selangor	High	Significant overhang in suburban condo projects
Klang Valley	Very High	Combined with Johor: 60% of total national overhang

What is the price range of these empty condos, and is affordability a factor?

Most empty condos in Malaysia fall within the RM300,000 to RM600,000 price range, with the upper-mid-range segment experiencing the greatest difficulty in sales.

Affordability represents a significant barrier for local buyers who struggle to meet property costs amid rising construction expenses and general living costs. The gap between developer pricing strategies and actual buyer purchasing power has widened considerably, creating a substantial overhang in this price segment.

Properties above RM600,000 face even more severe sales challenges, as they target a much smaller pool of qualified buyers. Foreign buyers tend to focus on higher-end units, leaving mid-range properties without sufficient local demand to absorb the supply.

Price growth remains constrained by these affordability issues, preventing developers from raising prices to improve margins while simultaneously making it difficult to reduce prices significantly without affecting project viability.

The mismatch between unit pricing and median household incomes in major Malaysian cities has created a structural problem where a large portion of new condo supply remains out of reach for the majority of potential buyers.

How are foreign buyers influencing the market for condos in Malaysia?

Foreign buyers, particularly from China, the Middle East, and Southeast Asia, actively target Malaysia's high-end and luxury condo segments, influencing developer strategies significantly.

These international investors push developers to build more upscale units with premium amenities and finishes, contributing to the oversupply in higher price ranges. While foreign investment brings capital into the market, it creates a disconnect between what's being built and what local buyers actually need or can afford.

Foreign buyer focus on luxury segments has led developers to overlook the mass market demand, exacerbating the oversupply situation in premium categories while potentially under-serving more affordable price points. Many foreign investors purchase units as investment vehicles rather than for occupation, contributing to the vacant unit problem.

The concentration of foreign investment in specific areas like Kuala Lumpur's Golden Triangle and Johor's Iskandar Malaysia has created localized bubbles where supply far exceeds sustainable demand from both local and international buyers.

It's something we develop in our Malaysia property pack.

What role does property market speculation play in this issue?

Speculation through property flipping and investment holding contributes directly to Malaysia's condo vacancy problem, as investors frequently leave units vacant while awaiting capital appreciation.

Many speculators purchase condos with the intention of selling them for profit rather than renting or occupying them, creating artificial demand during the buying phase but leaving units empty afterward. This speculative activity inflates sales figures for new developments while doing nothing to address actual housing needs or market absorption.

The practice of buying multiple units as investment portfolios has become common among both local and foreign investors, who view condos as stores of value rather than functional housing. These investors often hold properties vacant to avoid tenant management responsibilities while waiting for market prices to appreciate.

Property market experts increasingly call for vacancy taxes and higher real property gains tax to discourage speculative holding and encourage more productive use of housing stock. The current tax structure doesn't sufficiently disincentivize leaving properties vacant for extended periods.

Speculative buying creates market distortions where developer sales figures don't reflect genuine housing demand, leading to continued oversupply as developers misread market signals.

Are developers struggling to sell or rent out these condos?

Developers across Malaysia face mounting challenges with unsold inventory, creating significant cash flow strain and increased competition in an oversaturated market.

Many developers resort to extensive incentive packages including discounts, rebates, and freebies to move unsold units, but these measures have only partially improved sales performance. Projects in the upper-mid to luxury range experience the greatest absorption difficulties, with some developments taking years to achieve significant sales progress.

The rental market also presents challenges, as oversupply in certain areas has depressed rental yields and made it difficult for investors to generate positive cash flow from condo investments. High vacancy rates in rental markets further discourage potential buyers who rely on rental income projections.

Developers increasingly compete on price and amenities, eroding profit margins while still struggling to clear existing inventory. Some developers have been forced to reconsider future project launches or modify development plans to focus on more affordable segments.

The combination of weak sales and rental markets has created a feedback loop where new supply continues to enter the market while existing stock remains unabsorbed, perpetuating the oversupply cycle.

How do government policies impact the condo market and its vacancy rates?

Government affordable housing initiatives primarily support demand in lower price segments, providing limited relief for the mid to high-end condo oversupply affecting most developers.

Current policy discussions include implementing vacancy taxes specifically designed to reduce speculative holding and encourage more balanced supply and demand dynamics. These potential measures aim to discourage investors from keeping units vacant while waiting for capital appreciation.

Proposed policy interventions such as foreign ownership restrictions and limitations on property flipping are under consideration to address both oversupply and speculative behavior in the condo market. However, implementation timelines and specific details remain uncertain as of September 2025.

Existing policies that encouraged foreign investment and urban development may have inadvertently contributed to the current oversupply situation by incentivizing large-scale condo projects without sufficient demand analysis.

The government's focus on affordable housing doesn't directly address the structural issues in the condo market, where most problems exist in price ranges above typical affordable housing thresholds.

What impact does the economy, such as inflation or recession, have on condo demand?

Economic uncertainty and inflation significantly moderate demand for condos, particularly in locations outside prime urban cores where buyer confidence remains weak.

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.

Recent interest rate cuts have provided slight market support, but broader economic uncertainty continues to limit significant recovery in condo sales and absorption rates. Inflation particularly affects construction costs, pushing developer prices higher while simultaneously reducing buyer purchasing power.

Slowed economic growth impacts employment and income stability, making potential buyers more cautious about taking on large property loans for condo purchases. Consumer confidence in property investment remains subdued due to concerns about future economic performance and property value appreciation.

The economic environment creates a challenging cycle where developers need higher prices to maintain margins amid rising costs, while buyers become increasingly price-sensitive due to economic pressures.

Currency fluctuations also affect foreign buyer demand, with periods of currency weakness potentially reducing international investment in Malaysian condos while strengthening periods may increase foreign interest.

Are there issues with the quality or location of these condos that contribute to vacancies?

Significant mismatches exist between developer-offered amenities and actual buyer preferences, with many condos featuring expensive facilities that target buyers don't value or want to pay for.

Location and transportation access represent critical factors in absorption rates, with poorly connected or remote developments struggling most to attract buyers and tenants. Many new condo projects are located in areas with limited public transportation access or long commute times to major employment centers.

Build quality inconsistencies affect buyer confidence, with some empty developments perceived as less attractive due to design standards, construction quality, or developer reputation issues. The rapid pace of development has sometimes compromised attention to quality control and buyer satisfaction.

Parking availability, maintenance costs, and facility management quality influence buyer decisions significantly, with some developments failing to meet buyer expectations in these practical areas.

Unit sizes and layouts often don't match actual living needs of target buyers, with many condos designed for generic appeal rather than specific market requirements, contributing to poor sales performance.

How do the amenities offered in these condos compare to what people actually want?

Developers frequently include expensive amenities like sky lounges, multiple swimming pools, and extensive gym facilities that significantly increase property prices without adding corresponding value for most buyers.

1. **High-maintenance facilities** - Infinity pools, elaborate landscaping, and premium clubhouse facilities that create ongoing high maintenance fees2. **Luxury features targeting wrong market** - Premium amenities designed for wealthy buyers in developments priced for middle-income purchasers3. **Underutilized common areas** - Large multi-purpose halls and meeting rooms that residents rarely use but continue paying for through maintenance fees4. **Excessive security features** - Over-engineered security systems that add costs without providing proportional value to residents5. **Location-inappropriate amenities** - Resort-style facilities in urban locations where residents prioritize convenience over leisure features

Most Malaysian buyers prefer practical amenities like adequate parking, reliable elevators, good internet connectivity, and efficient air conditioning over elaborate facilities that drive up purchase prices and monthly maintenance costs.

The amenity mismatch contributes to poor value perception among buyers, who often feel they're paying for features they don't need while missing practical elements they actually value in daily living.

It's something we develop in our Malaysia property pack.

Are there cultural or social factors that contribute to high vacancy rates in condos?

Malaysian cultural preferences strongly favor landed property ownership over condo living, with many families viewing landed homes as more prestigious and providing better long-term value.

Traditional family structures and multi-generational living arrangements often require more space and privacy than typical condo units provide, making landed properties more suitable for local family needs. The cultural emphasis on property as a family legacy also favors landed properties that can be more easily expanded or modified over time.

Social expectations about homeownership and investment returns fuel speculative buying behavior, where property is viewed primarily as an investment vehicle rather than housing for actual use. This mindset encourages holding vacant units for capital appreciation rather than generating rental income.

Urban lifestyle trends toward high-rise living have not fully penetrated beyond core middle to upper-income groups in major cities, limiting the potential buyer base for condo developments. Many Malaysians still associate condo living with temporary housing rather than permanent family homes.

Community preferences for privacy and individual control over living spaces conflict with the shared facility management and communal living aspects inherent in condo developments, contributing to resistance among traditional buyers.

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.

Sources

1. The Edge Malaysia
2. VivaHomes Malaysia
3. InvestAsian
4. BambooRoutes Malaysia Market Outlook
5. Free Malaysia Today
6. JLL Malaysia Market Report
7. New Straits Times
8. Global Property Guide