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Malaysia's property market shows signs of oversupply in specific segments, particularly high-rise apartments and mid-to-high-end residential units in urban areas.
As of September 2025, approximately 100,000 residential units remain unsold across Malaysia, with developers reducing new launches by 46% to address this imbalance. While the overall economic fundamentals remain strong with GDP growth forecast at 4.4-4.5% annually, certain property types and regions face more acute oversupply challenges than others.
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Malaysia's property market faces oversupply in high-rise and mid-to-high-end segments, with 100,000 unsold units as of Q1 2025.
Economic growth remains resilient at 4.4-4.5% annually, supporting long-term demand despite short-term supply-demand mismatches.
| Property Segment | Supply Status | Key Metrics |
|---|---|---|
| High-rise Apartments | Oversupply | Highest unsold inventory |
| Affordable Housing (< RM300k) | Balanced | Over 50% of sales volume |
| Landed Properties | Stable demand | Better absorption rates |
| Industrial/Logistics | Strong demand | Driven by e-commerce growth |
| Office Space | High vacancy | KL vacancy rate: 15.7% |
| Commercial Retail | Oversupply | Persistent high vacancy |
| Serviced Residences | Oversupply | Concentrated in urban centers |
What is the current property supply situation in Malaysia compared to demand?
Malaysia currently faces an oversupply situation with approximately 100,000 residential units remaining unsold as of Q1 2025.
The overhang of completed but unsold units (properties unsold for 9+ months) stood at 23,515 units in Q1 2025, reaching levels similar to those seen in 2017. This indicates a significant supply-demand imbalance, particularly outside the affordable housing segment where most buyers are concentrated.
Developers have responded by reducing new launches by 46% in early 2025 to address this oversupply issue. Sales rates for new launches remain modest, especially for high-rise projects in urban areas. The strongest demand continues to be for affordable housing priced below RM300,000, which accounts for over half of all residential sales transactions.
The mismatch is most pronounced in mid-to-high-end residential units, where developers have focused on profitable projects that don't align with actual market demand. This oversupply is particularly acute in high-rise apartments and serviced residences located in major urban centers.
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How has Malaysia's property market performed over the last 5 to 10 years?
Malaysia's property market has experienced a complete cycle from boom to correction to recovery over the past decade.
The market went through a speculative bubble that peaked around 2015, driven by over-liberal mortgage lending and excessive investor speculation. This period was characterized by unsustainable price increases and overbuilding, particularly in urban areas. The bubble ended when market reforms and more prudent lending practices were implemented.
Since the correction, the market has shown remarkable resilience. Property prices have grown modestly but steadily, with national house prices increasing by 2-5% annually. The market reached record transaction volumes in 2024, though momentum cooled slightly in 2025. Price projections show a compound annual growth rate (CAGR) of 6.6% through 2033.
Recent years have demonstrated particular strength in landed properties and industrial/logistics segments, fueled by e-commerce growth and infrastructure investment. However, high-rise apartments in urban areas continue to face oversupply challenges that originated from the earlier speculative period.
The post-pandemic recovery has been broad-based, with improved transactional volumes across most segments, indicating restored market confidence and stability.
What are the main factors contributing to Malaysia's potential property glut?
Several interconnected factors have created the current oversupply situation in Malaysia's property market.
The primary driver is developers' strategic preference for profitable high-rise and mid-to-high-end projects, which diverges significantly from actual mass-market demand. This focus on profit margins has been intensified by rising construction costs, pushing developers toward higher-value developments that may not reflect genuine buyer needs.
Historical speculation, previously encouraged by schemes like Developer Interest Bearing Scheme (DIBS) before its abolition, led to excessive new supply creation in the 2010s. This speculative building created a supply overhang that the market is still absorbing.
Urban migration patterns and infrastructure-led expansions sometimes outpace organic demand growth, especially in satellite cities and new urban growth zones. This creates pockets of oversupply in areas where development preceded actual population and economic growth.
Economic uncertainties and affordability constraints limit the expansion of the buyer pool, particularly among first-time buyers who represent a significant portion of potential demand. When combined with the supply-demand mismatch, this creates a self-reinforcing cycle of oversupply in certain segments.
What is Malaysia's population growth forecast for the next 5 to 10 years?
Malaysia's population is projected to reach 36.5 million by 2030, up from approximately 34.2 million in 2024.
However, the annual population growth rate is expected to slow significantly, declining to just 0.5% by the 2030s. This represents a substantial deceleration from historical growth rates and has important implications for long-term property demand. The population is forecast to peak at approximately 42.38 million by 2059, after which it will begin to decline.
The demographic composition is also changing, with the Chinese community expected to shrink to under 15% of the national population by 2060, while other ethnic groups maintain or increase their proportional representation. This demographic shift may influence regional property demand patterns and buyer preferences.
Despite the slowing growth rate, the sustained population increase through 2030 provides a fundamental support base for property demand. Combined with continued urbanization trends, this demographic growth underpins long-term market stability, even as short-term supply-demand mismatches persist in certain segments and locations.
The aging population trend also suggests potential shifts in property type preferences, with increased demand for age-appropriate housing and healthcare-related real estate facilities.
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What government policies are currently impacting Malaysia's property market?
The Malaysian government has implemented several key policies that directly influence property market dynamics and oversupply management.
Affordable housing initiatives remain a central focus, with programs like PR1MA, Residensi Wilayah, and Rumah Selangorku continuing to promote accessible homeownership. These schemes specifically target the affordable housing segment where demand remains strongest, helping to address the supply-demand mismatch in lower-price brackets.
Macroprudential measures include continued monitoring of household leverage and debt-to-income ratios to prevent the formation of new speculative bubbles. The government actively releases overhang statistics and transaction data to help tune monetary and fiscal policies for market stability.
Recent tax policy changes include increased Sales and Service Tax (SST) for construction of non-residential properties as of July 2025, while residential construction remains exempt. This policy distinction helps support residential development while potentially cooling commercial oversupply.
Infrastructure investment continues through annual budgets, with emphasis on high-value industry growth, ESG principles, and foreign direct investment attraction. These investments support long-term economic fundamentals that underpin property demand, while also potentially creating new development opportunities in emerging corridors.
The government's active oversight approach includes regular market monitoring and policy adjustments to address regional imbalances and segment-specific oversupply issues.
How is Malaysia's economic performance affecting property demand?
Malaysia's economy continues to demonstrate resilience with GDP growth forecast at 4.4-4.5% annually in 2025, providing a stable foundation for property demand.
This economic growth is primarily driven by strong domestic consumption, a stable labor market, and ongoing infrastructure investment. The diversified economic base, spanning manufacturing, services, and emerging digital sectors, creates broad-based employment opportunities that support housing demand across different income levels.
The stable economic environment has maintained consumer confidence, contributing to the record transaction volumes achieved in 2024. Employment stability and income growth enable more Malaysians to consider property purchases, particularly in the affordable housing segment where demand remains robust.
Foreign direct investment continues to flow into Malaysia, particularly in technology and manufacturing sectors, creating employment opportunities that generate housing demand. The establishment of data centers, logistics facilities, and manufacturing plants in areas like Johor and Selangor creates localized demand for both residential and commercial properties.
However, global economic uncertainties and inflation pressures on construction costs continue to influence market dynamics. Rising building costs push developers toward higher-value projects, potentially exacerbating the supply-demand mismatch in affordable housing segments.
Overall, the resilient economic performance provides fundamental support for property demand, though it hasn't been sufficient to fully absorb the existing oversupply in certain market segments.
Which regions in Malaysia are most affected by property oversupply?
| Region | Oversupply Status | Key Characteristics |
|---|---|---|
| Greater Kuala Lumpur | High oversupply | High-rise apartments, office space |
| Johor (Iskandar) | Significant oversupply | Mixed development projects |
| Penang (urban areas) | Moderate oversupply | High-rise residential units |
| Selangor (industrial) | Strong demand | Logistics and data centers |
| Klang Valley (office) | High vacancy | Commercial office space |
| Klang Valley (retail) | Persistent oversupply | Shopping centers, retail units |
| Secondary cities | Varied conditions | Location-dependent demand |
What are the trends in foreign investment in Malaysia's real estate market?
Foreign investment in Malaysia's real estate market shows strong sectoral variation, with industrial properties attracting the most significant international interest.
Tech giants and multinational corporations are heavily investing in industrial and logistics real estate, particularly in data centers and logistics parks located in Johor and Selangor. This investment surge is driven by Malaysia's strategic position in Southeast Asia, competitive operating costs, and growing digital economy infrastructure requirements.
Residential real estate continues to attract foreign buyers due to Malaysia's relatively low property prices compared to regional markets and stable rental yields. However, transaction volumes remain modest due to foreign ownership restrictions, additional taxes on foreign buyers, and regulatory compliance requirements that add complexity to international purchases.
The Malaysia My Second Home (MM2H) program, despite recent modifications and tightened requirements, continues to attract some foreign residential investment, though at reduced levels compared to previous years. Most foreign residential investment now focuses on higher-value properties that meet minimum purchase thresholds.
Commercial property investment from foreign sources remains selective, with investors particularly cautious about office and retail segments due to high vacancy rates and oversupply concerns. Foreign investment tends to concentrate on prime locations with established tenant bases and stable income streams.
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Which property types are most likely to be affected by oversupply?
High-rise apartments and serviced residences in major urban centers face the most acute oversupply challenges in Malaysia's current market.
High-rise residential developments, particularly those in the mid-to-high-end price segments, represent the largest portion of unsold inventory. These properties often target investor buyers rather than owner-occupiers, creating a more volatile demand base that's sensitive to market conditions and rental yield expectations.
Serviced residences and mixed-development projects in central business districts show persistent oversupply, as developers built these expecting strong investor and corporate demand that hasn't materialized at projected levels. The concentration of such developments in urban centers has created intense competition and extended absorption periods.
Commercial office space continues to experience high vacancy rates, with Kuala Lumpur recording approximately 15.7% vacancy in 2025, down slightly from 16.7% the previous year but still indicating oversupply. Purpose-built office buildings in secondary locations face particular challenges in attracting tenants.
Retail commercial properties in shopping centers and standalone retail units show persistent oversupply, driven by changing consumer behaviors, e-commerce growth, and oversupply from previous development cycles. This segment faces structural challenges beyond cyclical oversupply issues.
In contrast, affordable landed homes below RM300,000 and industrial/logistics properties show balanced or strong demand conditions, with these segments less affected by current oversupply concerns.
What are the current vacancy rates for different property types in Malaysia?
Vacancy rates across Malaysia's property sectors reveal significant variations, with commercial segments showing the highest rates of unoccupied space.
Purpose-built office buildings in Kuala Lumpur recorded a vacancy rate of approximately 15.7% in 2025, representing a slight improvement from 16.7% in the previous year. While this shows some market stabilization, it still indicates substantial oversupply in the commercial office sector. Secondary office locations and older buildings face even higher vacancy rates.
Retail commercial properties continue to experience persistent high vacancy rates, though specific percentages vary significantly by location and property type. Shopping centers in prime locations maintain better occupancy than standalone retail units or centers in secondary locations.
Residential overhang statistics show that 23,515 completed units remained unsold for 9+ months as of Q1 2025, with the total unsold inventory reaching approximately 100,000 units. This represents a significant portion of recent residential supply, particularly affecting high-rise and serviced residence segments.
Industrial and logistics properties demonstrate much lower vacancy rates, with strong absorption driven by e-commerce growth, manufacturing expansion, and foreign investment in data centers and distribution facilities. These properties often achieve pre-leasing or rapid absorption upon completion.
The rental market shows signs of landlord competition, with tenants having increased choice and property owners needing to offer competitive rates and quality to attract occupants, indicating underlying oversupply pressure even in occupied properties.
How is Malaysia's rental market performing amid oversupply concerns?
Malaysia's rental market presents a paradox of rising rents alongside oversupply conditions, indicating complex underlying dynamics.
National average monthly rent reached RM2,052 in 2025, representing a five-year high despite oversupply concerns in certain property segments. This rent increase reflects strong demand for quality properties in desirable locations, while oversupply mainly affects specific segments and areas rather than the entire rental market.
Rental growth has now stabilized in major cities after the recent increases, suggesting the market has reached a new equilibrium. However, this stabilization occurs alongside increased tenant choice, creating a more competitive environment for landlords who must offer quality and value to maintain occupancy.
The rental market demonstrates clear segmentation, with prime properties in established areas commanding stable or increasing rents, while properties in oversupplied segments or secondary locations face downward pressure on rental rates and longer vacancy periods between tenants.
Landlords increasingly need to invest in property upgrades, offer flexible lease terms, or provide additional services to attract and retain tenants. This trend particularly affects owners of older high-rise units competing with newer developments in oversupplied areas.
Overall, the rental market remains functional but competitive, with tenants benefiting from increased options and landlords facing pressure to differentiate their offerings in an increasingly supply-rich environment.
What strategies are developers using to address the property glut?
Malaysian developers have implemented several strategic responses to address oversupply challenges and adapt to current market conditions.
1. **Dramatic reduction in new launches** - Developers have cut new project launches by 46% in early 2025, focusing on clearing existing inventory before introducing additional supply to the market.2. **Portfolio diversification** - Many developers are pivoting away from high-rise residential projects toward affordable housing segments, industrial developments, and specialized logistics facilities that show stronger demand.3. **Enhanced buyer incentives** - Developers now offer more flexible payment plans, extended completion periods, and value-added packages to attract genuine home buyers rather than speculative investors.4. **Project postponement and redesign** - Marginal projects are being postponed or redesigned to better match current market demand, with some developers switching from high-end to affordable housing concepts.5. **Strategic market repositioning** - Focus has shifted toward PR1MA and government-supported affordable housing schemes where demand remains robust and government backing provides additional security.6. **Geographic reallocation** - Developers are redirecting resources toward emerging growth areas and away from oversupplied urban centers, particularly focusing on industrial zones with confirmed foreign investment.7. **Product specification adjustments** - New developments increasingly target owner-occupiers rather than investors, with unit sizes and specifications designed for actual living rather than rental investment.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 faces genuine oversupply challenges in specific segments, particularly high-rise apartments and mid-to-high-end residential units in urban areas.
However, strong economic fundamentals, continued population growth, and developer adaptations suggest the market is working through these imbalances, with opportunities remaining in affordable housing and industrial sectors.
Sources
- Malaysia Property Market Outlook - BambooRoutes
- Property Market Adjustments in Early 2025 - Star Property
- NAPIC Malaysia Property Market Q1 2025 - IQI Global
- Malaysia Property Price History - Global Property Guide
- Banking on Resilient Domestic Demand - Alliance Bank
- Malaysia Property Market Rebounds - Asia Property Awards
- Housing Supply Mismatch - New Straits Times
- New Housing Projects Decline - Henry Butcher Penang
- Malaysia Property Market Outlook 2H 2025 - Met Property
- Malaysia Budget 2025 Real Estate Highlights - JLL