Malaysia's Property Market Faces Growing Imbalance Between Supply and Demand

Strategic Insights -

Malaysia's residential property market continues to face significant challenges, with developers favoring mid- to high-end units while most Malaysians, particularly those in low- and middle-income groups, struggle to afford suitable housing. The issue is further complicated by the lack of transparency in the property market, with buyers often being presented with a distorted view of the actual state of the market.

Key Takeaways:

  • The current property market in Malaysia is characterized by a significant supply of mid- to high-end units, while the demand for affordable housing remains high, particularly among low- and middle-income groups.
  • The data shows that a substantial volume of completed but unsold properties, mainly in the mid- to high-end segment, such as serviced apartments and condominiums in urban centers, remain unsold.
  • The housing market is suffering from a mismatch between effective demand, defined as what households can afford, and the type of housing being supplied.
  • The prices of houses have risen steadily over the years, outpacing income growth, making homes unaffordable for a significant share of the population.
  • In 2022, Malaysia's affordable median house price was RM228,168, three times the median annual household income. Only 10.7% of new launches were priced below RM200,000.
  • Between 2020 and 2023, most transactions, 709,283 units, were for homes priced below RM500,000. Properties under RM300,000 made up 56.2% of total sales.
  • The market has consistently scored above 3.0 points on the housing affordability index, signifying "seriously unaffordable" conditions.
  • The supply is not catering to the realities on the ground, and new project approvals are continuing unabated.
  • Developers often back strong financing or public-private partnerships, which leads to confidence in long-term market corrections or sustained demand.
  • However, persistent affordability issues raise justified questions about such optimism.

Statistics:

  • RM228,168: Malaysia's affordable median house price in 2022, three times the median annual household income.
  • 10.7%: Percentage of new launches priced below RM200,000 in 2022.
  • 24.7%: Percentage of launches in 2022 priced above RM500,000.
  • 709,283 units: Total transactions between 2020 and 2023 for homes priced below RM500,000.
  • 53%: Percentage of units priced below RM300,000 accounted for 53% of total sales in 2023.
  • 25,816: Number of overhang units recorded in the fourth quarter of 2023, with 70.6% priced above RM300,000.
  • 3.0: Housing affordability index score, signifying "seriously unaffordable" conditions.

Sources:

  • Suraya Ismail, Director of Research, Khazanah Research Institute (KRI)
  • Tan Wee Tiam, Executive Director, Olive Tree Property Consultants
  • Business Times
  • Napic (National Property Information Centre)