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- Tong noted that while the mandatory afforable housing quota is well intentioned, a blanket requirement often results in a disconnect between supply and demand.
KUALA LUMPUR (Sept 22): Malaysia’s housing market continued to face subdued conditions in the first half of 2025, with unsold affordable homes remaining a key concern, according to the Real Estate and Housing Developers’ Association (Rehda) here on Friday.
At a media briefing on the Rehda Property Industry Survey for 1H2025, and Market Outlook for 2H2025 and 1H2026, Rehda’s immediate past president, Datuk NK Tong, stated that unsuitable locations and a mismatch between property prices and local income levels are the main factors driving the high proportion of unsold affordable homes in Malaysia.
Under current rules, developers must allocate up to 50% of units for affordable housing regardless of location. Tong noted that while the policy is well intentioned, a blanket requirement often results in a disconnect between supply and demand.
“If the location is not attractive, or if people in the area cannot match the selling price, there is a high possibility that these units become unsold,” he added.
Data from the National Property Information Centre (Napic) showed affordable homes accounted for 20.7% of unsold units in the first quarter of 2025, the largest category within the residential overhang.
Meanwhile, developer confidence in Malaysia’s property market has weakened sharply. Its latest survey of 187 senior executives found only 19% optimistic about market prospects in mid-2025, down from 51% six months earlier, while confidence in sales dropped to the same level from 52%.
Rehda president Datuk Ho Hon Sang said rising construction costs, labour shortages, financing challenges and the impending sales and service tax (SST) are key concerns.
Reflecting the softer sentiment, just 41% of developers plan to launch new projects in the second half of 2025—down from 56% earlier—while 62% have no plans to buy land, reversing the 70% which previously intended to expand.
Loan rejection highest for affordable housing
The Rehda survey reported a 26% decline in new residential launches compared with the previous period, while the sales rate for new units fell to 24% from 55% in late 2024.
Landed 2- and 3-storey terraces remained the best-performing segment, but overall activity was muted.
Developers also cited persistent financing challenges, with 71% reporting difficulties related to end-financing for buyers, with loan rejection rates highest for homes priced between RM300,001 and RM500,000.
More than half of respondents indicated they were holding unsold completed units, mainly serviced residences priced above RM1 million or within the RM500,001–RM600,000 range.
Rising costs and tax concerns
Uncertainty over the implementation of the SST on construction services for commercial projects added to developers’ caution.
Although residential construction is exempt, separating taxable labour costs from non-taxable materials in mixed contracts has proven complex. Rehda has proposed a simplified flat-rate calculation and is in discussions with the authorities.
Developers also reported narrowing profit margins and rising operating expenses, with 74% noting higher business costs.
Less than half of developers plan new launches
For the second half of 2025, 41% of developers plan to launch new projects, comprising 7,608 landed units and 16,819 strata units, but most expect slower sales with take-up rates of only 25%–50% after six months.
The overall outlook for the next 12 months is neutral, with a slight increase in optimism for the first half of 2026. However, this could change.
"This optimism may change in the future as the impact of the SST becomes more apparent and defined. Nonetheless, whatever the future holds, developers will remain cautious," Tong concluded.
Rehda reiterated its call for the return of the Home Ownership Campaign to stimulate demand and affirmed its members’ commitment to providing quality, affordable housing despite ongoing economic and tax-related uncertainties.
As Penang girds itself towards the last lap of its Penang2030 vision, check out how the residential segment is keeping pace in EdgeProp’s special report: PENANG Investing Towards 2030.
