Budget 2026: Five property market shifts to watch

As Budget 2026 heads to Parliament on Oct 10, expectations are high that it will deliver more than just fiscal adjustments.

For Malaysia’s property sector, this budget could mark a turning point in addressing long-standing challenges of housing oversupply, affordability gaps, and mismatched demand.

1. Overhang reduction: data-driven decisions needed 

Fiabci Malaysia has sounded the alarm: the real issue is not how many homes are built, but whether they match genuine buyer demand.

According to the National Property Information Centre’s (Napic) Property Market Report 2024, the country’s residential overhang improved but remains a structural drag.

In 2024, 23,149 completed units remained unsold, worth RM13.94 billion, a 10.3% decline in volume and a 21.2% decline in value compared to 2023 (25,816 units, RM17.68 billion).

The overhang problem is concentrated in urban centres.

Kuala Lumpur led with 4,234 units worth RM3.38 billion, followed by Johor (2,964 units; RM2.89 billion), Perak (2,844 units), and Penang (2,796 units; RM2.09 billion).

High-rises dominate the glut: condominiums and apartments made up nearly 60% of the overhang (13,900 units).

Faizul Ridzuan, CEO of FAR Capital, highlights the mismatch bluntly, “The real crisis isn’t under-supply or over-supply, it’s mis-supply. We don’t have a shortage of homes; we have a shortage of the right homes in the right locations at the right price points. Until developers and the government are guided by hard data rather than guesswork, the overhang will keep repeating itself.”

2. Build-then-sell: rumours and realities

Speculation is rife that Budget 2026 may revive the build-then-sell (BTS) model, which requires developers to complete projects before selling.

Proponents see it as a buyer safeguard, but it also raises financing hurdles for developers.

Faizul argues that BTS can work but only if policymakers provide the right foundation: “If Malaysia is serious about BTS, we need to back it with transparent demand analytics and financing mechanisms that don’t cripple smaller developers. Done right, BTS could rebuild trust between buyers and developers, but done halfway it will simply choke project pipelines and dramatically reduce supply and competition”.

3. Rent-to-own: a model that never took off

Rent-to-own (RTO) schemes have been touted as an affordability solution, but history tells a different story. While available for several years, Maybank was the only bank to actively practise and promote RTO through its HouzKEY programme, yet take-up has remained weak. As a result, the rest of the banks don’t seem to be keen on driving the initiative. 

If Budget 2026 revisits RTO, the challenge will be to get more banks to participate and not allow RTO to become a dumpsite for property developers to unload unwanted, over-priced inventory. 

RTO will work when the banks combine RTOs with step-up financing at early years of property ownership, as this will dramatically increase affordability. 

4. Legislative shifts: developers and councils under pressure

Recent amendments to the Solid Waste and Public Cleansing Management Act, Street, Drainage and Building Act and Local Government Act signal a tightening of rules for both developers and councils.

Expect Budget 2026 to align funding and enforcement to these laws, ushering in stricter compliance, ESG-linked requirements, and improved service delivery at the local government level.

5. Affordable housing: incentives with tighter definitions

Targeted incentives for affordable housing grants, tax relief and financing support are likely. 

Crucially, definitions of “affordable” may be recalibrated to better reflect actual household income levels, ensuring subsidies reach the segments most in need.

In Singapore, the definition of affordable housing is more in tune with market demands hence why it sells out.

They have included 1, 2, 3 and even 4 bedrooms as part of their affordable housing, while we are still stuck with minimum 2 bedrooms as our version of affordable housing. 

Looking ahead: a market reset or more of the same?

Malaysia’s property sector stands at a crossroad.

With 23,149 unsold units still in the system and affordability challenges mounting, Budget 2026 may decide whether the market undergoes a true reset or whether familiar problems linger.

For buyers, it could mean greater protection, transparency, and access to genuinely affordable housing.

For developers, however, the message is clear: the era of building without data is ending.

Whatever emerges on Oct 10, one truth is clear: Malaysia’s housing future depends not on how much is built, but on how closely new supply matches real demand.