Malaysia’s housing market remained sluggish in the first half of 2025, weighed down by unsold affordable homes and weakening developer confidence, according to the Real Estate and Housing Developers’ Association (Rehda).

At the release of its Property Industry Survey for 1H2025 and Market Outlook for 2H2025 and 1H2026, Rehda highlighted a persistent mismatch between housing supply and buyer affordability. Datuk NK Tong, Rehda’s immediate past president, said unsuitable locations and price-income gaps were the primary reasons behind unsold units.

“Under current rules, developers must allocate up to 50% of units for affordable housing regardless of location. While the policy is well-intentioned, this blanket approach often disconnects supply from demand,” Tong explained. Data from the National Property Information Centre (Napic) showed that affordable homes made up 20.7% of Malaysia’s unsold units in Q1 2025—the largest category of residential overhang.

Developer sentiment weakens

The survey revealed a sharp fall in market confidence. Only 19% of 187 senior executives expressed optimism about mid-2025 prospects, compared with 51% six months earlier. Confidence in sales also slumped to 19%.

Rehda president Datuk Ho Hon Sang cited rising construction costs, labour shortages, financing hurdles and uncertainty over the upcoming sales and service tax (SST) as major concerns. Reflecting the cautious mood, just 41% of developers plan to launch new projects in the second half of the year, down from 56% previously.

Financing challenges and loan rejections

The report also noted a 26% decline in new residential launches, with sales rates for new units falling sharply to 24% from 55% in late 2024. While landed 2- and 3-storey terraces continued to perform relatively better, overall demand remained muted.

Financing remained a key obstacle, with 71% of developers citing difficulties in securing end-financing for buyers. Loan rejection rates were highest for homes priced between RM300,001 and RM500,000, a segment targeted as affordable housing. More than half of developers held unsold completed units, mostly serviced residences priced above RM1 million or within the RM500,001–RM600,000 bracket.

Rising costs and tax worries

Although residential construction is exempt from the SST, developers flagged complications in separating taxable labour costs from non-taxable materials in mixed contracts. Rehda has proposed a simplified flat-rate approach and is engaging authorities to resolve the issue. Meanwhile, 74% of respondents reported higher business costs, squeezing profit margins further.

Outlook ahead

For the second half of 2025, developers are planning 24,427 new units—7,608 landed and 16,819 strata—but expect modest take-up rates of 25%–50% after six months.

The overall outlook for the next 12 months is described as neutral, with a slight uptick in optimism for early 2026. Tong cautioned, however, that sentiment may shift once the full impact of the SST becomes clearer.

Rehda reiterated its call for the revival of the Home Ownership Campaign to stimulate demand and reaffirmed its members’ commitment to delivering quality, affordable housing despite ongoing challenges.

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