Analysis Snapshot: Malaysia Property Market H1 2024

Malaysia's property market is soaring, hitting a five-year high in the first half of 2024 with a remarkable 23.8% growth to RM105.65 billion. This surge, reported by Napic, signals a strong recovery and renewed investor confidence. This impressive growth was driven by a combination of supportive government policies, increased demand across various property sectors, and a stable economic environment.

Compared to the first half of 2023, the 23.8% increase demonstrates that the market is gaining strength, with more people investing in properties across Malaysia. This reflects the resilience of the market, underpinned by government support and fiscal policies aimed at encouraging homeownership and investment.

Transaction Growth Across Sub-sectors

The overall market growth in the first half of 2024 was driven by solid performances across all property sub-sectors. The RM105.65 billion in property transactions resulted not only from increased demand for residential properties but also significant contributions from the commercial, industrial, agricultural, and development land segments.

Residential Properties

Transactions in the residential sector reached RM49.43 billion, a 10.4% increase from the first half of 2023. For first-time buyers, this means competition for affordable homes is heating up, but government schemes are helping ease entry into the market.

The demand for homes, particularly in suburban and more affordable regions, was a major driver. The expansion of infrastructure in suburban areas and the growing trend of remote work have increased demand for homes outside city centers.

Moreover, government programs designed to promote homeownership, such as the Housing Credit Guarantee Scheme, made residential properties more accessible to first-time homebuyers, thus fueling growth.

Commercial Properties

The commercial property segment saw the highest year-on-year growth, with transaction values rising by 41.5%, totaling RM23.71 billion. This dramatic increase can be attributed to the recovery of business activities as the country continued to emerge from the pandemic.

Retail and office spaces became more attractive to investors as businesses resumed in-person operations. The expansion of e-commerce also played a role, with commercial properties, particularly warehouses and logistics hubs, being in high demand.

Industrial Properties

Malaysia's industrial property market benefited from ongoing growth in manufacturing and logistics, posting a 23.4% increase in transaction value, reaching RM13.50 billion.

The rise of e-commerce, coupled with strong foreign investment in the industrial sector, contributed to this steady demand. This sector continues to attract both local and international investors, as Malaysia positions itself as a regional manufacturing and logistics hub.

Agricultural Properties

Agricultural land transactions saw a substantial rise of 37.8%, totaling RM9.73 billion. The agricultural sector’s strong performance can be linked to increased investments in agribusiness, particularly palm oil and other cash crops, as well as rising land prices in rural areas.

There has been a growing interest in agricultural land not only for farming but also for eco-tourism and sustainable development projects.

Development Land

Development land experienced the most significant percentage growth, surging by 59.3% to RM9.28 billion. This signals optimism among developers who are positioning themselves for future projects in residential, commercial, and industrial developments.

With Malaysia’s urbanization continuing at a steady pace, developers are keen to acquire land for upcoming projects that cater to the growing population and evolving infrastructure needs.

Transaction Volume

The total number of property units sold in 1H2024 also saw an upward trend, with:

• Total units sold: 198,906 (up 8% from 184,140 units in 1H2023)
• Residential units: 121,964 (6.1% increase)
• Commercial units: 21,537 (22.4% increase)
• Agricultural units: 38,827 (6.5% increase)
• Industrial units: 3,822 (2.3% increase)
• Development land units: 12,756 (12.1% increase)

This reflects growing confidence among buyers, aided by favorable market conditions such as low interest rates and government incentives for first-time buyers.

Residential Units

121,964 residential units were sold, an increase of 6.1%. The majority of these transactions were concentrated in affordable housing sectors and suburban developments, as rising urban property prices made city living less accessible for many buyers. The continued focus on affordability and housing credit schemes helped drive these transactions.

Commercial Units

The commercial sector experienced a 22.4% rise in units sold, totaling 21,537 units. Increased demand for office space and retail outlets, particularly in urban areas and emerging commercial hubs, fueled this growth. This reflects business confidence returning, as more companies looked to expand or relocate to prime commercial areas.

Industrial Units

Despite only a 2.3% increase in the volume of industrial units sold (3,822 units), this sector remains vital in terms of transaction value, given the typically larger size and higher prices of industrial properties.

Agricultural Units

A total of 38,827 agricultural units were sold, reflecting a 6.5% increase. This aligns with the broader trend of increased investment in agricultural land, as well as rising interest in land for sustainable development and eco-friendly projects.

Development Land Units

The number of development land transactions increased by 12.1%, reaching 12,756 units. This continued demand highlights the importance of land acquisition for future projects, particularly as developers look to capitalize on growth opportunities in key urban and suburban areas.

Government Support and Fiscal Policies

The Malaysian government’s active involvement in shaping the property market landscape during the first half of 2024 (1H2024) was instrumental in ensuring the sector's resilience and growth.

A variety of policies and fiscal measures helped stabilize the market, stimulating both demand and development. By focusing on key incentives, financial guarantees, and regulatory support, the government created an environment that attracted homebuyers and investors alike.

Housing Credit Guarantee Scheme

The scheme provided RM10 billion in guarantees to promote homeownership, particularly for lower- to middle-income groups. This initiative, combined with low borrowing costs, made it easier for first-time buyers to enter the market, boosting demand in the residential property sector.

Additionally, the program complemented other housing schemes focused on affordability, furthering the government's long-standing goal of ensuring more Malaysians have access to affordable housing.

Fiscal Policies and Monetary Stability

Monetary policy stability was essential in keeping the property market healthy. The Overnight Policy Rate (OPR) was maintained at 3%, ensuring affordable borrowing costs for property purchases.

This stability also provided predictability for both buyers and developers. Additionally, the government extended the stamp duty exemption for first-time homebuyers, reducing upfront costs and further encouraging transactions.

House Price Trends

In the first half of 2024, house prices in Malaysia continued to show moderate growth, as evidenced by the Malaysian House Price Index (MHPI), which rose to 218.7 points. The average home price now stands at RM471,918, representing a 0.9% increase compared to the previous year.

While this overall increase suggests stable growth in the housing market, the price trends were not uniform across the country or property types, indicating varying dynamics in different regions and segments of the market.

Kuala Lumpur: Decline in High-End Market

Kuala Lumpur, was among the few areas to witness a decline in house prices, recording a 0.8% decrease in the average price. This decline is primarily attributed to a softening demand in the high-end residential market, where the luxury segment has struggled to maintain the growth seen in past years.

Rising property prices in the city have led buyers to seek more affordable alternatives in the neighboring regions or suburban areas, driving down demand for premium housing in central locations.

The combination of higher supply and decreased demand in this market segment has led to the moderate price decline seen in Kuala Lumpur’s housing market.

Suburban Popularity: Semi-detached, Terrace, and Detached Homes

Outside the urban centers, semi-detached, terrace, and detached homes have continued to perform well, showing stable price growth across most states. The demand for landed properties remains strong, particularly in suburban areas, where these housing types are more affordable and offer larger living spaces.

Many homebuyers, especially families, are opting for properties in suburban townships that offer a better balance between price and space. These areas provide access to newer infrastructure, green spaces, and proximity to highways, making them more attractive for those seeking a higher quality of life at a lower cost compared to the city centers. The preference for suburban living has been further accentuated by the rise of remote working, which has reduced the necessity for daily commutes into urban centers.

High-rise Apartments

On the other hand, the market for high-rise apartments has experienced a slight price decline, primarily due to oversupply in key urban centers. Despite being a popular option for young professionals and first-time buyers, particularly in cities like Kuala Lumpur and Penang, the large number of newly completed high-rise units has outpaced demand, leading to a correction in prices.

The growing supply of high-rise apartments, combined with increasing affordability challenges for potential buyers, has put downward pressure on prices. For example, many of these units were developed during Malaysia's real estate boom period, but as economic conditions shifted, so did buyer priorities. The COVID-19 pandemic further accelerated the preference for larger, landed homes, contributing to weaker demand for high-rise apartments.

Overhang and Unsold Units

One of the main challenges facing the Malaysian property market is the issue of unsold properties, particularly in the residential sector.

Completed but Unsold Properties (Overhang Units)

The number of completed but unsold residential properties declined to 22,642 units, valued at RM14.24 billion. While this represents an improvement, the issue of unsold affordable homes. The majority of these unsold properties are concentrated in the affordable housing category, priced below RM300,000.

This is a critical threshold in Malaysia, as affordability remains a key factor for many potential homeowners, particularly first-time buyers and low-to middle-income families.

Despite government initiatives aimed at encouraging homeownership through programs like the Housing Credit Guarantee Scheme, the mismatch between the supply of homes at this price point and actual buyer demand persists.

Geographically, certain states have been more affected by the overhang issue than others, reflecting regional disparities in property demand and supply:

• Perak recorded the highest number of unsold properties, with 4,161 completed but unsold units. The state has seen a significant increase in property development over the past few years, particularly in suburban and semi-urban areas. However, a large portion of these developments have not been absorbed by the market, largely due to affordability concerns and mismatches between buyer expectations and property locations.
• Johor comes in second, with 3,219 unsold units. This is a significant reduction from previous periods but still highlights lingering challenges in this state. Johor’s property market has been highly active in recent years, especially with international investors looking to capitalize on its proximity to Singapore. However, high-end developments and oversupply have created a glut of unsold homes in certain areas, particularly in the luxury and high-rise apartment segments.
• Kuala Lumpur, Malaysia’s capital, recorded 3,051 unsold units. The decline in overhang properties in the city reflects ongoing adjustments in the market, with developers focusing on smaller, more affordable units and shifting away from high-end luxury developments, which had previously contributed to the city's property overhang. However, rising land and construction costs continue to push prices higher, making affordability a significant challenge for middle-income buyers.

Unsold, Incomplete Units

There were 67,944 unsold but incomplete units, of which 57,934 were still under construction. Again, a majority of these units (53.86%) were priced below RM300,000, indicating a mismatch between supply and demand in the affordable housing market. This large inventory of unsold units is a point of concern,  indicating that these properties were targeted at the affordable housing segment.

The mismatch between supply and demand in the affordable housing sector is evident here. While government programs like the Housing Credit Guarantee Scheme (SJKP) aim to promote homeownership among lower-income groups, a significant proportion of affordable homes remain unsold, highlighting a disconnect between the type of homes being built and the actual needs of potential buyers.

This imbalance may stem from factors such as location, design, or financing constraints, as many prospective homeowners struggle with the overall cost of homeownership despite the relatively low price tag.

• Perak: The state recorded the highest number of unsold, incomplete units, totaling 11,376 units. This reflects both the aggressive development of affordable housing projects and potentially sluggish demand from buyers, particularly in rural and suburban areas. 
• Kuala Lumpur: Despite being the country’s economic hub, Kuala Lumpur had 9,837 unsold, incomplete units, a substantial number for a metropolitan area. This is partly due to an oversupply of high-rise apartments and luxury homes, which are less attractive to first-time buyers and lower-income groups. 
• Selangor: As one of the most populous states, Selangor had 8,534 unsold, incomplete units. Similar to Kuala Lumpur, Selangor’s property market has been marked by rapid development, but the focus on high-end homes and gated communities has contributed to a glut of unsold units. 

 

The Malaysian property market in H1 2024 demonstrated strong growth, with significant increases in both transaction value and volume across all sub-sectors. Government policies, such as the Housing Credit Guarantee Scheme and stamp duty exemptions, have played a key role in supporting this growth. However, challenges remain, particularly in addressing the overhang of unsold affordable homes and ensuring a better alignment between supply and demand.

As Malaysia's property market continues its strong performance, the second half of 2024 looks promising, particularly for the commercial and development land sectors. However, addressing the oversupply of affordable homes will be crucial for long-term stability. With government support and a stable economic environment, investors and buyers alike can look forward to more opportunities in the coming months.

Other Article:

• Overview of Malaysia Property Market Q1 2024
• Understanding Malaysia's OPR Impact 2024: What You Need to Know?
• Malaysia Budget 2024 Wishlist: Empowering First-Time Homebuyers for a Better Future!