Malaysia's Residential Property Market Analysis 2026

Malaysia's residential property market remains fundamentally resilient, with stable house prices underpinned by healthy demand and strong economic growth.

This extended Global Property Guide overview examines recent house price trends, demand and supply dynamics, and the longer-term outlook for Malaysia's housing sector.

Table of Contents

• Housing Market Snapshot
• House Price Variations
• Demand Highlights
• Supply Highlights
• Rental Market
• Mortgage Market
• Historic Perspective
• Socio-Economic Context

Housing Market Snapshot

In the third quarter of 2025, the nationwide house price index rose slightly by 0.1% from a year earlier, following year-on-year growth of 3.01% in Q2 2025, 3.54% in Q1 2025, 4.43% in Q4 2024 and 4.33% in Q3 2024, based on figures released by the Valuation and Property Services Department (JPPH). But when adjusted for inflation, house prices actually dropped by 1.39% over the same period.

Quarter-on-quarter, the house price index fell by 1.46% (-1.97% inflation-adjusted) in Q3 2025, its first q-o-q decline since Q3 2021.

Malaysia's house price annual change:

Malaysia's average house price stood at MYR 494,384 (US$121,560) in Q3 2025, up slightly by 0.1% from the same period in the prior year.

By property type:

• Terraced house prices rose slightly by 0.8% y-o-y to an average of MYR 479,882 (US$117,994) in Q3 2025. Yet, quarter-on-quarter, prices fell by 1.3% during the latest quarter.
• High-rise residential properties' average price was down by 2.6% y-o-y to MYR 375,421 (US$92,309) in Q3 2025. Likewise, on a quarterly basis, prices dropped 1.4% over the same period.
• Detached house prices were down slightly by 0.9% y-o-y to an average of MYR 661,458 (US$162,640) in Q3 2025. Quarter-on-quarter, detached house prices fell by 3.3% over the same period.
• Semi-detached house prices rose by 1.8% y-o-y but declined slightly by 0.9% q-o-q to reach an average of MYR 757,617 (US$186,284) in Q3 2025.

Demand remains healthy. In the third quarter of 2025, the total number of residential property transactions reached 66,766 units, up by 9.3% as compared to the previous quarter but down by 5.2% from the same period last year, based on figures released by the JPPH. This followed annual growth of 4% in 2024, 3% in 2023, 22.3% in 2022, and 3.9% in 2021 and a contraction of 8.6% during the onset of the Covid-19 pandemic in 2020.

Likewise, residential transaction value totalled MYR 28.51 billion (US$7 billion) in Q3 2025, up strongly by 14.6% from the previous quarter but down slightly by 0.6% from a year earlier. Prior to this, the value of residential transactions increased by 5.9% during 2024, after increasing by 7.1% in 2023, 22.6% in 2022, and 16.7% in 2021 and declining by 9% in 2020.

Though residential construction activity shows mixed results, in the first three quarters of 2025, the total number of housing starts for landed and high-rise residential buildings fell by 12.1% y-o-y to 64,843 units, following a strong growth of 20.6% in 2024, and an annual decline of 9.9% in 2023, according to figures released by JPPH. In contrast, housing completions rose strongly by 25.3% y-o-y to 69,303 units in Q1-Q3 2025, following annual increases of 9.7% in 2024 and 4% in 2023.

The unsold housing stock in Malaysia is increasing again. In the third quarter of 2025, the total residential supply overhang rose sharply by 30.5% y-o-y to 28,672 units, following annual declines of 10.3% during the whole year of 2024, 7% in 2023, and 24.7% in 2022, based on figures from JPPH. Similarly, the value of supply overhang also increased by a huge 24.6% y-o-y to MYR 17.25 billion (US$4.24 billion) over the same period.

As such, the new planned supply in the whole country totalled 49,602 units in the first three quarters of 2025, down sharply by 31.7% from 72,608 units in the same period in the preceding year.

"The property market performance continues to strengthen, supported by stable economic conditions and targeted government initiatives," said JPPH.

In the third quarter of 2025, Malaysia's economy grew by 5.2% from a year earlier, following year-on-year expansions of 4.4% in both Q1 and Q2 2025, 4.9% in Q4 2024 and 5.4% in Q3 2024, according to the BNM. The robust growth was mainly driven by sustained domestic demand and higher net exports.

Quarter-on-quarter, the economy expanded 2.4% in Q3 2025, higher than the prior quarter's 2.2% increase and the strongest growth recorded since Q2 2022.

Overall, Malaysia's economy was estimated to have expanded by approximately 5% last year, following annual expansions of 5.1% in 2024, 3.6% in 2023, 8.9% in 2022, and 3.3% in 2021. Prior to this, the economy had grown by a healthy annual average of 5.3% from 2010 to 2019, before suffering a contraction of 5.5% in 2020 due to the Covid-19 pandemic.

House Price Variations:

Local house price variations

Kuala Lumpur has Malaysia's most expensive housing, with an average house price of MYR804,642 (US$197,847) in Q3 2025, according to figures released by JPPH. It was followed by Selangor with an average price of MYR553,196 (US$136,021), Sarawak with MYR540,884 (US$132,993), Sabah with MYR533,614 (US$131,206), and Pulau Pinang with MYR504,845 (US$124,132).

House prices remain above the MYR 400,000 mark in Johor, with an average price of MYR471,485 (US$115,929) over the same period.

House prices are slightly above MYR 300,000 in Kedah, with an average price of MYR322,890 (US$79,393), Negeri Sembilan with MYR314,652 (US$77,367), and Terengganu with MYR307,717 (US$75,662).

The cheapest housing in Malaysia can be found in Perlis and Melaka, with an average price of MYR 246,254 (US$60,549) and MYR 250,311 (US$61,547), respectively.

Residential properties are also relatively affordable in Perak, with an average house price of MYR 280,724 (US$69,025); Pahang, with MYR 275,159 (US$67,657), and Kelantan, with MYR 272,824 (US$67,082).

Demand Highlights:

Housing demand remains resilient amid government support

Residential property demand remains healthy. In the third quarter of 2025, the total number of residential property transactions reached 66,766 units, up by 9.3% as compared to the previous quarter but down by 5.2% from the same period last year, based on figures released by the JPPH. This followed annual growth of 4% in 2024, 3% in 2023, 22.3% in 2022, and 3.9% in 2021 and a contraction of 8.6% during the onset of the Covid-19 pandemic in 2020.

On the other hand, residential transaction value totalled MYR 28.51 billion (US$7 billion) in Q3 2025, up strongly by 14.6% from the previous quarter but down slightly by 0.6% from a year earlier. Prior to this, the value of residential transactions increased by 5.9% during 2024, after increasing by 7.1% in 2023, 22.6% in 2022, and 16.7% in 2021 and declining by 9% in 2020.

Kelantan registered the biggest year-over-year growth in the total number of residential property transactions in Malaysia last year, at a whopping 98.05%, followed by Melaka (29.83%), Pahang (10.74%), WP Putrajaya (9.7%), WP Labuan (9.68%), and Perak (6.41%). Modest to minimal growth was registered in Selangor (2.06%), Kedah (0.33%), and WP Kuala Lumpur (0.21%).

In contrast, Perlis and Negeri Sembilan saw the biggest fall in residential property transactions last year of 16.95% and 16.44%, respectively. Transactions also declined in Sarawak (-5.29%), Terengganu (-4.75%), Sabah (-4.55%), and Pulau Pinang (-2.9%).

Selangor dominated the market, accounting for about 21.6% of the total volume of residential property transactions in Malaysia. It was followed by Johor with a 16.3% market share and Perak with 11.4% share.

To buoy the property market, various government initiatives were included in the Budget 2025, including:

• MYR 405 million (US$99.6 million) allocated for 48 Program Residensi Rakyat (PRR) projects, including two new developments in Port Dickson and Seberang Perai Tengah. Thirty PRR projects are targeted for completion by the end of 2025, benefiting nearly 17,500 residents.
• MYR 452 million (US$111.1 million) set aside for 14 Projek Rumah Mesra Rakyat (RMR), involving the construction of 5,410 housing units nationwide.
• The government guarantees up to MYR 10 billion (US$2.5 billion) under the Housing Credit Guarantee Scheme (SJKP) to support housing financing for about 20,000 homebuyers.
• Income tax relief on housing loan interest for first-time buyers, capped at MYR 7,000 (US$1,721) for homes priced up to MYR 500,000 (US$122,941), and MYR 5,000 (US$1,229) for homes priced between MYR 500,000 (US$122,941) and MYR 750,000 (US$184,411).
• Introduction of the Step-Up Financing Scheme under SJKP, with guarantees of up to MYR 5 billion (US$1.2 billion), offering lower instalments during the first five years for young homebuyers.
• MYR 200 million (US$49.2 million) in funding through UDA for affordable housing development on waqf land.
• Forest City is designated as a Duty-Free Island, alongside incentives for the Forest City Special Financial Zone to support financial services and fintech activities.
• Special incentives under the Johor-Singapore Special Economic Zone (JS-SEZ) to attract high-quality investments and high-value jobs, with further details expected to be announced by year-end.

MM2H rules eased under new three-tier framework

The Malaysia My Second Home (MM2H) scheme was relaunched in January 2022 under the Immigration Department of Malaysia, following its suspension during the COVID-19 pandemic. Even prior to the pandemic, the programme had been unofficially closed since September 2019, amid reports of rejection rates as high as 90%.

Upon its relaunch, the government introduced significantly stricter requirements, including a minimum MYR 1 million (US$ 245,882) fixed deposit, declared liquid assets of MYR 1.5 million (US$368,822), and a minimum offshore income of MYR 40,000 (US$9,835) per month, compared with just MYR 10,000 (US$2,459) previously. Government fees were also raised, and applicants were required to stay in Malaysia for at least 90 days annually.

These tighter rules sharply reduced participation, with only 1,905 MM2H applications approved between November 2021 and September 2023, compared with 5,610 approvals in 2018, according to RHB Research.

In response, the government announced a major relaxation of MM2H requirements in June 2024, following a comprehensive review aimed at reviving foreign interest.

Some of the notable changes include the following:

• The visa will now be open to applicants aged at least 25 years old, compared with 35 previously.
• MM2H visa holders will be required to spend a minimum of 60 days in Malaysia, down from 90 days previously - a condition that may also be fulfilled by dependents such as spouses and children.
• The minimum requirement of MYR 40,000 (US$9,835) offshore income - the single biggest obstacle in the previous rules - was removed.
• The liquid asset requirement of at least MYR 1.5 million (US$368,822) was also removed.
• Previously, MM2H eligibility was based on a fixed deposit of MYR 1 million (US$245,882); now, the program will come in three tiers (Silver, Gold, and Platinum), giving the applicants several options.

The Malaysian Cabinet has also approved new regulations for the licensing of MM2H agents, requiring all agents to update their licenses according to the new rules.

"The objective is to simplify the often-criticised MM2H application procedures by introducing more flexibility and clarity," said Tourism Minister Datuk Seri Tiong King Sing.

From the programme's inception in 2002 to early 2025, a total of 58,468 MM2H passes were approved, including 28,528 principal applicants and 29,940 dependents, according to Tourism Minister Tiong King Sing. Of this total, 782 approvals were granted following the introduction of the new tiered system in June 2024.

As of August 2025, nearly 5,972 foreign nationals held MM2H visas under the revamped scheme, with China remaining the largest source market, followed by Taiwan, Hong Kong, Singapore, South Korea, Japan, and the United Kingdom.

Authorities estimate the restructured MM2H programme generated over MYR 800 million (US$197 million) in inflows between mid-2024 and mid-2025, through fixed deposits, property purchases, and participation fees, underscoring its renewed role as a channel for long-term residency and investment.

The MM2H program allows foreigners to live in Malaysia for 5 to 20 years, provided that they meet the criteria. Successful applicants are also allowed to bring their spouse, an unmarried child under the age of 21, and parents who are over 60 years old.

Foreign property ownership rules vary per state

The different states in the country vary in their criteria and investment thresholds for foreign property ownership.

In Selangor, Malaysia's most populous and largest state in terms of GDP, foreigners can purchase a property with a minimum value of MYR 2 million (US$493,218). However, foreign buyers are limited to landed properties with landed strata titles. In addition, foreigners cannot buy properties at auction or own agricultural land in Selangor.

In Kuala Lumpur, as well as in Perak, Kelantan, Putrajaya, Labuan, Pahang, and Terengganu, the minimum investment requirement is MYR 1 million (US$ 246,609), while it is only MYR 500,000 (US$ 123,305) in Perlis. Other states have different foreign property ownership limits, too.

The Malaysia My Second Home (MM2H) scheme also serves as a special avenue for property purchase in the country.

Currently, the minimum property purchase price per state is shown below:

Supply Highlights:

Residential construction activity indicators showed mixed results

In the first three quarters of 2025, the total number of housing starts for landed and high-rise residential buildings fell by 12.1% y-o-y to 64,843 units, following a strong growth of 20.6% in 2024, and an annual decline of 9.9% in 2023, according to figures released by JPPH. In contrast, housing completions rose strongly by 25.3% y-o-y to 69,303 units in Q1-Q3 2025, following annual increases of 9.7% in 2024 and 4% in 2023.

In addition, there are wide variations in residential construction activity per state:

• In WP Kuala Lumpur, housing starts dropped 14.9% y-o-y to 11,013 units in the first three quarters of 2025, while completions soared by 32.7% to 7,418 units.
• In WP Putrajaya, no housing starts nor completions were recorded in the first three quarters of 2025.
• In WP Labuan, starts surged by 111.1% y-o-y to 38 units in Q1-Q3 2025. No completions were recorded over the same period.
• In Selangor, housing starts declined by 23.3% y-o-y to 9,246 units while completions increased by 37.9% to 15,910 units.
• In Johor, housing starts declined by a huge 21.7% y-o-y to 8,791 units, and completions were down by 5.8% to 6,585 units.
• In Pulau Pinang, housing starts rose by 23% y-o-y to 7,132 units while completions plummeted by 62.6% to 3,947 units.
• Perak saw strong growth in residential construction activity, with housing starts rising by 29.3% y-o-y to 7,553 units and completions increasing by a huge 40.9% to 7,807 units.
• Negeri Sembilan's local residential construction sector continues to grow, with housing starts increasing by 16.5% y-o-y to 5,524 units and completions rising strongly by 170.8% y-o-y to 5,786 units.
• In Melaka, housing starts were down by 19.4% y-o-y to 4,595 units in the first three quarters of 2025, while completions surged by a whopping 682% to 4,309 units.
• In Kedah, construction activity is also mixed, with housing starts falling by 37% y-o-y to 1,709 units while completions soaring by 74.3% to 2,759 units.
• In Pahang, housing starts decreased by 14.5% y-o-y to 3,197 units in Q1-Q3 2025, while completions were up by 26.7% to 2,777 units.
• In Terengganu, housing starts declined by 54.1% to 724 units in Q1-Q3 2025 from the prior year, while completions rose by 24.5% to 844 units.
• In Kelantan, the number of housing units started to fall by 33.8% y-o-y to 822, while houses completed rose strongly by 84.4% to 2,644 units.
• In Perlis, housing starts increased by 10.2% y-o-y to 195 units while completions rose by a huge 78.4% to 305 units.
• In Sabah, the number of housing starts fell by 13.4% y-o-y to 2,146 units in the first three quarters of 202,5 while completions surged by a whopping 210.3% to 4,766 units.
• Sarawak's residential construction activity is cooling fast, with housing starts falling by 38.8% y-o-y to 2,158 units in Q1-Q3 2025 and completions declining by 11% to 3,446 units.

The new planned supply in the whole country totalled 49,602 units in the first three quarters of 2025, down sharply by 31.7% from 72,608 units in the same period in the preceding year.

In recent years, residential construction in Malaysia has weakened due to the government's decision to freeze approvals for high-end property developments. Effective November 2017, the restriction covers properties costing over MYR 1 million (US$245,882). This was aggravated by the adverse impact of pandemic-related restrictions imposed in 2020 and 2021.

As a result, starts fell by an average of 6% annually from 2018 to 2023 while completions declined by an average of 3.6% over the same period. It was only in 2024 that residential construction activity started to show some improvements.

Supply overhang increasing again

The unsold housing stock in Malaysia is increasing again. In the third quarter of 2025, the total residential supply overhang rose sharply by 30.5% y-o-y to 28,672 units, following annual declines of 10.3% during the whole year of 2024, 7% in 2023, and 24.7% in 2022, based on figures from JPPH. Similarly, the value of supply overhang also increased by a huge 24.6% y-o-y to MYR 17.25 billion (US$4.24 billion) over the same period.

Perak accounted for the biggest overhang in Q3 2025, at 3,300 units, representing approximately 11.5% of the national total. It was closely followed by Johor (with 3,293 units), Sabah (with 2,771 units), Selangor (with 2,757 units), Pulau Pinang (with 2,730 units), Kelantan (with 2,599 units), WP Kuala Lumpur (with 2,287 units), and Negeri Sembilan (with 2,205 units).

In terms of value, Johor led with MYR 2.83 billion (US$696 million), followed by WP Kuala Lumpur with 2.4 billion (US$590 million), Selangor with MYR 2.26 billion (US$556 million), Pulau Pinang with MYR 2.04 billion (US$502 million), and Sabah with MYR 2.03 billion (US$499 million).

Condominiums/apartments represented around 51.2% of the total overhang in Q3 2025, followed by terraced houses, which accounted for about a 27.1% share.

Total housing stock reached more than 6.48 million units as of Q3 2025, up by about 2.8% from the same period last year.

Selangor accounted for the biggest share in the total housing stock in the country, at 27.1% in Q3 2025. It was followed by Johor (14.5% share), WP Kuala Lumpur (8.9%), Pulau Pinang (8.8%), Perak (8.6%), Kedah (5.7%), and Negeri Sembilan (5.0%).

Rental Market:

Moderate rental yields

Gross rental yields from apartments in Malaysia remain moderate, averaging 5.19% in Q3 2025, not significantly different from 5.1% in Q1 2025, 5.24% in Q3 2024 and 5.16% in Q1 2024, according to research conducted by the Global Property Guide. The gross rental yield is the rent the landlord will earn, before taxation, vacancy costs, and other costs, compared to the property's purchase price. While Malaysian property is often not particularly attractive in terms of return on investment, a stable country is a stable market. Residential property prices in Malaysia showed notable growth over the past 20 years.

In Kuala Lumpur, apartments offer gross rental yields ranging from 3.11% to 6.49%, with a city average of 4.93%, which is lower compared to the national average.

Gross rental yields in other cities and areas in Malaysia in Q3 2025 were as follows:

• In Johor Bahru, rental yields are higher, ranging from 3.23% to 9.07% in Q3 2025, with a city average of 5.24%.
• Petaling Jaya offers rental returns of around 4.27% to 6.82%, with a city average of 5.55%.
• Georgetown yields are low, ranging from 2.63% to 4.23%, with a city average of 3.68%.
• In Iskander Puteri, apartments offer relatively higher rental yields from 5.2% to 6.35%, with a city average of 5.8%.
• In Ipoh, the gross rental yields for apartments range from 3.98% to 5.6%, with a city average of 5%.
• Shah Alam's rental returns range from 4.25% to 6.61%, with a city average of 5.41%.
• Subang Jaya offers apartment rental returns from 5.63% to 6.32%, with a city average of 5.94%.

Residential rental market continues to grow

Malaysia's residential rental market continues to expand, with sustained demand supporting higher rents in key urban centres. In the Central Region, rental prices have trended upward in the first half of 2025 in several high-demand locations, especially those situated near LRT and MRT stations, close to major universities, and benefiting from strong transport connectivity.

"The residential rental market was generally stable in major states with terraced houses and high-rise units experiencing rental growth in selected locations," said JPPH in its Property Market Report H1 2025.

In WP Kuala Lumpur, rental prices have trended upward in several high-demand areas, particularly near LRT and MRT stations, with KLCC views, and strong connectivity. For example, flat units in Taman Melati and condominiums in Star Residences saw noticeable increases. Meanwhile, double-storey terraces in Damansara Heights and Desa Park City (Casaman) commanded monthly rents exceeding MYR 8,000 (US$1,967) in H1 2025. Similarly, luxury condominiums in U Thant Residence, 10 Mont Kiara, Seni Mont Kiara, and Sunway Vivaldi achieved rents of over MYR 11,000 (US$2,705) per month.

Selangor's rental market remained generally stable, with modest growth observed for double-storey terrace houses and apartments, particularly in Petaling, Gombak, and Hulu Selangor. Double-storey terrace homes in Valencia, Sungai Buloh, commanded premium rents exceeding MYR 8,000 (US$1,967) per month. Apartments in Mutiara Damansara and Setia Eco Glade, Cyberjaya, recorded monthly rents ranging from MYR 2,300 (US$566) to MYR 3,000 (US$738) and MYR 3,200 (US$787) to MYR 3,900 (US$959), respectively. The condominium market also remained stable, with higher monthly rentals of MYR 2,500 (US$615) to MYR 3,500 (US$861) reported in La Costa Condominium, Saujana Villa Resort, Subang Park Home, and One Jelatek.

In the Southern Region, the rental market remained largely stable, with modest increases in Johor Bahru, Johor, and Seremban, Negeri Sembilan. In Johor Bahru, rents for one-and-a-half-storey terrace houses rose between 3.8% and 12.1%, while condominiums at Iskandar Residence, Medini, reached up to MYR 2,800 (US$688) per month. In Seremban, slight rental growth was seen for single- and double-storey terrace houses, with monthly rates remaining below MYR 2,000 (US$492).

In the Northern Region, Pulau Pinang's rental market remained resilient, with mixed trends for terrace houses and high-rise units across most districts. Condominium rents in the Timur Laut and Barat Daya districts rose between 2.4% and 8.0%, with The Cove commanding the highest rates of MYR 6,000 (US$1,475) to MYR 8,500 (US$2,090) per month.

This is supported by PropertyGuru's nationwide rental price index, which experienced a strong growth of 12.4% in Q1 2024 (latest available data) from a year earlier, following y-o-y growth of 15.2% in Q4 2023, 16.3% in Q3, 17.8% in Q2, and 15.4% in Q1. On a quarterly basis, rental prices were up by 2.2% in Q1 2024.

Though Malaysia's rental market remains small. Only 6% of the housing stock is in the private rental sector. About 85% of the total stock is owner-occupied, while government-provided housing accounts for 7% of the stock.

Mortgage Market:

Key interest rates kept unchanged

During its November 2025 meeting, BNM's Monetary Policy Committee (MPC) maintained its Overnight Policy Rate (OPR) unchanged at 2.75% for the fourth consecutive period. The recent decision was on the back of steady inflation, easing global cost pressures, and robust economic growth. Nationwide inflation stood at 1.4% in November 2025, slightly up from 1.3% in the previous month but down from 1.8% in the same period last year.

To tame inflation, the central bank hiked the key rate five times from May 2022 to May 2023, with a cumulative increase of 125 basis points. The key rate was then kept unchanged through June 2025, before the central bank opted for a 25-basis point cut in July 2025.

"For the Malaysian economy, latest developments indicate better-than-expected growth in the third quarter, driven by sustained domestic demand, resilient electrical and electronics (E&E) exports, and recovery in commodity production. Looking ahead, resilient domestic demand will continue to support growth going into 2026. Employment, wage growth and income-related policy measures will remain supportive of household spending, said BNM in its November 2025 Monetary Policy Statement.

"Year-to-date, headline and core inflation averaged 1.4% and 1.9%, respectively. Moving forward, headline inflation is expected to remain moderate in 2026 amid the continued easing in global cost conditions. Global commodity prices are expected to remain modest, contributing to contained domestic cost conditions," added

At the current OPR level, BNM's monetary policy stance continues to support the economy and aligns with current inflation and growth trends. Accordingly, the central bank is closely monitoring developments to guide its outlook on inflation and growth and ensure that policy remains supportive of steady economic growth while keeping prices stable.

Mortgage market continues to expand, albeit at a slower pace

Housing loans continue to increase, albeit at a noticeably slower rate of growth. The value of housing loans rose by an annual average of 8% from 2016 to 2024, down from annual average growth of 13.1% in 2007-2015 and 19.3% in 2000-2006.

By the end of August 2025, the total amount of outstanding loans for house purchase rose by 6.3% y-o-y to MYR 869.54 billion (US$214.44 billion), according to BNM. This is compared to the y-o-y growth of 7.6% registered in August 2024.

By financial institution, as of August 2025:

• Commercial banks: housing loans outstanding increased by a modest 3.7% y-o-y to MYR 509.78 billion (US$125.72 billion), a slight deceleration from the prior year's 3.8% growth.
• Islamic banks: housing loans were up strongly by 10% y-o-y to MYR 359.71 billion (US$88.71 billion). This followed a robust growth of 13.8% in August 2024.
• Investment banks: housing loans rose by 4.1% y-o-y to MYR 45.6 million (US$11.25 million), a sharp deceleration from the preceding year's 16.2% growth.

By value of residential property purchased, as of August 2025:

• Less than or equal to MYR 250,000: total loans amounted to MYR 92.89 billion (US$22.91 billion), down slightly by 1.1% from the same period last year.
• More than MYR 250K to MYR 500K: loans totalled MYR 276.6 billion (US$68.21 billion), up by 6.9% from the previous year.
• More than MYR 500K to MYR 1 million: housing loan volume reached MYR 320.89 billion (US$79.13 billion), up by 8.4% from a year ago.
• More than MYR 1 million: loans volume totalled MYR 179.16 billion (US$44.18 billion), up by 5.5% from the previous year.

The size of the mortgage market was equivalent to about 43.3% of GDP in 2024, almost unchanged from the previous four years but sharply up from 22% in 2008 and 13% in 1996.

The mortgage market remained robust in 2025 and was estimated to have remained at around 43% of GDP, buoyed by fundamentally strong demand coupled with the support of the government through several housing initiatives.

Under Budget 2025, the government allocated MYR 10 billion (US$2.47 billion) for the Housing Credit Guarantee Scheme (HCGS) to help ease the financial burden of more than 20,000 first-time homebuyers.

Historic Perspective:

House prices are still below Asian crisis levels

Amazingly, house prices in Malaysia are still below pre-Asian Crisis 1997 levels, in inflation-adjusted terms, despite the recent housing boom.

Since the Asian crisis, Kuala Lumpur's house prices have significantly outperformed the rest of the country. After the downturn of 2008-2009, the property market was revitalised with the help of the Greater Kuala Lumpur Plan, which included "The MRT Project". From 2005 to 2015, Kuala Lumpur house prices surged by almost 122% (73% inflation-adjusted).

In contrast, national price rises have been more muted. From 2005 to 2015, Malaysia's house prices rose by 96.1% (52.4% inflation-adjusted).

From 2016 to 2018, nationwide house prices rose by an annual average of 5.2% (3.3% inflation-adjusted).

However, the housing market has slowed in recent years, as the government's market cooling measures took effect, coupled with the adverse impact of the Covid-19 pandemic. Nationwide house prices increased by a meager 1.79% (0.79% inflation-adjusted) in 2019, 1.21% (2.63% inflation-adjusted) in 2020, and 1.89% (-1.3% inflation-adjusted) in 2021.

After increasing by 3.9% (0.12% inflation-adjusted) in 2022, 3.85% (2.27% inflation-adjusted) in 2023, and 4.43% (2.71% inflation-adjusted) in 2024, house price growth decelerated sharply again to a miniscule 0.09% y-o-y in Q3 2025. In fact, house prices fell by 1.39% in real terms.

Overall, national house prices increased by a cumulative of just 15.2% (4.2% inflation-adjusted) from 2019 to Q3 2025.

Socio-Economic Context:

Malaysia's economy continues to grow strongly

In the third quarter of 2025, Malaysia's economy grew by 5.2% from a year earlier, following year-on-year expansions of 4.4% in both Q1 and Q2 2025, 4.9% in Q4 2024 and 5.4% in Q3 2024, according to the BNM. The robust growth was mainly driven by sustained domestic demand and higher net exports.

"Malaysia's economy expanded in 3Q 2025 by 5.2 per cent versus 4.4 per cent in the second quarter of 2025 (2Q 2025), driven by robust performance across all sectors. Resilient domestic demand continued to anchor growth despite lingering external headwinds and global uncertainties," said Prime Minister Datuk Seri Anwar Ibrahim.

In the first nine months of 2025, the economy expanded by 4.7% - within the government's official forecast range of 4% to 4.8%.

"Household spending was supported by positive labour market conditions, income-related policy measures, and cash assistance programmes. Investment activity was underpinned by continued capital expansion by both private and public sectors. On the external front, net exports registered higher growth as export growth outpaced import growth," said the central bank.

By major sectors:

• Manufacturing grew by 4.1% y-o-y in Q3 2025, following expansion of 3.7% in the previous quarter.
• Mining and quarrying rebounded strongly, growing by 9.7% y-o-y in Q3 2025, in contrast to a contraction of 5.2% in the previous quarter.
• Agriculture registered a minuscule growth of 0.4% y-o-y in Q3 2025, a slowdown from the prior quarter's 2.5% increase.
• Construction expanded by 11.8% in Q3 2025 from a year earlier, following a y-o-y growth of 12.1% in the previous quarter.
• Services rose by 5% in Q3 2025 from a year earlier, at par with the previous quarter's 5.1% growth.

Quarter-on-quarter, the economy expanded 2.4% in Q3 2025, higher than the prior quarter's 2.2% increase and the strongest growth recorded since Q2 2022.

Overall, Malaysia's economy was estimated to have expanded by approximately 5% last year, following annual expansions of 5.1% in 2024, 3.6% in 2023, 8.9% in 2022, and 3.3% in 2021. Prior to this, the economy had grown by a healthy annual average of 5.3% from 2010 to 2019, before suffering a contraction of 5.5% in 2020 due to the Covid-19 pandemic.

In the first eleven months of 2025, Malaysia's exports reached MYR 1.45 trillion (US$356.5 billion), up by 6.1% as compared to the same period last year, according to the Department of Statistics Malaysia. Likewise, imports increased by 5.6% y-o-y to MYR 1.32 trillion (US$324.6 billion) over the same period.

A proposed 24% tariff on Malaysian exports formed part of the U.S. global import measures announced in April 2025 by U.S. President Donald Trump, but later revisions reshaped the policy. After implementation delays and a reciprocal trade agreement, Malaysia now faces an effective tariff of about 19% on most exports, supported by extensive exemptions.

The International Monetary Fund (IMF) expects the Malaysian economy to grow by 4.5% this year and by another 4% in 2027.

"Malaysia's economy has shown notable resilience against global policy uncertainties and trade tensions. The resilience is expected to continue, supported by strong domestic demand and prudent policies," said the IMF.

Inflation remains manageable. In November 2025, the nationwide inflation rate was 1.4%, slightly up from 1.3% in the previous month but still lower than the 1.8% recorded in the same month last year, according to figures from the Department of Statistics Malaysia. Nationwide inflation averaged 2.8% in 2024, from 2.5% in 2023, 3.4% in 2022, and 2.5% in 2021.

Nationwide inflation is projected to remain low in the coming months.

"Moving forward, headline inflation is expected to remain moderate in 2026 amid the continued easing in global cost conditions," said the BNM. "Global commodity prices are expected to remain modest, contributing to contained domestic cost conditions. Meanwhile, core inflation in 2026 is expected to remain stable and close to its long-term average, reflecting continued expansion in economic activity and the absence of excessive demand pressures."

The labor market continues to strengthen. In November 2025, the nationwide unemployment rate stood at 2.9%, down from 3% in the previous month and 3.2% a year earlier, according to recent figures released by the Department of Statistics Malaysia. In fact, it was the lowest level recorded since December 2014.

The country's jobless rate averaged 3.2% annually in 2009-19 before increasing to 4.5% in 2020 and 4.7% in 2021, mainly due to the Covid-19 pandemic. Unemployment declined to an average of 3.8% in 2022, 3.6% in 2023, and 3.5% in 2024.

The number of unemployed people fell by 4.3% y-o-y to a near six-year low of 518,400 people in November 2025. Employment rose by 3.1% to a record-high of 17.09 million in November 2025.

Public finances improving

Malaysia's budget deficit was equivalent to approximately 3.8% of GDP last year, an improvement from shortfalls of about 4.1% of GDP in 2024, 5% of GDP in 2023, 5.6% in 2022, 6.4% in 2021, and 6.2% in 2020, based on government estimates. However, it remains higher than the pre-pandemic deficits, equivalent to 3.4% of GDP in 2019, 3.7% in 2018, 2.9% in 2017, and 3.1% in 2016.

The budget, announced in October 2025, sets a federal deficit target of 3.5% of GDP for 2026 and reiterates the medium-term goal of reducing the shortfall to 3% of GDP. Authorities project the deficit will average 3.2% of GDP between 2026 and 2028, aiming to achieve the 3% target by 2028.

This is marginally narrower than the latest projections released by BMI, a unit of Fitch Solutions. BMI forecasts that Malaysia's federal government budget deficit will decline to about 3.6% of GDP in 2026, given the current administration's track record of sticking closely to its fiscal targets.

The Malaysian government's shortfall soared to more than 6% of GDP during the onset of the Covid-19 pandemic in 2020-21 due to the introduction of several stimulus packages, with a combined value of MYR 380 billion (US$93.4 billion) - equivalent to almost 27% of the country's GDP.

As the deficit decreases, the government will issue less new debt each year, slowing the growth of total debt. Borrowings have fallen from nearly MYR 100 billion (US$24.6 billion) in 2022 to MYR 92.6 billion (US$22.8 billion) in 2023, and to about MYR 76.8 billion (US$18.9 billion) in 2024. Looking ahead, the government is projecting that new borrowings have declined further to around MYR 75 billion (US$18.4 billion) in 2025, continuing the trend of fiscal consolidation.

"Malaysia's commitment to prudent fiscal management has been demonstrated by the passage of the landmark Public Finance and Fiscal Responsibility Act in 2023 and a steady reduction in the fiscal deficit since 2022," said the IMF. "Staff welcomes ongoing efforts to strengthen fiscal transparency and spending efficiency, including the passage of the new Government Procurement Act."

The government's gross debt was estimated to be around 71.2% of GDP last year, slightly up from 70.4% of GDP in 2024, 69.8% in 2023 and 61.1% in 2022, according to the Ministry of Finance.

BMI estimates are even higher, with Malaysia's general government debt reaching 76.5% of GDP as of end-June 2025, inclusive of committed guarantees amounting to 11.8% of GDP, which account for 55.8% of total outstanding financial guarantees. Overall financial guarantees totaled 21.1% of GDP at the same period, remaining below the 25% ceiling set under the Public Finance and Fiscal Responsibility Act.

Currently, the country's statutory debt limit is at 65%. The statutory debt ceiling was raised from 55% to 60% in late August 2020, and then again from 60% to 65% in 2021, because of the need to undertake more borrowing during the pandemic. The increase of the ceiling to 60% was the first since July 2009.

The statutory debt is composed of Malaysian Government Securities, Malaysian Government Investment Issues, and Malaysian Islamic Treasury Bills.

Malaysian ringgit strengthens

The Malaysian ringgit has strengthened in the past two years, amidst a cautious outlook on the U.S. economy. The ringgit appreciated by nearly 14% against the U.S. dollar to reach a monthly average exchange rate of MYR 4.0908 = USD1 in December 2025, from MYR 4.6583 = USD1 in December 2023.

This offsets the 15% depreciation suffered by the ringgit from December 2020 to April 2024, mainly due to domestic political tension, the decline in oil prices caused by sticky US inflation, as well as the strong US dollar amidst the Fed's successive rate hikes.

The ringgit is expected to maintain its strengthening trend against the U.S. dollar and other major currencies over the course of the year.

"Moving forward, we project that the ringgit will remain on a strengthening trend in 2026. Our positive outlook is underpinned by the expectations that the interest rate differential between Malaysia's OPR and the US Fed funds rate will continue to narrow throughout 2026," said MBSB Research. "In our base case projection, we anticipate sustained appreciation in the ringgit, which is expected to average RM4.00 in 2026 (2025: RM4.28) with year-end target moving towards RM3.95 (end-2025: RM4.06; end-2024: RM4.47)."

According to Fitch Ratings, Malaysia has recorded current account surpluses for nearly three decades, and this trend is expected to continue in the medium term. It projects a surplus of around 1% to 2% of GDP in the coming years, supported by a diversified export base and competitive manufacturing sector.

In the third quarter of 2025, Malaysia's current account surplus widened to MYR 12.2 billion (US$3 billion), compared to just MYR 265 million (US$65.2 million) in the previous quarter and MYR 1.8 billion (US$443 million) in the same period last year.

The country's diverse export base and strong manufacturing sector also position it to benefit from ongoing shifts in global supply chains.

Political stability, but slow reforms

In July 2018, former Prime Minister Najib Tun Razak was arrested over his role in the multi-billion-dollar 1MDB corruption scandal.

Najib denied the allegations, and while in office, Malaysia's authorities cleared him of all wrongdoing. However, the case was reopened after the surprise defeat of the United Malays National Organisation (UMNO), which had governed Malaysia since independence, in the 2018 general elections. Mahathir Mohamad capitalised on public mistrust of Najib to win the general elections, vowing to bring his former protégé to justice. At least 42 charges were filed against Najib for alleged corruption, money laundering, and abuse of power. He was then convicted and ordered to serve a 12-year prison sentence in August 2022, making him the first former Malaysian prime minister to be jailed.

A multi-party, multi-ethnic coalition called Pakatan Harapan (PH) was then formed. PH was brought together in 2018 by Anwar Ibrahim's reformist Keadilan party, the main ethnic Chinese party, the DAP, and two anti-UMNO Malay parties, Amanah and Bersatu. Mahathir and Anwar agreed that if they won, Mahathir would serve as prime minister initially, with plans to hand over the role to Anwar after two years, though the details of the transition were vague.

A crisis over succession followed between the two leaders, who have a long history of unhappy relations. With growing tension within the coalition, Muhyiddin Yassin, another key HP leader, defected with more than 30 MPs to ally with his old party, UMNO. In February 2020, Mahathir tendered his resignation, and the coalition collapsed. To avoid a political crisis, Malaysia's constitutional monarch, King Abdullah, appointed Muhyiddin Yassin as the new Prime Minister, and a UMNO-led government was formed.

However, seventeen months after taking office, Yassin's government lost parliamentary support after UMNO's president, Ahmad Zahid Hamidi, announced in July 2021 that UMNO was withdrawing its support for Yassin, citing his failed pandemic response. In August 2021, Yassin resigned after attempts to regain support from MPs were unsuccessful. He was replaced by Ismail Sabri Yaakob, who served as MP until November 2022. During his 15 months in office, he lifted the Movement Control Order following the expansion of the vaccination program and oversaw the Twelfth Malaysia Plan.

The November 2022 general elections failed to achieve conclusive results, as neither of the leading coalitions - Anwar's Pakatan Harapan and Yassin's Perikatan Nasional - had received a simple majority to form a government. The protracted election deadlock forced Malaysia's king, the Yang di-Pertuan Agong, to decide on a new government and prime minister. On November 24, 2022, Anwar was sworn in as the tenth Malaysian Prime Minister. In December 2022, Anwar formed a unity government and appointed members of Parliament from Pakatan Harapan, Gabungan Parti Sarawak (GPS), and UMNO. The new PM has long been an advocate of Islamic democracy and for reforms to the country's political system.

Despite a polarised political climate, Anwar succeeded in consolidating power in 2023 and brought unexpected stability, but at the price of slow-pedalling much-needed economic and democratic reforms, according to an article published by the East Asia Forum.

In the by-election held in September 2024, the ruling coalition scored a landslide victory - a manifestation of public acceptance of Anwar's unity government and a sign of long-term political stability. It was the ruling coalition's second consecutive victory in provincial polls.

Malaysia's economy outperformed expectations in 2024, driven by stronger foreign investment, particularly in the semiconductor sector and a modest recovery in the ringgit. These trends extended into 2025, alongside continued investment inflows and active diplomacy by Anwar to raise Malaysia's international profile. As Malaysia assumed and held the ASEAN Chairmanship in 2025, expectations rose for the government to translate diplomatic visibility into concrete economic outcomes.

Sources:

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