Malaysia's Residential Property Market Analysis 2025

Malaysia's residential property market remains fundamentally healthy, supported by increasing demand and improving residential construction activity.

This extended overview from the Global Property Guide covers key aspects of Malaysia's housing market and takes a closer look at its most recent developments and long-term trends.

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

During 2024, the nationwide house price index rose by 1.4% from a year earlier, following annual growth of 3.85% in 2023, 3.9% in 2022, 1.89% in 2021, and 1.21% in 2020, based on figures released by the Valuation and Property Services Department (JPPH). When adjusted for inflation, house prices actually dropped slightly by 0.27% over the same period.

Quarter-on-quarter, the house price index fell by 2.01% (-2.16% inflation-adjusted) in Q4 2024, its first q-o-q decline since Q3 2021.

Malaysia's house price annual change:

Malaysia's average house price stood at MYR 483,879 (US$110,513) in Q4 2024.

By property type:

• Terraced house prices rose slightly by 1.3% y-o-y to an average of MYR 466,506 (US$106,545) in Q4 2024. Yet, quarter-on-quarter, prices fell by 2% in the final quarter of 2024.
• High-rise residential properties' average price was up by 1.8% y-o-y to MYR 378,414 (US$86,426) in Q4 2024. However, on a quarterly basis, prices dropped 1.8%.
• Detached house prices were up slightly by 0.6% y-o-y to an average of MYR 648,403 (US$148,088) in Q4 2024. Quarter-on-quarter, detached house prices fell by 2.8% over the same period.
• Semi-detached house prices rose by 1.6% y-o-y but declined by 1.8% q-o-q to reach an average of MYR 730,851 (US$166,918) in Q4 2024.

Property demand continues to grow. During 2024, the total number of residential property transactions rose by 4% to 260,516 units as compared to the previous year, following annual growth of 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, based on figures released by the JPPH.

Likewise, residential transaction value increased by 5.9% y-o-y to MYR 106.92 billion (US$24.42 billion) in 2024, after increasing by 7.1% in 2023, 22.6% in 2022, and 16.7% in 2021 and a decline of 9% in 2020.

Residential construction activity is also picking up. In 2024, the total number of housing starts for landed and high-rise residential buildings rose strongly by 20.6% y-o-y to 106,236 units, following an annual decline of 9.9% in 2023 and increases of 13.4% in 2022 and 5% in 2021, according to JPPH. Likewise, completions were also up by 9.7% to 82,135 units last year, following a modest growth of 4% in 2023 and six consecutive years of y-o-y declines from 2017 to 2022.

The new planned supply in the whole country reached 100,461 units in 2024, up strongly by 24.1% as compared to the preceding year.

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

Malaysia's economy grew by 5.1% during 2024, following annual expansions of 3.6% in 2023, 8.9% in 2022, and 3.3% in 2021 and a pandemic-induced contraction of 5.5% in 2020. The robust growth last year was mainly due to increased domestic demand and a rebound in exports.

Then in the first quarter of 2025, the economy expanded by 4.4% as compared to the same period last year, after growing by 5.0% in Q4 2024, 5.4% in Q3, 5.9% in Q2, and 4.2% in Q1, mainly driven by the services, manufacturing, and construction sectors.

"The Malaysian economy is projected to grow between 4.5% and 5.5% in 2025. This growth will be driven by sustained domestic demand, despite heightened external uncertainties that could lead to a more moderate expansion of exports," said BNM.

House Price Variations:

Local house price variations

Kuala Lumpur has Malaysia's most expensive housing, with an average house price of MYR 794,467 (US$180,274) in Q4 2024, according to figures released by JPPH. It was followed by Selangor with an average price of MYR 553,693 (US$125,639), Sarawak with MYR 545,503 (US$123,781), and Sabah with MYR 517,922 (US$117,523).

House prices remain above the MYR 400,000 mark in Pulau Pinang, with an average price of MYR 475,037 (US$107,791) in Q4 2024 and Johor, with an average price of MYR 437,280 (US$99,224) over the same period.

House prices are slightly above MYR 300,000 (US$68,073) in Negeri Sembilan, Kedah, and Terengganu.

The cheapest housing in Malaysia can be found in Melaka and Perlis, with an average price of MYR 240,655 (US$54,607) and MYR 245,031 (US$55,600), respectively.

Residential properties are also relatively affordable in Perak, with an average house price of MYR 273,464 (US$62,052); Pahang, with MYR 272,796 (US$61,901), and Kelantan, with MYR 268,493 (US$60,924).

Demand Highlights:

Demand continues to grow

Property demand continues to increase. During 2024, the total number of residential property transactions rose by 4% to 260,516 units as compared to the previous year, following annual growth of 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, based on figures released by the JPPH.

Likewise, residential transaction value increased by 5.9% y-o-y to MYR 106.92 billion (US$24.42 billion) in 2024, after increasing by 7.1% in 2023, 22.6% in 2022, and 16.7% in 2021 and a decline of 9% in 2020.

"The Property Market Report 2024 highlights exceptional performance, recording the highest volume and value of property transactions in Malaysia over the past decade. This impressive growth was fueled by a robust expansion in market activities across all sub-sectors," said JPPH in its latest report.

"The highest achievement of the property market was supported by the strong growth of Malaysia's economy and the continuous government support, including the full implementation of the New Industrial Master Plan 2030 (NIMP 2030), the National Energy Transition Roadmap, and the Twelve Malaysia Plan," added the same report.

Kelantan registered the biggest y-o-y 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 in 2024. It was followed by Johor with a 16.3% market share and Perak with 11.4% share.

MM2H Scheme requirements relaxed

The "Malaysia My Second Home" (MM2H) scheme was relaunched in January 2022 under the Immigration Department, after it was temporarily suspended in July 2020, amidst the Covid-19 pandemic. Even before the pandemic, the program had already been unofficially closed since September 2019, with claims of 90% application rejection rates.

However, the government announced new, stricter conditions for the program, including the requirement for applicants to have permanent savings of at least MYR 1 million (US$231,241) and a declaration of liquid assets of at least MYR 1.5 million (US$346,861).

Previously, the savings required were just MYR 300,000 (US$69,372) to MYR 500,000 (US$115,620).

In addition, applicants must have an offshore income of at least MYR 40,000 (US$9,250) every month, sharply up from MYR 10,000 (US$2,312).

Government charges were also increased substantially.

• The annual visa fee was raised from MYR 90 (US$21) to MYR 500 (US$116).
• There will be a processing fee charged by immigration of MYR 5,000 (US$1,156) for principal applicants and MYR 2,500 (US$578) for each dependent.

Applicants are also required to stay in the country for a minimum of 90 days annually.

Due to stricter criteria, there were only 1,905 MM2H applications approved between November 2021 and September 2023 as compared to 5,610 in 2018, according to RHB Research.

To attract more foreign investors into the country, the government released relaxed requirements for the MM2H scheme in June 2024, after several months of reviewing the said program.

Some of the notable changes include the following:

1. The visa will now be open to applicants aged at least 25 years old, compared with 35 previously.
2. 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.
3. The minimum requirement of MYR 40,000 (US$9,250) offshore income - the single biggest obstacle in the previous rules - was removed.
4. The liquid asset requirement of at least MYR 1.5 million (US$346,861) was also removed.
5. Previously, MM2H eligibility was based on a fixed deposit of MYR 1 million (US$231,241); 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 its inception in 2002 to early 2025, a total of 58,468 MM2H passes have been approved, including 28,528 principal applicants and 29,940 dependents, according to Tourism Minister Tiong King Sing. Of this total, 782 approvals were granted since the introduction of the new tiered categories in June 2024.

China dominated the market, followed by South Korea, Japan, and the UK.

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$462,481). 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$231,241), while it is only MYR 500,000 (US$115,620) 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.

In 2025, the minimum property purchase price per state is shown below:

Supply Highlights:

Residential construction activity increasing

During 2024, the total number of housing starts for landed and high-rise residential buildings rose strongly by 20.6% y-o-y to 106,236 units, following an annual decline of 9.9% in 2023 and increases of 13.4% in 2022 and 5% in 2021, according to JPPH. Likewise, completions were also up by 9.7% to 82,135 units last year, following a modest growth of 4% in 2023 and six consecutive years of y-o-y declines from 2017 to 2022.

Yet there are wide variations in residential construction activity per state:

• In WP Kuala Lumpur, housing starts surged by 26.1% y-o-y to 18,903 units in 2024, and completions soared by 42.5% to 10,712 units.
• In WP Putrajaya, no housing starts were recorded last year while completions fell by 7.4% y-o-y to 463 units.
• In WP Labuan, starts dropped 47.1% y-o-y to 18 units while completions were up by a whopping 1,062.8% from 43 units in 2023 to 500 units last year.
• In Selangor, housing starts dropped 2.7% y-o-y to 19,322 units while completions plunged by 21.7% to 16,793 units last year.
• In Johor, starts rose strongly by 46.6% y-o-y to 14,505 units while completions were up by 5.5% to 11,031 units.
• Pulau Pinang saw strong growth in residential construction activity, with starts rising by 74.3% y-o-y to 11,121 units while completions skyrocketed by 124% to 12,539 units.
• In Perak, housing starts rose by 4.9% y-o-y to 8,623 units, but completions fell by 11.2% to 6,401 units.
• In Negeri Sembilan, starts were up by 48.8% y-o-y to 5,968 units while completions were down by 21% y-o-y to 3,562 units last year.
• In Melaka, housing starts rose by 44.3% y-o-y to 7,397 units in 2024, and completions surged by 127.5% to 3,269 units.
• In Kedah, construction activity remained weak last year, with housing starts falling by 6% y-o-y to 3,146 units while completions declined by 3.5% to 1,949 units.
• In Pahang, starts increased by 14.2% y-o-y to 5,037 units last year while completions dropped slightly by 0.4% to 3,786 units.
• In Terengganu, housing starts skyrocketed by 121.2% to 2,568 units in 2024 from the prior year, while completions plummeted by 51.5% to 985 units.
• In Kelantan, the number of housing units started to fall slightly by 1.8% y-o-y to 1,661 last year, while houses completed rose strongly by 66.3% to 1,921 units.
• In Perlis, starts fell by 8.4% y-o-y to 186 units while completions rose by 33.6% to 318 units.
• Sabah registered a huge decline in residential construction activity last year, with the number of housing starts falling by 21.7% to 2,529 units and completions decreasing by 29.5% to 2,205 units.
• In Sarawak, housing starts were down by 5.2% y-o-y to 5,252 units while completions rose by 50.1% to 5,701 units last year.

"By property type, supply changed the focus to terraced houses, which formed 43.5% (35,745 units) of the national total, followed closely by condominiums/apartments, which formed another 35.5% (29,118 units)," said the JPPH report.

The new planned supply in the whole country reached 100,461 units in 2024, up strongly by 24.1% as compared to 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$228,180). 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.

Supply overhang continues to fall

The unsold housing stock in Malaysia continues to decline. In 2024, the total residential supply overhang fell by 10.3% y-o-y to 23,149 units, following annual declines of 7% in 2023 and 24.7% in 2022, based on figures from JPPH. Likewise, the value of supply overhang dropped by a huge 21.2% to MYR 13.94 billion (US$3.18 billion) over the same period.

"The residential overhang situation improved in 2024 as the numbers gradually reduced. There were 23,149 overhang units worth RM13.94 billion recorded, decreased by 10.3% and 21.2% in volume and value, respectively, compared to 2023 (25,816 overhang units worth RM17.68 billion)," revealed the JPPH report.

WP Kuala Lumpur accounted for the biggest overhang, at 4,234 units, accounting for about 18.3% of the national total. It was followed by Johor (with 2,964 units), Perak (with 2,844 units), and Pulau Pinang (with 2,796 units).

In terms of value, WP Kuala Lumpur still led with MYR 3.38 billion (US$771 million), followed by Johor with MYR 2.89 billion (US$659 million), Pulau Pinang with MYR 2.09 billion (US$477 million), and Selangor with MYR 1.59 billion (US$363 million).

Condominiums/apartments represented nearly 60% of the total overhang in 2024, followed by terraced houses, which accounted for about a 23.5% share.

Total housing stock reached more than 6.34 million units by the end of 2024, up by about 2.3% from a year earlier.

Selangor accounted for the biggest share in the total housing stock in the country, at 27.2%. It was followed by Johor (14.6% share), Pulau Pinang (8.9%), WP Kuala Lumpur (8.8%), and Perak (8.6%).

Rental Market:

Moderate rental yields

Gross rental yields from apartments in Malaysia remain moderate, averaging 5.1% in Q1 2025, slightly down from 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 2.93% to 6.46%, with a city average of 4.6%, which is lower compared to the national average.

Gross rental yields in other cities and areas in Malaysia in Q1 2025:

• In Johor Bahru, rental yields are higher, ranging from 3.23% to 7.15% in Q1 2025, with a city average of 5.47%.
• Petaling Jaya offers rental returns of around 4.36% to 6.06%, with a city average of 5.28%.
• Georgetown yields are low, ranging from 3.33% to 4.2%, with a city average of 3.77%.
• In Iskander Puteri, apartments offer relatively higher rental yields from 5.14% to 6.2%, with a city average of 5.6%.
• In Ipoh, rental yields for apartments range from 4.74% to 6%, with a city average of 5.29%.
• Shah Alam's rental returns range from 4.83% to 6.55%, with a city average of 5.39%.
• Subang Jaya offers apartment rental returns from 4.8% to 6.4%, with a city average of 5.42%.

Residential rental market remains robust

Malaysia's residential rental market continues to grow. In the Central Region, rental prices in 2024 saw an upward trend in several high-demand areas, especially those situated near LRT and MRT stations, close to major universities, and benefiting from strong transport connectivity, said JPPH.

In WP Kuala Lumpur, the rental market for terraced houses and high-rise units in various developments recorded the highest monthly rental rates in the country in 2024. Luxury condominiums such as The Binjai on the Park, The Oval, U Thant Residence, 10 Mont Kiara, Seni Mont Kiara, and Sunway Vivaldi commanded premium rents ranging from MYR 10,500 (US$2,396) to MYR 15,000 (US$3,423) per month. Meanwhile, double-storey terrace houses in prime residential areas like Damansara Heights, Desa Park City (Casaman), and Desa Sri Hartamas also secured high rental values, with rates exceeding MYR 5,000 (US$1,141) per month.

In Selangor, the rental market is generally stable, with moderate growth recorded for terraced houses and high-rise units across all districts-particularly in Petaling, Klang, Hulu Langat, and Gombak. Double-storey terraced houses and high-rise units in developments situated near urban centers, higher learning institutions, and areas with strong transport connectivity experienced double-digit rental appreciation.

In the Southern Region, the rental markets in Johor, Melaka, and Negeri Sembilan remain robust, with high-end properties driving rental increases. In fact, in Johor Bahru, double-storey terraces saw rental growth ranging from 2.6% to 10%, with Horizon Hills units renting for up to MYR 2,900 (US$662) per month.

Meanwhile, in the Northern Region, rental markets across all states were steady, with some growth recorded for terraced houses and high-rise units in areas like Barat Daya and Seberang Perai in Pulau Pinang, as well as in Ipoh City, Perak.

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 March 2025 meeting, BNM's Monetary Policy Committee (MPC) maintained its Overnight Policy Rate (OPR) unchanged at 3% for the tenth consecutive period. The recent decision was on the back of steady inflation, easing global cost pressures, and robust economic growth. Nationwide inflation eased to 1.4% in March 2025, down from 1.5% in the previous month and 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 has been unchanged since.

"The Malaysian economy recorded a higher growth of 5.1% in 2024, driven by stronger domestic demand and a rebound in exports. Moving forward, despite external uncertainties, the strength in economic activity is expected to be sustained in 2025, anchored by domestic demand. Employment and wage growth, as well as policy measures, including the upward revision of the minimum wage and civil servant salaries, will support household spending," said BNM in its March 2025 Monetary Policy Statement.

"Overall, inflation in 2025 is expected to remain manageable, amid the easing global cost conditions and the absence of excessive domestic demand pressures," added the central bank.

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 the rate of growth is noticeably slowing. 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.

In February 2025, the total amount of outstanding loans for house purchase rose by 6.8% y-o-y to MYR 844.59 billion (US$191.82 billion), according to BNM.

By financial institution, as of February 2025:

• Commercial banks: housing loans outstanding increased by a modest 3.5% y-o-y to MYR 500.11 billion (US$113.58 billion).
• Islamic banks: housing loans were up strongly by 12% y-o-y to MYR 344.43 billion (US$78.23 billion).
• Investment banks: housing loans rose by 2.7% y-o-y to MYR 42.2 million (US$9.58 million).

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

• Less than or equal to MYR 250,000: total loans amounted to MYR 93.62 billion (US$21.36 billion), down slightly by 0.6% from the same period last year.
• More than MYR 250K to MYR 500K: loans totaled MYR 268.51 billion (US$61.27 billion), up by 8.7% from the previous year.
• More than MYR 500K to MYR 1 million: housing loan volume reached MYR 308.4 billion (US$70.37 billion), up by 9% from a year ago.
• More than MYR 1 million: loans volume totaled MYR 174.06 billion (US$39.72 billion), up by 4.5% from the previous year.

The size of the mortgage market was equivalent to about 41.8% 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 is expected to continue growing during the remainder of the year, 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$2.28 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 revitalized 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. National house prices increased by just 12.8% (3.4% inflation-adjusted) from 2019 to 2024.

Socio-Economic Context:

Malaysian economy remains firm despite global headwinds

Malaysia's economy grew by 5.1% during 2024, following annual expansions of 3.6% in 2023, 8.9% in 2022, and 3.3% in 2021 and a pandemic-induced contraction of 5.5% in 2020. The robust growth last year was mainly due to increased domestic demand and a rebound in exports.

Then in the first quarter of 2025, the economy expanded by 4.4% as compared to the same period last year, after growing by 5.0% in Q4 2024, 5.4% in Q3, 5.9% in Q2, and 4.2% in Q1, mainly driven by the services, manufacturing, and construction sectors.

"Malaysia's GDP growth held firm amid persistent global headwinds, underpinned by resilient domestic fundamentals," said Chief Statistician Mohd Uzir Mahidin. He stressed that the strong performance in retail and wholesale trade, a healthy job market, and increased demand for major exports had helped shield the local economy against global challenges.

In March 2025, exports rose by a stronger-than-expected 6.8% y-o-y, with shipments to the U.S. surging by 50.8% to a record MYR 22.66 billion (US$5.14 billion).

Though Malaysia is facing a 24% tariff rate under the global import measures announced by U.S. President Donald Trump, set to take effect in July.

Despite this, the country's central bank remained optimistic that the Malaysian economy will grow by around 4.5% to 5.5% this year, and export growth was projected at 5.2%.

"The Malaysian economy is projected to grow between 4.5% and 5.5% in 2025. This growth will be driven by sustained domestic demand, despite heightened external uncertainties that could lead to a more moderate expansion of exports," said BNM.

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. The economy bounced back quickly and has been continuously growing again since.

Annual inflation eased to 1.4% in March 2025, down from 1.5% in the previous month and the lowest level recorded since February 2021, 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 manageable this year.

"In 2025, headline and core inflation are expected to average between 2% and 3.5% and 1.5% and 2.5% respectively. Inflation is expected to trend higher but will remain manageable, amid easing global costs and the absence of excessive demand pressures," according to BNM.

Labor market conditions remain strong. In February 2025, the nationwide unemployment rate stood at 3.1%, unchanged from the prior month but down from 3.3% in the previous year, according to figures released by the Department of Statistics Malaysia.

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 6% y-o-y to 532,800 people in February 2025. Employment has persistently increased since August 2021, with the number of employed rising by about 1.2% y-o-y to 16.73 million in February 2025.

Public finances improving

Malaysia's budget deficit was equivalent to 4.1% of GDP in 2024, an improvement from shortfalls of about 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 far 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 Malaysian government is committed to reducing the deficit further to around 3.8% of GDP this year, according to Finance Minister II Datuk Seri Amir Hamzah Azizan, in an effort to consolidate the country's fiscal position for more sustainable public finance.

This is in line with the projections released by BMI, a unit of Fitch Solutions. BMI retained its forecast that Malaysia's federal government budget deficit will narrow to 3.8% of GDP in 2025, 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$92.1 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 are set to drop from nearly MYR 100 billion (US$23.1 billion) in 2022 to MYR 92.6 billion (US$21.4 billion) in 2023, and to about MYR 77 billion (US$17.8 billion) in 2024.

"This declining trend demonstrates the government's commitment to ensuring that the debt-to-gross domestic product (GDP) ratio is reduced so that it does not exceed 60 per cent, and that a fiscal deficit of three per cent can be achieved in the medium term, as stipulated in the Public Financial Act and Fiscal Responsibility Act (FRA) 2023," said Finance Minister Azizan.

"Therefore, in general, we are on track to achieve the targets outlined in the FRA by the end of 2028, starting with achieving a three per cent deficit," he added.

The government's gross debt was estimated to be around 69.4% of GDP last year, slightly down from 69.8% in 2023 but still far higher than 61.1% in 2022.

BMI forecasts Malaysia's total government debt as a share of GDP to decline to around 63% of GDP this year, slightly lower than the country's statutory debt limit of 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 year, amidst a cautious outlook on the U.S. economy. The ringgit appreciated by nearly 8% against the U.S. dollar to reach a monthly average exchange rate of MYR 4.4187 = USD1 in April 2025, from MYR 4.7712 = USD1 in April 2024.

This partly 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.

"Ringgit performance continues to be primarily driven by external developments. The narrowing interest rate differentials between Malaysia and the advanced economies are positive for the ringgit. Financial markets could experience heightened bouts of volatility due to global policy uncertainties. Nevertheless, Malaysia's favourable economic prospects and domestic structural reforms, complemented by ongoing initiatives to encourage flows, will continue to provide enduring support to the ringgit," said BNM in its March 2025 Monetary Policy Statement.

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. In 2024, the country was estimated to have recorded a modest current account surplus of 1.4% of GDP, despite high import costs for intermediate goods and capital investments. 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 capitalized 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 remained 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 polarized political climate, Anwar succeeded in consolidating power in 2023 and brought unexpected stability, but at the price of slow-pedaling much-needed economic and democratic reforms, according to an article published by the East Asia Forum.

In a recently concluded 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.

In 2024, the economy performed better than expected, thanks in part to rising foreign investment, especially in the semiconductor industry. The ringgit also saw a slight recovery, and Anwar's active diplomacy helped raise Malaysia's international profile. As Malaysia assumed the ASEAN Chair in 2025, Anwar now faces growing expectations both at home and on the global stage.

Sources:

• Malaysian Quarterly House Price Index (Valuation and Property Services Department): https://napic2.jpph.gov.my/
• Malaysia Property Market Report Q1 2024 (Property Guru): https://www.propertyguru.com.my/
• Over 58,400 MM2H passes approved to date (The Star): https://www.thestar.com.my/
• MM2H approvals reach 58,468 by end-2024, govt gains over RM455m from investments - Tiong (The Edge Malaysia): https://theedgemalaysia.com/
• Overhaul for Malaysia's My Second Home Program: What You Need to Know (ASEAN Briefing): https://www.aseanbriefing.com/
• eMM2H Official Launch (Mm2h.com): https://emm2h.com/
• Temporary Suspension Of Malaysia My Second Home Programme (MM2H) (Ministry of Tourism, Arts and Culture): https://www.motac.gov.my/
• After Rejecting Up to 90% of Applications, Malaysia Freezes MM2H, Again (IMI Daily): https://www.imidaily.com/
• Gross rental yields in Malaysia: Kuala Lumpur and 7 other areas (Global Property Guide): https://www.globalpropertyguide.com/
• Malaysia Property Buying Guide for Foreigners in 2025 (iProperty): https://www.iproperty.com.my/
• Foreigners Buying Property In Malaysia: Your Complete Guide! (PropertyGuru): https://www.propertyguru.com.my/
• How to Buy a House in Malaysia as a Foreigner: 2025 Guide: Rules & Cost (Housing Watch): https://www.housingwatch.my/
• Monthly Highlights & Statistics February 2025 (Bank Negara Malaysia): https://www.bnm.gov.my/
• Malaysia Overnight Rate (MYOR) (Bank Negara Malaysia): https://www.bnm.gov.my/
• Malaysia Consumer Price Index (CPI) (Trading Economics): https://tradingeconomics.com/
• Malaysia (International Monetary Fund): https://www.imf.org/
• Monetary Policy Statement, September 2024 (Bank Negara Malaysia): https://www.bnm.gov.my/
• Monetary Policy Statement, March 2025 (Bank Negara Malaysia): https://www.bnm.gov.my/
• Malaysia Interest Rate (Trading Economics): https://tradingeconomics.com/
• Can Budget 2025 tax relief make homes affordable? (The Malaysian Reserve): https://themalaysianreserve.com/
• Economic and Financial Developments in Malaysia in the Fourth Quarter of 2024 (Bank Negara Malaysia): https://www.bnm.gov.my/
• Bank Negara Malaysia Publishes Annual Report 2024, Economic and Monetary Review 2024 and Financial Stability Review for Second Half 2024 (Bank Negara Malaysia): https://www.bnm.gov.my/
• Malaysia's economy grew 4.4% y/y in Q1, exports to U.S. surge in March (Reuters): https://www.reuters.com/
• Advance Gross Domestic Product (GDP) Estimates First Quarter 2025 (Department of Statistics Malaysia): https://www.dosm.gov.my/.
• Labour Force Statistics, February 2025 (Department of Statistics Malaysia): https://www.dosm.gov.my/
• Malaysia Government Budget (Trading Economics): https://tradingeconomics.com/
• Malaysia's federal govt deficit to narrow to 3.8% of GDP in 2025, says BMI (The Edge Malaysia): https://theedgemalaysia.com/
• What's in Malaysia's 2025 Budget? (The Diplomat): https://thediplomat.com/
• Finance minister: Malaysia on course for 3.8pc deficit in 2025, reducing national debt (Malay Mail): https://www.malaymail.com/
• Malaysia's federal govt deficit to narrow to 3.8% of GDP in 2025 - BMI (The Star): https://www.thestar.com.my/
• Fitch Affirms Malaysia at 'BBB+'; Outlook Stable (Fitch Ratings): https://www.fitchratings.com/
• Malaysia country profile (BBC News): https://www.bbc.com/
• Malaysia's economic reform still caught in the baggage of the old politics (East Asia Forum): https://eastasiaforum.org/
• Malaysia's Anwar gets boost with 2nd straight by-election win (Bangkok Post): https://www.bangkokpost.com/
• Malaysia's reform aspirations clashed with political realities in 2024 (East Asia Forum): https://eastasiaforum.org/