Malaysia Property: Cautiously Optimistic

• Resilient domestic demand underpins stable property demand
• Robust labour market and accommodative monetary policy to lift sentiment
• Tailwinds from Malaysia's sustained investment upcycle

Steady growth

Malaysia's 2Q25 property sector demonstrated healthy growth momentum (+1% q-o-q, +4% y-o-y) despite elevated tariff-induced economic slowdown concerns during the quarter. This is in line with 2Q25 GDP growth of 4.4%, thanks to the robust domestic demand. Notably, the industrial properties segment was the standout performer, registering a robust 18% y-o-y increase in 2Q25 transactions as the record-high approved investments in 2021-2024 continue to be implemented. We believe the overall property market will continue to be implemented. We believe the overall property market will continue to exhibit resilient underlying strength in 2H25, in tandem with stable household spending and investment activities.

Overhang concerns

2Q25 residential overhang came in at 26,911 units (+14% q-o-q, +19% y-o-y) marking the third successive quarterly increase since the lows in 3Q25. This largely reflects the aggressive projects launches over the past three years to capture the long-overdue sector recovery since 2022. We believe this nascent uptick is not a major risk at this juncture, considering the sustained expansion in the labour market as unemployment rate dipped to a 10-year low of 3.0% in Jul 2025 with record high labour force participation.

Better 2H25 with easing uncertainties.

The 19% US tariff on Malaysian exports puts the country on par with the rates imposed on other competing ASEAN peers which may help preserve Malaysia's competitive advantages in the US trade. Meanwhile, the first BNM interest rate cut of 25 bps in Jul 2025 to 2.75% in five years will serve as a catalyst to boost the property market sentiment, coupled with government's concerted efforts to alleviate cost of living for the people. In addition, Budget 2026, to be unveiled on 10 Oct 2025 is expected to promote housing affordability with financial/tax incentives which will in turn help sustain resilient property demand.

Tailwinds from burgeoning investment activities

Malaysia's progressive national policies for digital economy and renewable energy have led to record high investments, as the country has emerged as a fast-rising hub for regional cloud infrastructure. This sustained uptrend has continued unabated in 2025 as approved investments rose 19% y-o-y to RM190bn in 1H25, spurring strong industrial land price appreciation especially in strategic locations within Johor and Selangor.
 

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