Malaysia Property: Healthy growth momentum

• Sustained domestic demand in 2026 to underpin resilient property market outlook
• Malaysia's economic tailwinds to more than offset external uncertainties
• Manageable supply overhang despite uptick

Closing 2025 with a bang

Malaysia's property sector delivered its strongest performance in 4Q25, with property transactions (+3.4% q-o-q, 2% y-o-y) rising for the fourth consecutive quarter, alongside strong 4Q25 GDP growth of 6.3%. This is also corroborated by firm property loans demand as loans for residential property and non-residential property grew 5.9% and 6.4% respectively in Dec 2025, reflecting the healthy economic outlook. The shift in market sentiment from US tariff-related fear and uncertainty in 1H25 to a more upbeat tone in 2hH25 clearly contributed to the sustained growth momentum for Malaysia's property market.

Tailwinds from domestic economy.

Notwithstanding the escalating Middle East tensions, we believe Malaysia's property demand will remain supported by the accommodative economic landscape. Large developers have generally projected steady property sales target in 2026, indicating stable property demand. This is also evident in the 17% y-o-y climb for Jan 2026 residential property loan applications. In addition, the record-high approved investments in 2025 (+11% y-o-y) underscores Malaysia's appeal as an attractive investment destination. Notably, approved investments have reached new record highs for three years consecutively, which will underpin sustained demand for industrial and commercial properties.

Overhang concerns.

4Q25 overhang for residential and high-rise properties grew by +5% q-o-q and +17% y-o-y, marking the third successive quarterly increase since the lows in 1Q25. We are not unduly worried as this largely reflects the aggressive project launches over the past three years to capture the long-overdue sector recovery since 2022. We believe this nascent uptick remains an insignificant risk at this juncture, considering the sustained expansion in the labour market as unemployment rate dipped to a 11-year low of 2.9% in Jan 2026 with historic high labour force participation rate. Meanwhile, the proportion of unsold units to overall residential inventory remains below pre-pandemic levels, indicating healthy supply conditions.

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