Insights
Malaysia Property: Rising headwinds
25 June 2026
- Cautious sentiment amid elevated construction cost and intensifying competition
- Stable economic growth continues to underpin resilient property demand
- Uptick in supply overhang remains manageable
Headwinds ahead
While the US and Iran have reached a tentative agreement to reopen the Strait of Hormuz, the prolonged energy supply shock since end-Feb 2026 has reverberated across supply chains, leading to elevated construction cost for property developers. The property market may experience a period of consolidation as prospective buyers adopt a wait-and-see approach before committing to purchases. In the near term, inflationary pressures, tighter lending standards and higher development costs could temper demand and weigh on developers' earnings.
Weaker confidence
1Q26 property transactions dipped 8% y-o-y, largely driven by the weak residential segment which declined 11% y-o-y. This is contrary to the stronger-than-expected 1Q26 GDP growth of 5.4%, reflecting the divergence from a relatively subdued property market. While property developers have started to feel the brunt of weaker sentiment in 1Q26, large listed-developers continue to achieve relatively decent property sales with most being confident of achieving their respective full-year sales targets. Nevertheless, property loan demand remained healthy as loans for residential property and non-residential property grew 5.6% and 7.5% respectively in Apr 2026 (vs total loan growth of 5.6%). Meanwhile, Apr 2026 property loan applications rebounded by 12% y-o-y, reversing a two-month moderating trend driven by Middle East conflict concerns.
Selective opportunities
1Q26 overhang for residential and high-rise properties grew by +5% q-o-q and +26% y-o-y, marking the fourth successive quarterly increase since the lows in 1Q25. While this warrants greater caution for the property sector, we believe Malaysia's property demand will remain supported by an accommodative economic landscape. In addition, the proportion of unsold units to overall residential inventory remains below pre-pandemic levels. Meanwhile, Malaysia's appeal as an attractive investment destination, will continue to support demand for industrial and commercial properties.
