Malaysia’s property market is expected to remain weak in the second half of 2024, according to the Real Estate and Housing Developers’ Association (Rehda). Despite some positive indicators in property launches and sales earlier this year, many developers are approaching the rest of the year with caution. The prevailing sentiment is one of prudence, as uncertainties continue to cloud the immediate future of the real estate sector.
Developers are proceeding cautiously with their business operations due to a mix of unfavorable market conditions and ongoing challenges that have not been fully addressed. This careful approach is especially evident among smaller developers, who feel the impact of increasing costs and market volatility more keenly than their larger counterparts.
Optimism builds for a 2025 market recovery
Developers are very optimistic about the property market’s performance in the first half of 2025. They are hopeful due to expectations of a more positive economic situation in Malaysia. Anticipated government initiatives, such as supportive measures in the upcoming 2025 Budget, are expected to address major industry challenges and stimulate growth.
The confidence in a rebound by 2025 suggests that developers believe the current market softness is temporary. They are hopeful that economic improvements and policy support will revitalize buyer interest and investment activity, setting the stage for a more robust property market in the near future.
Rising material costs squeeze smaller developers
Developers are facing a major challenge due to the rising prices of certain building materials. Smaller developers are especially affected by these higher costs, which have a more significant impact on their profits compared to larger companies that have more financial stability. As a result, these financial pressures have led to more cautious business strategies and a reluctance to start new projects.
Higher costs pose a challenge for smaller developers who struggle to price their properties competitively without compromising profitability. This situation adds to the general hesitancy in the market, as developers carefully consider the risks and benefits of launching new developments in the face of uncertain economic conditions.
Majority of developers postpone new launches
The Rehda survey showed that 56% of respondents do not plan to launch new projects in the second half of 2024. Several factors contribute to this decision, including unfavorable market conditions and business constraints such as financing difficulties. Additionally, a lack of suitable products or land banks, and low buyer demand in specific locations have led developers to hold back.
Another significant factor is the high number of unsold stock, which contributes to the hesitation in introducing new properties into an already saturated market. Developers are prioritizing the management of existing inventories instead of taking on the risks associated with new launches during a period of market softness.
Marginal growth amid high unsold units
In the first half of 2024, the property market experienced a slight increase in sales despite the challenges. A total of 13,445 units were sold, with 65% (8,699 units) coming from existing unsold units rather than new launches. This suggests that although new developments are slowing down, there is still activity in the market as buyers make use of the properties that are currently available.
However, the number of completed residential units that remain unsold is still high due to several factors. Rejections of end-financing loans account for 23% of unsold units, while low demand or interest contributes 19%, and unsold Bumiputera lots make up 18%. Many of these unsold properties are priced at RM 500,000 ($105,000) or below, highlighting affordability issues and financing challenges faced by potential buyers.
What this means for foreign investors
For individuals interested in investing in Malaysian real estate or purchasing a holiday home, the current market conditions offer both challenges and opportunities. The slow market in the second half of 2024 may result in attractive pricing and negotiation opportunities. However, the cautious approach of developers and the high number of unsold units indicate the need for thorough due diligence.
The expected market recovery in 2025 could indicate a good time to invest, particularly if government initiatives effectively tackle industry challenges. Foreign investors should keep abreast of policy changes and market trends to take advantage of potential growth in the Malaysian property market.
