PETALING JAYA: The residential market is expected to remain resilient “but selective” in the second half of the year (2H25), as affordable and strategically located projects are set to continue recording healthy take-up.
Zerin Properties chief executive officer (CEO) Previn Singhe said transaction volumes could record a modest uplift from levels in 1H25 supported by Bank Negara Malaysia’s decision to maintain the country’s benchmark interest rate at 2.75%.
“This will sustain borrowing affordability and ongoing incentives such as loan guarantees and tax reliefs,” he told StarBiz, adding that policy direction would also be a key driver.
“The 13th Malaysia Plan (13MP), with RM430bil in development expenditure, together with the upcoming Budget 2026, provides a strong framework for growth.
“The government’s plan to deliver one million affordable homes between 2026 and 2035 is ambitious, but its success will depend on delivery in the right locations, supported by transport infrastructure and employment hubs.”
Previn emphasised that quality and suitability would be just as important as quantity in ensuring long-term absorption.
Olive Tree Property Consultants founder and CEO Samuel Tan
Olive Tree Property Consultants founder and CEO Samuel Tan expects steady growth for the residential segment in 2H25, with “several supportive factors at play”.
“Demand should be lifted by potential policy incentives in Budget 2026, resilient owner-occupier needs in the affordable and mid-range segments, major infrastructure projects like the Johor Baru–Singapore Rapid Transit System Link, Johor-Singapore Special Economic Zone and Mass Rapid Transit 3, as well as more market-aligned launches by developers.
“However, inflationary pressures and supply-demand mismatches, particularly in the mid-to-high-end segment, remain challenging.”
Olive Tree Property Consultants executive director Tan Wee Tiam expects cautious optimism for the residential segment in 2H25 driven by a stable economic backdrop, government initiatives and continued demand in the affordable housing segment.
“However, the market will remain highly selective,” he said.
Overall, Wee Tiam believes that momentum would be driven by affordable housing and connectivity-led growth corridors, keeping the residential property market on a stable upward path.
“Budget 2026 which will be unveiled on Oct 10, will see the government strengthening housing reform, with a particular focus on expanding access to affordable housing.
“Reforms under the 13MP are also designed to address housing challenges, including the development of new models such as rent-to-own schemes and a gradual shift towards a build-then-sell approach to reduce the risk of abandoned projects.”
Data from the National Property Information Centre showed the residential property segment in 1H25 dipping in volume and value to 120,307 units and RM49.37bil respectively, compared with 121,964 units and RM49.43bil in 1H24.
TA Research said the moderation was relatively mild in historical context.
“Residential activity remains well above post-pandemic lows, and the slight pullback mainly reflects a high-base effect after several years of strong growth.
“Given ongoing local policy adjustments [fuel subsidy rationalisation, sales and service tax (SST) expansion and e-invoicing rollout] and external uncertainties (such as renewed tariff rhetoric in the United States after Liberation Day), some cooling in transaction momentum is not unexpected.”
Additionally, the research house noted that the overhang of homes worsened in 1H25, with the number of completed-but-unsold residences rising 16.3% in volume to 26,911 units and 17.9% in value to RM16.4bil from end-2024.
“While this marks a reversal after several quarters of decline, we do not view the increase as alarming.
“Comparisons with the 2021 peak (36,900 units worth RM22.8bil) are less meaningful, as market activity during that period was distorted by the pandemic standstill.
“Instead, benchmarking against the 2018 to 2019 levels, when overhang volumes already exceeded 30,000 units, provides more realistic context, as today’s levels remain below pre-pandemic highs.”
Zerin Properties chief executive officer (CEO) Previn Singhe
Previn noted that developers have also shifted focus towards inventory management and margin discipline, especially with the rise in overhang levels.
This (overhang) stock is concentrated mainly in residential-titled high-rise projects (condominiums and flats), which account for 58.5% of the total.
“Equally crucial is the performance of the serviced apartment segment (under commercial title).
“In 1H25, performance was mixed, with transaction volume easing slightly to 6,624 units [minus 2.6% year-on-year (y-o-y)] but transaction value rising to RM5.16bil (up 4.5% y-o-y), reflecting fewer sales but at higher price points.”
Encouragingly, Previn said the overhang eased to 17,883 units (minus 8.6% versus 2H24) worth RM14.43bil (minus 8.1%).
“This signals gradual progress in clearing unsold supply in a segment that has been one of the key drags on overall balance,” he said.
Going forward, Previn said that the residential market will see “persisting challenges”.
“The combined overhang (including serviced apartments) of 44,794 completed units and 106,677 unsold under-construction units reflects ongoing mismatches in product, pricing and location.
“Rising construction costs remain a key pressure point, driven by material price volatility, labour shortages, and the extended SST regime.”
While residential components have been exempted, Previn highlighted that the ambiguity over the treatment of certain materials and services continues to complicate cost planning, particularly for developers of integrated mixed-use projects.
“In parallel, shifting demographics and lifestyle preferences are compelling developers to be more careful and diligent in delivering products that align with evolving market expectations, from compact urban living to sustainable compliant housing.”
To address these issues, Previn pointed out that several 13MP recommendations are particularly relevant.
“These include wider adoption of the build-then-sell model to improve supply discipline and buyer confidence, stronger emphasis on environmental, social and governance-compliant and energy-efficient housing and greater reliance on public–private partnerships, as well as institutional delivery to scale affordable housing sustainably.”
Overall, he said the residential sector is consolidating in an adjustment phase.
“Well-located compact high-rise units, particularly those within or near transit-orientated developments and affordable landed homes in established townships will continue to attract demand, while disciplined policy execution and reforms under the 13MP will define the sector’s trajectory heading into 2026 and beyond.”
