PETALING JAYA: Analysts are seeing growing challenges that could cloud the outlook for the property sector.
MBSB Research said in a report that the increasing property overhang is another concern for the sector.
“Besides, the elevated oil price may also weigh on sentiment and affordability, although the impact on households is partly mitigated by the Budi95 programme,” it told clients in a report.
Hence, we maintain our “neutral” stance on the sector, MBSB Research said, adding that its top picks for the sector were Matrix Concepts Holdings Bhd
and Mah Sing Group Bhd.
MBSB Research noted that total loan applications for purchase of property declined for the first time in five months in August, falling 4% year-on-year (y-o-y) to RM58.4bil.
On a monthly basis, loan applications also eased by 7.2% month-on-month.
While this may be an early indication of softer buying sentiment, the trend over the next few months will provide a clearer picture of property demand amid ongoing geopolitical uncertainties, it said.
A property analyst concurred and told StarBiz that, a clearer picture on the prospects of the sector is likely to emerge, only over the new few quarters.
Cumulatively, MBSB Research said total loan applications in the first eight months of 2026 increased marginally by 1.3% y-o-y to RM440.8bil, suggesting that overall buying sentiment remains relatively stable despite consumers remaining cautious amid the higher cost environment.
Nevertheless, persistent inflationary pressures are likely to continue weighing on purchasing decisions and could moderate buying sentiment going forward, it noted.
It said according to data released by the National Property Information Centre, the number of unsold completed residential units increased for the seventh consecutive quarter since the fourth quarter of financial year 2024 (4Q24), rising to 33,094 units in 2Q26 from 32,801 units in 1Q26.
It was also significantly higher than the 26,911 units recorded in 2Q25.
Residential overhang in the first half of this year were mainly contributed by Johor at 4,222 units, followed by Selangor (4,185 units) and Perak (4,075 units).
“Similarly, serviced apartment overhang rose sharply to 23,375 units in 2Q26 from 19,263 units in 1Q26, mainly driven by higher overhang levels in Kuala Lumpur and Selangor,” it said.
MBSB Research said it continues to view the rising property overhang as a key downside risk to the sector, as the growing inventory of unsold units may point to emerging oversupply concerns.
“This could dampen developers’ appetite for new launches and potentially weigh on sales growth and earnings visibility going forward,” it added.
It said it believed the external environment for the property market is becoming more challenging amid ongoing geopolitical tensions, elevated oil prices and rising bond yields.
While Malaysians are largely shielded by the Budi95 programme, businesses could still face higher operating costs from the indirect effects of increased fuel prices, which may in turn dampen buying sentiment, MBSB Research reiterated.
