Property sector on solid ground

OF late, there has been some misconception about the health of the Malaysian property market and, to a larger extent, its impact on the banking sector as well as on the economy.

According to official data from the National Property Information Centre (Napic), the Malaysian property sector experienced a slight dip of 1% year-on-year (y-o-y) to 416,413 transactions in 2025, the first annual drop since the 9.9% decline in 2020.

However, on closer look, one could also argue that the number of transactions dropped from a record high of 420,545 transactions in 2024.

Nevertheless, transaction value continued to surge, rising 4.1% y-o-y to hit a new record high of RM241.9bil. Within the residential segment, transaction volume declined by 1.5% y-o-y, but transaction value increased 1.3% y-o-y, signalling a moderate price increase on average.

In fact, this is also captured by the Malaysian House Price Index, which rose 2.6% y-o-y to 233.1 points.

In terms of new launches, a total of 64,487 units were brought to market, a 14.9% decline from 75,784 units that were launched in 2024. There was also a drop in sales performance, from 37.3% to 35.5% in 2024.

As the number of launches in 2025 was lower, the reduced sales performance suggests there was a steep decline of 19.1% in the actual number of units sold, which fell to 22,876 units in 2025 against 28,280 the previous year.

This suggests that new launches, of those sold by developers, remain a small fraction of the overall residential property market transactions, accounting for just under 15% of the transaction volume and value.

Not alarming

Last month, there was wide coverage by the media on statistics provided by the Real Estate and Housing Developers’ Association (Rehda) Malaysia, which showed results of a survey carried out among its members.

According to the survey, 60% of developers reported unsold completed units as at end of 2025, which was attributed to challenges faced in selling newly completed homes.

There are two issues that are misleading here.

First, this is only a survey that was conducted by Rehda among its 1,500 members, of which 166 responses were received, a small sample size of just 11.1%.

Second, as can be seen from data provided by Napic, sales from new launches are inherently not spectacular, as they averaged at 37.7% over the past five years. In any case, the sales figures do increase over time.

The 60% unsold completed units seem to suggest that sales must be extremely poor, which is not the case.

Third, unsold completed units are only part of Napic statistics if they remain unsold after nine months from the date of the receipt of the Certificate of Completion and Compliance. Those numbers are not alarming.

Higher overhang

Based on Napic’s data, residential overhang (including those originating from service residences) rose 15.2% in volume and 11.9% in value y-o-y to hit 49,223 units worth RM33.16bil.

Interestingly, it was the residential segment that rose the most as the number of overhang units surged 31.6% y-o-y to 30,471 units valued at RM17.73bil at end-2025, up 27.2% y-o-y compared with 23,149 overhang units worth RM13.94bil previously.

Service apartments, which have been a thorn in the property market, saw a 4.2% dip in the number of overhang units to 18,752 units against 19,564 units at the end of 2024. In terms of value, the overhang value in this sub-segment declined 1.8% to RM15.42bil from RM15.7bil previously.

Aged overhang

Statistics, although presented as they are, can also be misleading. For example, in terms of ageing analysis, 56.6% of residential overhang relates to properties that remained unsold for more than six years since they were completed.

For service residences, the overhang is highly concentrated among properties aged five years and beyond, with 86.2% falling into this age group.

Hence, while we may be fixated by overhang data, the real overhang that the market should be concerned about is rather minimal, as those under three years are just 23.1% of the total number of units in the residential segment and less than 4% for those that are categorised under the service apartment sub-segment.

The argument that Rehda members are facing severe unsold properties seems to be misguided, as the official data from Napic does not paint a similar picture.

Uncalled for claims

Another misleading, or rather simplistic, assumption that was recently circulating in the media is with respect to the health of the banking sector due to its RM1.195 trillion exposure to the property sector.

While the property sector has a huge exposure to the banking system, accounting for just over half of the total loan book, the health of the sector remains robust and well under control.

In fact, Bank Negara Malaysia’s (BNM) statistics as at the end of February 2026 showed that impaired loans from the residential and non-residential sector accounted for only RM14.3bil or 42.5% of the total banking sector impairment, which translates to just 1.2% in terms of gross impaired loans of total property sector outstanding loans.

The household sector remains resilient, as even though household debt to gross domestic product is at 84.8% and remains elevated, total household financial assets remain high, at 2.1 times of household debt.

Hence, for anyone to suggest that the banking system is about to collapse due to bad industry practices related to the sale of properties, which may have resulted in overvalued sale and purchase agreements (SPAs), is simply off the mark.

While there are many parties involved in such racketeering that inflates prices in SPAs, the buck surely stops at the bank level, and it will not overextend itself by providing a high margin of finance for inflated properties.

While there are many parties involved here, the key players are the valuers themselves, and for the profession to succumb to any pressure from either developers (for newly launched projects), buyers, or bank officials (presumedly to meet their key performance targets) is unethical.

Property developers, in their efforts to push sales, do provide some form of rebates, cashback, and even throw in furnished or semi-furnished units to close the sale.

However, for valuers, what matters is the real value of the property itself, and they should be the ones who make the necessary adjustments to enable bankers to provide the right amount and margin of financing and not blame others for their own lack of professional integrity.

In conclusion, the Malaysian property market remains on solid fundamentals, and data provided by both BNM and Napic speaks for itself and is not based on information from surveys or bad market practices when it comes to property valuations.