Time to rein in supply

THE latest National Property Information Centre (Napic) data shows that the largest category of property overhang is in the affordable housing segment priced at RM300,000 and below.

This is surprising, considering the media has often reported that there is a shortage of affordable housing for the people.

According to Napic, 14,201 completed residential units worth RM2.77bil remained unsold as of the first quarter of 2026, accounting for 43.3% of Malaysia’s total property overhang. The majority of these units are located in the Klang Valley, Johor and Perak.

In fact, successive government administrations have always put affordable housing on the agenda as part of their election manifestos.

From the 1Malaysia Housing Programme or PR1MA to Madani housing at the federal level, and Rumah Selangorku, Rumah Mampu Milik Johor and Rumah WIP at the state level, various iterations of affordable housing programmes have been introduced.

Despite all these programmes, it would appear that there is a lack of buyers for these completed residential units. It is an oxymoron that affordable housing units are the biggest contributor to the country’s property oversupply.

Rise of unqualified developers

In Economics 101, it is about supply and demand. Where supply exceeds demand, naturally the price falls. This would adjust the market equilibrium, where the price falls to a certain level and demand picks up to meet supply and form a new equilibrium.

The pertinent question to ask then is why the overhang persists despite the price falling below the affordable housing threshold of RM300,000.

Real Estate and Housing Developers’ Association Malaysia Institute has highlighted a variety of reasons for this, such as housing quotas, bumiputra quota release mechanisms, excessive cross-subsidisation within the housing development framework, project location versus pricing, connectivity and others.

It has called for stronger incentives to encourage affordable housing delivery, more innovative home financing options and the integration of national housing data to support evidence-based policymaking.

However, what I feel is the main challenge in the property sector over the past decades is the rise of many unqualified developers. By unqualified, I mean developers whose core business is not within the property and construction industry. Their main business may be consumer retail, trading and distribution, technology, insurance or others, but they decided to venture into property development with the belief that the business is easy and profitable.

This is why we have seen failed and abandoned projects over the past decades, some even in prime locations. When there are unqualified developers, they produce products that do not meet market demand and fail to address the actual needs of the people.

Additionally, they flood the market with units for which there are no takers. The assumption of “build and they will come” is a fallacy that has proven to repeat itself every market cycle.

It is important to realise that the property sector is cyclical, with boom-and-bust cycles occurring throughout history, and is hardly ever smooth sailing.

Central federal agency

If we truly hope to address the affordable housing gap, the solution is not to build more houses. Some policymakers may think that addressing the shortage of access to housing means increasing supply but, in fact, this will end up being detrimental and could kill the industry altogether.

The first step is to form a central federal agency to coordinate and implement affordable housing projects instead of allowing each state to run its own programme.

A central agency, taking a leaf out of one of the most successful affordable housing programmes in the world – the Singapore Housing and Development Board, or HDB – would be the first step in that direction.

The benefits of a central agency would include cost savings, project delivery efficiency and effective progress monitoring. A standardised design with economies of scale could be achieved nationwide.

When everyone is trying to do everything at the same time, the outcome is often atrocious. Too many cooks spoil the broth.

Once a central agency takes control, national data can be analysed and products rolled out through central procurement, while the appointment of contractors and vendors along the supply chain can be coordinated more effectively.

As land is a state matter, the states can retain authority over approvals, but the design of affordable housing policies should be based on a national framework. This would also allow the adoption of the industrialised building system to make commercial sense due to the sheer scale of rollout across projects nationwide.

Private sector participation

For now, the immediate resolution to the oversupply of properties below RM300,000, I believe, is to help reduce the overhang before it gets out of control.

If market forces cannot fix the imbalance, some level of government intervention would be necessary. Instead of launching new affordable housing projects in new locations, the government should first assess projects by the private sector that are contributing to the overhang.

If the price, unit and design fit the criteria for affordable housing, the government and its relevant agencies can seek out private sector developers carrying these unsold units on their balance sheets and match them with end-buyers in the government’s database.

Working together to redesignate the remaining unsold units (subject to the government’s approved criteria for affordable housing), then helping to market them, would be a win-win solution.

This gives developers sitting on unsold units a second chance to clear their stock, while the government need not fork out additional funding for new projects.

Genuine buyers would have immediate access to these properties, which otherwise they would have to wait another few years to occupy after completion.

Let market forces dictate

Some think tanks would argue that easy financing and the availability of mortgages cause the oversupply in the property market.

However, the flip side would be depriving genuine buyers who want to own a home. If there is a situation of overbuilding in the property market, naturally prices would come down. We have seen this happen in the retail mall and commercial office asset classes.

The problem is also the hype of the day. Many developers build based on the flavour of the day.

For example, industrial assets have been very attractive to many investors and buyers over the past four to five years.

Now there is an increasing number of unqualified developers venturing into industrial development. This may also be a cause for concern in the future.

At the end of the day, market forces dictate everything, and the best way to address the root cause of oversupply is to first address the current overhang by reducing approval permits and developer licences in locations that are unrealistic.