Economic factors, government policies, and demographic changes contributed to significant transformations in the Malaysian housing market between 2000 and 2025. During this period, Malaysia’s economy fluctuated in tandem with the global economy, influenced by domestic policy changes and demographic shifts. Key drivers for housing demand included urbanization, population growth, and rising household incomes. However, the housing market became increasingly unaffordable due to the disparity between income growth and housing prices.
In the early 2000s, house prices began to rise rapidly. By 2016, they were 2.4 times higher than in 2000. From 2002 to 2014, house prices grew at a compound annual growth rate (CAGR) of 26.5%, while income increased by only 11.7% during the same period. This imbalance significantly affected homeownership rates, which declined from 4.1% in 2002 to 5.1% in 2014 before slightly increasing to 5.0% in 2016.
Government Policy and Initiatives
The Malaysian government is actively addressing housing affordability and living conditions through various policies. A key focus of the National Housing Policy (2018–2025) is affordable housing planning and development. Programs such as the People’s Housing Programme (PPR) are critical in providing low-cost housing for low- and middle-income families.
Despite these efforts, challenges remain. As of mid-2023, only 50,036 residential units were available, while the demand for the Rumah Selangorku housing scheme exceeded 83,603 units. Furthermore, over 25,311 completed units remained unsold, indicating a significant surplus in certain regions.
To tackle ongoing issues of housing affordability and accessibility in Malaysia, the National Housing Policy (NHP) 2018-2025 was introduced, specifically targeting the bottom 40% income group (B40). This policy aims to bridge the gap between housing demand and supply, with a special focus on increasing homeownership rates among low-income households. One notable initiative is the Rent to Own (RTO) Scheme, which allows families to rent a property for five years before being able to borrow money to purchase it. The National Home Ownership Campaign also promotes affordable housing by offering stamp duty exemptions for first-time buyers purchasing homes valued under RM500,000. The government has also allocated RM1 billion through Bank Negara Malaysia to support first-time homebuyers with incomes below RM2,300, enabling them to buy homes priced between RM150,000 and RM300,000 at concessionary financing rates. These programs aim to reduce financial barriers and enhance homeownership opportunities for low-income households.
Although the NHP has improved access to housing for low-income families, several issues persist. There is a supply-demand mismatch, with affordable housing units priced below RM200,000 making up less than 20% of launched projects in recent years. Additionally, economic challenges, worsened by the COVID-19 pandemic, have led to job losses and reduced incomes, making it increasingly difficult for first-time buyers to afford homes in an already strained market. The problem of property overhang remains significant, with over 25,000 unsold residential units valued at RM17.4 billion as of Q3 2023, many of which are priced beyond the reach of low-income families.
Buying Capability & Market Trends
Several factors, such as interest rates, economic growth, and employment rates, have influenced Malaysians’ purchasing power. A notable increase in the Malaysian property market is evident, with transactions rising to an impressive 399,000 units sold in 2023, primarily valued at RM200 billion. Despite this recovery, the average house price in 2023 reached RM467,144, showing an average annual growth rate of 3.2 percent.
Looking ahead through 2025 and beyond, Malaysia’s property market is expected to continue evolving, strongly emphasizing sustainability and innovation. This evolution is set to attract both local and international investors, particularly in green-certified developments. Furthermore, government initiatives to enhance connectivity and infrastructure will play a significant role in shaping future demand.
Under the National Housing Policy 2018-2025, various measures have been taken to increase the homeownership rate among Malaysians, particularly the low-income group. Since its implementation, there has been a slight increase in overall homeownership rates; however, rising house prices and a mismatch in supply and demand continue to present significant barriers. As a result, future efforts must focus on developing affordable housing and effectively implementing financial assistance programs to ensure that all Malaysians can achieve the dream of homeownership.
From 2000 to 2025, Malaysia’s housing sector has faced notable challenges and opportunities, providing valuable lessons regarding urban forms and processes, policy paradigms, financing, and delivery systems. Despite the demand for housing, affordability remains a significant challenge, with many potential homeowners unable to purchase a home. As the economy evolves, it will be crucial for the government to maintain its intervention to keep housing accessible for all Malaysians.
Two important takeaways from the housing developments in Malaysia between 2000 and 2025 include the persistent lag in income growth compared to escalating housing prices and the vital role of government initiatives—such as the National Housing Policy—in improving access to affordable housing for low-income families. Moving forward, exploring innovative partnerships with private developers to supply genuinely affordable housing units and repurpose surplus units on the market to create additional affordable options is essential. Future preparations should emphasize sustainable urban planning by promoting green-certified developments and enhancing financial aid programs that reflect the changing economic circumstances of Malaysian households.
By: Associate Professor Ts. Sr Dr. Noorsidi Aizuddin Hj Mat Noor currently serves as the Head of the Mass Appraisal, Housing, and Planning Research Group at the Faculty of Built Environment and Surveying (FABU), Universiti Teknologi Malaysia (UTM)
Source: UTM NewsHub