As we usher in 2025, Malaysia’s property market is on a bullish trajectory. However, while this spells good news for property owners and investors, it is shaping up to be a tough year for those who have yet to get on the property ownership ladder.
Let’s explore why this year might be a turning point for tenants and non-property owners—and why waiting any longer to invest could widen the wealth gap even further.
Setting the stage
The year 2024 marked the beginning of the property market’s recovery after the pandemic-induced slump. Several key factors contributed to this rebound:
- Low inflation and unemployment: Inflation remained at a modest 1.9%, while the unemployment rate dropped to its lowest since the lockdowns at 3.2%.
- Foreign direct investment (FDI) growth: Malaysia’s government actively pursued policies to attract foreign investment, bolstered by political stability and a weak ringgit, making Malaysian assets more appealing.
- Stable interest rates: The US Federal Reserve’s decision to cut interest rates by 0.25% helped usher in a lower-interest environment globally.
These factors collectively fuelled a surge in property transactions and higher rental rates. The National Property Information Centre (NAPIC) reported that property transactions reached record highs in Q1 to Q3 2024, with 311,211 units sold, valued at RM162.96bil — a 6.2% increase in volume and a 14.3% increase in value year-on-year.
Why 2025 could be worse for non-owners
With property prices and rentals on the rise, non-property owners face a growing challenge. In some areas, rental rates have increased by as much as 20% year-on-year. The Home Rental Index rose by 5.5%, reflecting sustained demand, especially in urban centres like the Klang Valley.
These rising costs are driven by several factors:
- Undersupply of New Launches: Developers have slowed the pace of new launches due to heightened scrutiny following recent structural issues, such as the sinkhole incident. This supply constraint is expected to persist for the next few years, driving rental demand higher.
- Rising Demand from Foreign Investors: With the ringgit at a historic low, foreign investors are snapping up properties in Malaysia, particularly in prime areas like KLCC, Bangsar and Bukit Bintang. This influx has increased rental yields, making it harder for local tenants to afford.
- Infrastructure Projects: The government’s ambitious infrastructure projects, such as Bandar Malaysia, will further boost property demand. KLCC Properties has been appointed as the master developer for this project and I anticipate that it will replicate its successful development model from Kuala Lumpur City Centre.
Economic stability driving confidence
Malaysia’s improving economic fundamentals continue to drive property investment. Household debt remains manageable at 70% of GDP while loan approvals for personal loans, vehicle financing and credit cards are at their highest levels in years.
This strong credit environment indicates that Malaysians are financially equipped to invest in property, despite rising prices. Personal wealth growth, coupled with a stable government and promising job market, provides further confidence.
NAPIC’s Q3 2024 data paints a clear picture of the market’s momentum:
- 112,000 property transactions in Q3 2024: This represents a 3% increase year-on-year.
- Total transaction value of RM57.3bil: Up 13.7% from Q3 2023.
- Residential sub-sector growth: Property sales reached 192,484 units valued at RM78.17 billion in Q1 to Q3 2024, marking a 4.9% and 6.9% increase, respectively.
- Overhang properties reduced by 15.2%: The total overhang dropped to 21,968 units, down from its peak in recent years.
Despite these gains, Kuala Lumpur, Perak and Johor respectively remain the states with the highest overhang units, highlighting that not all markets are equally buoyant.
Rental market trends
Rental rates have been steadily climbing, driven by increased demand and a constrained supply of new properties. In Klang Valley, rental yields have risen dramatically as workers return to the city post-pandemic and international tenants seek accommodation in prime locations.
The short-stay rental market, such as Airbnb, has also rebounded. Weaker ringgit values have increased domestic tourism, further driving demand for short-term rentals.
Based on current trends, the property bull run is expected to begin this year and continue beyond. Key predictions for this year include:
- Transaction volumes: Maintaining a 10% variance compared to the average of 2022–2024 transaction levels.
- Rental growth: Particularly in Tier 1 areas, where undersupply continues to push prices up.
- Property values: Anticipated to rise to their highest rate in four years.
- New launches: Expected to return to pre-pandemic levels as developers regain confidence.
Bad news for tenants
For tenants and those without property assets, 2025 looks set to widen the wealth gap further. Rising rental rates, increasing property values and constrained supply mean that the cost of not owning property will only grow over time.
With mega infrastructure projects like Bandar Malaysia set to transform the landscape and foreign investment continuing to flow into the country, the property market’s upward trajectory shows no signs of slowing down. Property ownership is no longer just about having a home—it is about securing financial stability and capitalising on Malaysia’s growth story.
For those still sitting on the sidelines, the window of opportunity is narrowing. The longer one waits to enter the property market, the more expensive and challenging it will become to catch up. In 2025, not owning property could be the biggest financial setback for Malaysians.
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‘Good year for property’
Frank Knight Malaysia's Wong said Johor is an obvious market that is expected to grow.
KUALA LUMPUR: The property market is poised for growth in 2025, with a significant focus on industrial property which will be underpinned by supporting government policies and increase in foreign direct investments (FDIs), says Knight Frank Malaysia executive director of research and consultancy Amy Wong Siew Fong.
The increase in FDIs will lead to a higher number of multinational companies opting to kick start operations and thus drive the economy.
Citing a recent report conducted by Knight Frank titled “Real Estate Highlights”, Wong said respondents had ranked data centres, industrial and logistics as the top three growing real estate investment sectors for 2024.
“Moving into 2025, the green light is for data centres, industrial and logistics, while office, hospitality and retail are rather stagnant,” she said during a panel session at the 18th Bursa-Hong Leong Investment Bank (HLIB) stratum focus series here yesterday.
She highlighted that aside from the Klang Valley, Johor is an obvious market that is expected to grow, especially considering the development of the Johor-Singapore Special Economic Zone (JS-SEZ) followed by Penang.
However, in terms of investment, Wong pointed out that despite the Iskandar region playing a huge role for the JS-SEZ, the market may not be as exciting as the Johor Baru City Centre area.
“If you are talking about the JS-SEZ, I think the industrial sector will continue to be a key sector to look at and manufacturers will continue to look into areas surrounding Senai and Kulai – which always have consistent demand due to its good fundamentals,” she said.
Wong said there has also been an increase in interest in the Sarawak and Sabah region, considering its strong drive towards the green agenda.
Asked about expected downside risks for the year, Wong said there are factors that are impossible to predict such as changes in policies and rate cuts.
“With all these chess pieces in place, I think 2025 is going to be a good year for the property market,” she said.
Sharing the same optimism, HLIB group managing director and chief executive officer Lee Jim Leng said affordability remains a key factor for the property market moving forward.
“In 2025, we are expecting higher wages for civil servants and the introduction of a higher minimum wage.
“The incremental increase in disposable income is a much welcome factor in catalysing demand and raising affordability for properties across the country,” she said, adding that the current 3% overnight policy rate and stable mortgage rates are also expected to bode well for the property sector.Positive indicators such as stable employment growth rate and an expected gross domestic product growth of 4.9% for 2025, are expected to provide the right conditions for sustained growth within the property sector.
According to the National Property Information Centre, Malaysia’s property transaction values soared to RM105.65bil in the first half of 2024, marking an impressive 23.8% year-on-year growth and the highest in five years.
As of the nine months of 2024, the number was noted to have increased to RM162.96bil.
The Kuala Lumpur Property Index has increased by 31.17% in 2024 and the residential overhang situation was noted to have improved, with a 12.3% reduction in volume of unsold properties.
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