Malaysia Property: Banking on resilient domestic demand

• Stable outlook to be underpinned by resilient demand despite external uncertainties
• SST expansion unlikely to dent healthy sector dynamics
• Positive apillover effects from Malaysia's investment upcycle

Sustainable trajectory

Malaysia's property sector growth momentum eased in 1Q25 with total property transactions falling 6% y-o-y after the record year in 2024. This was also reflected in normalizing loans growth for residential and non-residential properties which grew by 6.5% y-o-y and 7.6% y-o-y respectively in Apr 2025 (vs 6.9%/8.1% in Dec 2024). Nevertheless, Apr 2025 loan application for residential and non-residential properties grew 3.1% y-o-y and 14.8% y-o-y respctively, indicating resilient demand. We believe the overall property market continues to exhibit resilient underlying strength in tandem with stable household spending and investment activities.

Favourable supply-demand dynamics

1Q25 residential overhand came in at 23,515 units (+2% q-o-q, -3% y-o-y), a level that was last seen in 2017. Meanwhile, improvement was also seen in the overhang for serviced apartments which dipped 7% q-o-q and 17% y-o-y in 1Q25, recovering to the pre-pandemic level. All these positive results were achieved despite the aggressive property launches in 2023-2024 (+34%/+4% y-o-y), signalling improved property demand.

Minimal impact from expanded SST.

The expansion of the sales and service tax (SST) effective July 2025 includes a 6% service tax on construction services for commercial and industrial properties but residential properties are exempted. Meanwhile, sales tax for basic construction materials such as cement, aggregates and sand remains at 0%, suggesting limited price impact on the overall property market. In addition, the solid labour market conditions with record labour force participation and 10-year low unemployment will continue to sustain the property sector recovery.

Benefitting from burgeoning investment activites.

Malaysia's progressive national policies for digital economy and renewable energy have led to a record high investments, as the country has emerged as a fast-rising hub for regional cloud infrastructure. This has spurred strong land price appreciation in Johor and Selangor, benefitting industrial landowners in strategic locations. This structural trend is likely to remain supportive of Malaysia's overall property sector in 2025.

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