The State Of Home Ownership And The Property Market…

For cross-subsidisation, developers bear most of the burden while absorbing project risks. Cost pressures strained project viability, contributing to delays, financial stress and even abandoned projects. Meantime, B40 households continue to struggle to purchase houses.

Recently, REHDA said, M40 homeownership rate falls below B40 as cross-subsidisation inflates open-market home prices. 

Developers concerns

REHDA’s research on abandoned projects and affordable housing delivery, showed the challenges “are systemic rather than developer-specific. Apart from affordability is the question of delivery sustainability and ecosystem (land policy, financing structures, infrastructure and utility provision, compliance costs and approval processes) resilience. 

Players, such as the financial sector, utility providers, state and local governments are expected to be partners in delivery and also be part of the solution. The entire development ecosystem then becomes more resilient and improve the economy as a whole. 

Any cost increase such as the stamp duty on foreign purchasers is seen as negative as such purchases generate economic spillover and could deter investment and undermine Malaysia’s attractiveness to foreign talent and foreign direct investments (FDI). 

Unsold units are a headache. REHDA’s survey for the first half of 2025 (1H25) and the market outlook for 2H25 and 1H26 confirmed, if the location is not attractive or if people in the area cannot match the selling price, there is a high possibility that these units become unsold. 

Government’s assistance

To ease the financial burden for first-time homebuyers, the government extended the full stamp duty exemption on the instrument of transfer and loan agreement for homes priced up to RM500,000 until 31 December 2027. 

Another initiative is raising the Lembaga Pembiayaan Perumahan Sektor Awam (LPPSA) financing eligibility limit from RM600,000 to RM1 million.

Supposedly, to help civil servants afford more suitable housing, especially in light of increasing property values. Civil servants can also apply for a second LPPSA loan without needing to fully settle the first one. In addition, the Young Home Financing Scheme (SPPM) for those aged 30 and below has been extended, offering a maximum tenure of 40 years. 

There is a doubling of allocation under the Housing Credit Guarantee Scheme to RM20 billion and special tax deduction equivalent to 10% of the cost of renovation and conversion of commercial properties into residential properties. 

Now, let’s analyse the above concerns and assistance.

Why blame cross-subsidisation for delays, financial stress and abandoned projects since sell-then-build (STB) is the dominant model accounting for close to 100% of new residential projects.

Some players may affect delivery sustainability and ecosystem resilience but various players are increasingly sharing the risks and responsibilities. However, many industry players still favour traditional, non-sustainable construction methods, with slow adoption of modern, sustainable techniques and heavy reliance on low-skilled foreign labour.

Increase in stamp duty on foreign home purchases won’t undermine attractiveness to foreign talent and FDI since our house prices are much cheaper compared to their home countries.

Why blame unsold units to unattractive location or unaffordability since the model in on STB – is it a case of over-build? 

Claiming affordable homes make up the largest share of unsold properties is untrue. NAPIC Q325 reported, unsold completed homes rose to 28,672 units, valued at RM17.25 billion, driven mainly by condos and serviced apartments.

With all the government’s assistance, it stimulates demand and more profits to developers but reduces government revenue. 

Despite the systemic issues, many Malaysian property developers are still making profits as of 2024 and 2025 with steady to strong earnings and a rebound in transaction values. Historically, the average net profit margin is around 20.79%. 

By its own admission, REHDA said profit margins are being squeezed and to maintain viability, some developers have had to accept lower profit margins, increase property selling prices or use more ‘cost-effective’ materials. It seems, developers won’t accept risks and losses and will pass it on to others. And I wonder what are ‘cost-effective’ materials.

Do developers share their profits with the other players?

A dangerous precedent is set when civil servants can apply for a second LPPSA loan without needing to fully settle their first one. And offering a maximum tenure of 40 years for the SPPM is a big risk since the proposed Urban Renewal Act has a 30-year age threshold to invoke redevelopment.

On the conversion of commercial properties into residential, is this an admission of a relative supply imbalance. Was there any monitoring from the ministry?

What next?

1. We must prioritise homebuyers’ interests, control speculation and not focus on foreigners. 
2. There must be a rebalancing of risks between developers and buyers to effectively protect homebuyers through the BTS. It is in the Housing Development (Control and Licensing) Regulations. Only God knows the reason why the ministry has opted for cohabitation of STB and continue exposing buyers to devastating risks.
3. Government should not forsake revenue for developers benefit e.g. Forest City – billions spent on infra upgrades and various incentives including taxes are given away.
4. Corruption and abuse of power in the housing and construction sector is a significant, systemic issue. Key drivers include rapid approvals, weak ethics and complex processes with cartels involving officials and contractors. In July 2025, the MACC raided a Johor data centre project and seized RM7.5 million in cash from a senior project manager.
5. Put a stop on the cartels and the strong lobbying power of the rich and powerful property developers.
6. Seriously think about tax on vacant and unsold homes.
7. The ministry to act decisively on unlicensed developers as blacklisting is just a slap on the wrist. 
8. The ministry to seriously look at the Malaysia House Price Index (MHPI) showing average house price of RM494,384 compared to an “affordable home” definition in the range of RM200,000 to RM380,000. 
9. Learn from the shortcomings in the Dasar Perumahan Negara (DRN) 2018-2025.
10. Focus on sustainability, not consistently pushing for positive economic growth in this sector.

To put in perspective, today, a few thousand developers crying systemic risks but pocket profits within a couple years, millions of homebuyers live with the loan and interest rate risks for up to 35 (and now 40) years with SPPM, but in around 30 years’ time, a few hundred developers (some may be the same ones and still talking about systemic risks) working hand-inhand with the ministry will knock on your door telling you its time for redevelopment through the URA.  

May God help us homebuyers but the government can be the guardian.

While we are pondering on our options, property developers are aggressively acquiring land, with several major transactions exceeding the billion-ringgit mark in 2025 and early 2026. 

What say you…

 

Saleh Mohammed