Tackling Malaysia’s Property Overhang in the Low-Cost Flats and Low-Medium Cost Apartment Sectors
The Consumers’ Association of Penang (CAP) is concerned about the persistent property overhang and the continued pursuit of further construction of both residential and commercial buildings. As of 2024, Malaysia’s residential property market remains under significant strain from a persistent property overhang, with 22,642 unsold completed units nationwide, valued at RM14.24 billion. The majority of the unsold units, close to 60 per cent, comprise condominiums and apartments, while terraced houses account for approximately 24.4 per cent.
In states such as Penang, the problem has intensified. By the third quarter of 2024, Penang recorded 13,474 unsold and overhang units, with nearly 70 per cent priced between RM300,000 and RM500,000, indicating that the mid-range apartment segment is particularly oversupplied. Hence, Penang should halt land reclamation for the purpose of building more properties and instead focus on addressing the issue of completed properties that remain unsold for nine months after their launch date.
Notably, affordable homes priced at RM300,000 and below continue to see strong demand, accounting for 52.5 per cent of all residential transactions. This is followed by homes priced from RM300,001 to RM500,000 at 24.5 per cent. High-rise units, including low-cost flats, made up only 13.9 per cent of total residential transactions, while terraced houses remained the preferred choice at 43.1 per cent. These figures highlight a persistent mismatch between what is being supplied and what the market can afford or desires.
The overhang in low-cost and low-medium cost apartment sectors is driven by several interrelated factors. First, there is an affordability gap. Even so-called affordable homes in the RM300,000 to RM500,000 range are beyond the reach of many due to high living costs, stagnant wages, and strict lending requirements. This gap is even more severe for the B40 income group, for whom RM100,000 to RM200,000 units may already be financially burdensome.
Loan rejection rates are a major cause of unsold low-cost flats. Many in the B40 group, including gig workers, single parents, and fresh graduates, struggle to meet bank requirements due to irregular income or weak credit histories. Financial institutions, wary of rising non-performing loans, tend to reject applications from this segment.
There is also a mismatch in supply and location. Developers have focused on building medium-cost high-rise apartments in poorly connected areas, driven by land costs and planning constraints. Many low-cost flats are located in remote or underdeveloped areas lacking access to public transport, employment, schools, and healthcare.
Poor maintenance and negative perceptions of low-cost flats contribute to the issue. Low-cost flats, particularly older ones managed by local authorities such as DBKL, suffer from inadequate upkeep. The average rent of RM124 per month is insufficient to fund proper maintenance, leading to deteriorating conditions that discourage potential buyers or tenants.
Administrative inefficiencies further exacerbate the situation. The bureaucratic nature of low-cost housing allocation, which is overseen by state governments, creates additional delays. If a buyer’s loan application is rejected, the process of reallocating the unit is often slow, prolonging the overhang.
To address this complex issue, a comprehensive strategy must be implemented. Lending practices should be revised. Banks should adopt more flexible assessment models that consider total income sources, including informal or gig economy earnings, and provide targeted loan products backed by government guarantees for low-income buyers. Strengthening agencies such as Cagamas or reviving schemes like MyHome could provide necessary support.
The planning and location of affordable housing must be improved. Housing for lower-income groups should be developed in well-connected areas with access to public transport, education, and employment opportunities. State authorities should enforce planning policies that prioritise accessibility and integrated development.
Public-private partnerships should be encouraged to improve maintenance and management of low-cost flats. This approach could ensure sustainable upkeep and improve living conditions, particularly for units under local council management.
Bureaucratic processes must be streamlined and data transparency enhanced. State housing systems should be digitised and centralised to provide real-time updates on eligibility, approvals, and unit availability. Reducing administrative delays will help speed up sales and allocation.
Rent-to-own models should be expanded. These schemes offer a gradual path to ownership for low-income households without requiring immediate full financing, making homeownership more accessible and less risky.
In conclusion, Malaysia’s property overhang, particularly in the low-cost and low-medium-cost apartment sectors, is a structural challenge driven by affordability constraints, market misalignment, and policy inefficiencies. CAP calls on the government to address these persistent issues through systemic reforms that prioritise liveability, inclusivity, financial accessibility, and more effective cross-sector collaboration.
Mohideen Abdul Kader
President
Consumers’ Association of Penang
Letter to the Editor, 17 June 2025