This article first appeared in City & Country, The Edge Malaysia Weekly on May 19, 2025 - May 25, 2025

Despite often being perceived as sluggish, Melaka’s property market has been growing steadily in the past couple of years, thanks to a stable rise in residential property prices, improving occupancy rates for commercial property and stronger support from infrastructure developments in the industrial sector, said Rahim & Co International Sdn Bhd at its Property Market Review 2024/2025 presentation held on May 7 in Melaka.

In his presentation, Rahim & Co director of research Sulaiman Saheh said: “Compared to national trends, Melaka showed one of the most consistent and stable property market performances.”

He highlighted that the state recorded an all-time high in volume and value of property transactions last year.

In 2024, it saw 20,321 transactions valued at RM6.7 billion, compared with 16,869 transactions valued at RM5.8 billion in 2023, which translated into 20.5% growth in volume and 15.5% growth in value of transactions.

Breaking the data down by sector, Sulaiman said the volume transactions rose 29.8% for residential, 5% for industrial and 4.8% commercial. In terms of value, residential transactions grew 22.9%; commercial, 24.4%; and industrial, 21.5%.

“Now, when we look deeper, we ask, ‘Is this growth broad-based? Or is it being driven by just one sector?’ We analysed the different segments in Melaka’s market, including residential, commercial, industrial and development land, and what we found is that all of them are showing stable or growing activity, even when accounting for the high base effect from 2023.

“And here’s something particularly noteworthy — development land transactions in Melaka grew 7%, and that category is increasingly on the radar of developers. That tells you something about plans for and confidence in long-term development here. So, overall, Melaka is showing well-rounded growth,” Sulaiman added.

The state’s residential sector has seen a steady increase in prices, according to Sulaiman’s observations. The average transacted price of terraced houses has increased from RM213,305 in 2015 to RM289,210 in 2024.

Similarly, the Melaka Tengah district, which is one of the three administrative districts in Melaka, has witnessed a rise in residential property prices over the years. The average transacted price of Melaka Tengah’s terraced houses increased from RM238,085 in 2015 to RM335,466 in 2024.

Sulaiman explained: “Residential property prices in Melaka have grown steadily. What’s notable is that during the period, when other states were consolidating, specifically from 2017 to 2019 after the post-boom adjustment, Melaka’s market kept growing, as though unaffected.

“A key reason for this is that Melaka’s state government has been very proactive in regulating housing prices. The market in Melaka is known to be very proactive in controlling the house price mechanism, which, if you compare [to all the other] states in Malaysia, the most affordable in terms of income-to-price ratio is Melaka.”

He observed that the state has focused on keeping properties affordable. “Whether you’re a believer in free markets or regulated markets, that’s a separate debate. But what Melaka has done is curb excessive price growth to ensure that housing remains accessible to the local population. Perhaps because of this intervention, Melaka’s price growth has been more stable and consistent.”

In contrast, Sulaiman pointed out that when property prices in other states rose too quickly, they eventually had to undergo a market correction. In Melaka, however, the growth has been more linear, which helps maintain affordability.

“One of Melaka’s greatest strengths is its strong affordability index. It has consistently shown the best performance when measured by the median multiple, which is the ratio of median house price to median household income. If that ratio becomes too high, you risk creating a permanent affordability gap, and that’s what we’re trying to avoid.”

He added that Melaka’s house prices are growing slightly faster than the national average. Its median household income has begun to flatten or decline, however, compared with the national trend.

“This is something we need to watch closely because if income doesn’t keep pace with price growth, the market’s long-term saleability becomes an issue,” Sulaiman cautioned.

In terms of residential property overhang, he says the state’s numbers have declined and this is because new launches have slowed down for a period, allowing the market to absorb some of the existing inventory.

He pointed out that 18% of its overhang units are priced below RM300,000 and 23% are priced between RM300,000 and RM500,000.

“That’s more than two-thirds of the total overhang priced under RM500,000. So, yes, the higher-end units carry risk, but affordable units are not automatically sellable either. The distribution is relatively even. So, again, the overhang in Melaka is not severe compared to other states.”

Sulaiman said there is growing optimism over the state’s industrial sector.

“If we look at Melaka specifically, we see that while supply has grown, transaction growth is rising even faster. That’s one of the reasons industrial property is starting to attract more attention. [Nowadays], we’re seeing a shift [in demand] towards customised detached lots in well-managed industrial parks.

“There are several growth factors behind the industrial sector, and much of the momentum is being driven by government policies and incentives. This is why we expect the industrial sector to continue growing.”

Among these government policies are the New Industrial Master Plan 2030, Circular Economy Policy Framework, National E-Commerce Strategic Roadmap and National Industry Environmental, Social and Governance (i-ESG) Framework.

Sulaiman was concerned, however, that the market may not not be able to absorb the incoming supply of industrial properties in the state.

“The challenge is that industrial property has now become a hot sector. Nearly every developer, when launching a new township, will include an industrial component, which isn’t necessarily a bad thing.

“Historically, we’ve seen the industrial sector as an economic engine. After all, you can’t just build homes; people need places to work. Industrial areas generate employment and sustain local economies. But when everyone jumps in, supply can quickly outpace demand. That’s what happened with the retail sector, especially the cloud-based retail sector.”

Concurring with Sulaiman, Rahim & Co senior manager of valuation services Fiqri Rohaizad pointed out that owing to the oversupply of industrial properties in Melaka, occupancy rates in some areas have yet to recover.

Instead of building speculatively, Sulaiman suggested using build-to-suit strategies. “Engage the market; understand what end-users actually need. Register interest before you build because there’s real interest in this sector, especially from institutional investors and fund managers.

“Industrial property is still on the radar, but we shouldn’t rely on investors alone to carry this segment. If too much stock is built without real users, you’ll end up with industrial parks full of empty land, which we’re already seeing in some areas.”

According to Fiqri, prices in the commercial sector have remained relatively stable. He examined three samples — Taman Kota Syahbandar, Taman Kota Laksamana and Taman Semabok Perdana — and found that prices in Taman Kota Syahbandar have been fairly consistent. In Taman Kota Laksamana, some commercial units are being sold between RM1.2 million and RM1.5 million, and even up to RM1.6 million.

“When we look at Taman Melaka Raya, however, particularly along Jalan Merdeka, the story is different. Properties that used to easily sell at RM1.5 million now struggle to find buyers even at RM1 million. Some units there have gone through three or four auctions without success. Jalan Merdeka used to be one of the busiest roads in Melaka,” he said.

“But the tenant migration from Melaka Raya to Kota Syahbandar is very real. That’s why, today, Kota Syahbandar is bustling. A few years ago, areas like Taman Kota Syahbandar and Taman Kota Laksamana, especially towards the Klebang side, had very low occupancy. But after The Beer Factory opened in [Kota Syahbandar], activity picked up.”

Fiqri said popular brands in the Klang Valley such as Jaya Grocer, Uniqlo and Padini, along with fast-food chains, are starting to set up shop in the Tarcor Park commercial hub in Klebang.

“This shows that despite people saying ‘retail in Melaka is dying’, the reality is more nuanced. Yes, people talk about seven-storey malls that never opened or 10-storey malls that are said to be haunted, and there are malls with high tenant turnover,” he added.

“But the reality? That area is now booming. So, to all the developers, I encourage you to think creatively when building your projects. Don’t just build; instead, create a destination.”

Fiqri named some notable development areas in Melaka. In the northern region, there are Masjid Tanah Perdana, Anjung Ayer Paabas, Desa Bertam, Bertam Heights, Anjung Sungei Petai, Krubong Heights and Scientex Durian Tunggal. In the central region, he listed the German Technology Park, Impiana Kesang, Gapam Perdana, Anjung Gapam, Serambi Gapam, I-Molek and Molek Residence.

For the southern region, which he said has more potential for growth, he pointed to Scientex Jasin Mutiara Botani Parkland, Scientex Bandar Jasin, Taman Merlimau Mutiara and Taman Muhibbah.

“The areas in and around Jasin may appear green, meaning not much development is currently happening, but in reality, these lands are owned mostly by large companies. A large portion has already been taken over by developers, which is a signal that development is beginning to move into that corridor,” he said.

“If you’re in Merlimau or Serkam, it’s just a 10- to 15-minute drive to the Jasin town centre. That’s very reasonable. Now, if you’re coming from the north, say, from Bertam to Taman Merdeka, it’s also 10 to 15 minutes in theory. But in reality? There’s traffic congestion, especially during peak hours. So, from a logistical standpoint, the Jasin direction is more favourable. That’s why I believe there’s strong potential, especially in this area.”

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