This article first appeared in City & Country, The Edge Malaysia Weekly on October 13, 2025 - October 19, 2025

In 2Q2025, Greater Kuala Lumpur’s residential property market demonstrated cautious resilience amid uneven recovery, according to Savills Malaysia director of research and consultancy Fong Kean Hwa in presenting The Edge Malaysia | Savills Klang Valley Residential Property Monitor 2Q2025.

“The demand was sustained in mid-market and TODs (transit-­oriented developments), supported by policy easing and financing innovation. At the same time, developers faced persistent pressures from rising costs and thinner margins, underlining the cautious tone that continues to shape the industry,” says Fong in an email interview.

During the quarter under review, Bank Negara Malaysia reduced the statutory reserve requirement (SRR) by 100 basis points to 1%. Fong reckons that this adjustment released liquidity into the banking system, enhancing lending capacity and providing banks with more room to support mortgage demand. This was reflected in Bank Negara’s 1H2025 loan statistics, which showed that total loan applications reached RM225.2 billion. 

However, loan approvals declined by 2.8% year on year (y-o-y) in 1H2025, totalling RM91.5 billion, with an approval rate of 40.6%.

“Several banks, in collaboration with developers, introduced 120% loan packages that not only cover the purchase price but also include funds for renovations, furnishings and even moving costs. These offers are particularly appealing to first-time homebuyers and younger purchasers as they lower initial barriers to entry and facilitate move-in-ready purchases.

“For developers, these packages help boost sales while banks benefit by attracting new mortgage business. However, there is a clear trade-off, such as repayments on loans of this type that are typically 30% higher than those for conventional mortgages. This raises concerns over the sustainability of long-term repayment, especially as household debt continues to increase,” Fong comments.

Nonetheless, financial results from developers for 2Q2025 revealed the fragmented nature of market recovery. Developers focusing on affordable and mid-market products have seen healthier sales momentum, particularly in Greater KL and township projects. The significant unbilled sales backlog has provided stability and enhanced earnings visibility. However, Fong points out that many developers are experiencing challenges when it comes to profitability due to rising costs.

“In the high-end segment, there are tentative signs of revival, which are evident through increased transaction activity in prime areas of KL, especially in the city centre. This suggests a gradual absorption of the overhanging stock that has burdened the market in recent years,” he notes.

Savills’ market tracking showed that in 2Q2025, demand for properties in prime locations in KL remained strong, with Bangsar and Mont’Kiara recording healthier price and rental growth compared to the same period last year.

In 2Q2025, average transaction prices rose by 0.7%, 1.9% and 7% y-o-y in KL city centre (KLCC), Bangsar and Mont’Kiara, reaching RM1.46 million, RM988,000 and RM840,000 respectively for 2-bedroom high-rise units.

Rental rates also posted positive growth across KLCC, Bangsar and Mont’Kiara, increasing by 7.7%, 8.1% and 2.5% y-o-y respectively. Among these, Mont’Kiara continued to offer comparatively stronger rental yields.

The KLCC high-rise residential segment is anticipated to stay resilient, supported by sustained interest from expatriates and high-net-worth buyers, according to Fong. A notable addition is The Conlay on Jalan Kia Peng, recently completed with 491 units priced above RM1,500 psf.

Meanwhile, Bangsar continues to attract young professionals and expatriates due to its lively atmosphere, supporting ongoing residential development in the area. One key project is Phase 1 of Bangsar Hill Park called Verdura, comprising Towers D and E. The project will deliver 812 units ranging from 917 to 1,478 sq ft with prices starting from RM800 psf.

Market resilience for high-rises is also evident in Selangor’s prime location, where Fong points out that areas such as Bandar Sunway, Subang Jaya and Shah Alam experienced steady growth in prices and rentals.

According to Savills’ data, the average transaction price in Bandar Sunway climbed 5.3% y-o-y to RM900,000 in 2Q2025. Concurrently, monthly rental rates rose to RM3,600, delivering a rental yield of 4.8%.

In Subang Jaya, the average transaction price remained at RM785,000, with monthly rental unchanged at RM3,000 y-o-y, yielding a quarterly return of 4.6%.

Petaling Jaya, however, recorded a modest 0.1% y-o-y price growth, with transaction values ranging between RM1.06 million and RM1.1 million. Meanwhile, rental rates rose by 2.1% y-o-y to RM3,470 per month, resulting in an annual yield of 3.9%.

In Shah Alam, prices rose 0.6% y-o-y from RM780,000 to RM785,000, while monthly rents increased to RM2,750 from RM2,720, representing a 4.2% rental yield.

In 2Q2025, the 2-storey terraced house market in KL and Selangor showed varied performance. Prices fell in areas such as Putra Heights and Bandar Bukit Raja while the remaining monitored areas showed an increase.

For example, the 2-storey terraced house market in key areas such as KL’s Taman Tun Dr Ismail (TTDI), Lucky Garden in Bangsar and Taman Midah in Cheras showed positive price appreciation trends. TTDI recorded a y-o-y increase of 2.5% to RM1.61 million, Lucky Garden saw a 2.4% increase y-o-y to RM1.7 million and Taman Midah increased 2.6% y-o-y to RM780,000.

Monthly rental rates in TTDI and Taman Midah rose by 4.8% to RM3,250 (2.4% rental yield) and 5.7% to RM1,850 (2.8% rental yield) respectively. Rental for Lucky Garden remained stable at RM3,200, maintaining a rental yield of 2.3%.

In Selangor, the average transacted price for 2-storey terraced houses in SS2, Petaling Jaya, increased by 1.5% to RM1.02 million while monthly rental rates remained unchanged y-o-y at RM2,000, yielding a return of 2.4%.

Bandar Utama also saw a steady price increase of 7.9% y-o-y to RM1.36 million, while rental rates remained unchanged at RM2,600 per month, resulting in a 2.3% rental yield.

The Puchong 2-storey terraced house market demonstrated stable yet positive sentiment, with Bandar Kinrara seeing an increase of 6.1% to RM780,000 (monthly rental rates up 5.9% y-o-y to RM2,150 with a 3.3% yield) and Bandar Bukit Puchong climbing 4.3% to RM720,000 (monthly rental rates up 3% y-o-y to RM1,700 with a 2.8% yield).

Meanwhile, prices of 2-storey terraced houses in Putra Heights dipped 2.8% y-o-y to RM700,000 while rentals rose 5.7% to RM1,750, yielding 3%. Fong believes the decline could be due to negative public perception following the deadly gas pipeline blast in April.

“While the explosion may not have directly impacted property values, the name ‘Putra Heights’ itself might influence buyer sentiment. Although rental demand appears to remain resilient in the short term, it may be premature to conclude that the market is stabilising. Ongoing recovery efforts are underway, but the longer-term impact on property values and buyer sentiment, especially in the affected areas, remains uncertain,” he shares.

In Shah Alam, the terraced house market showed varied performance. For instance, Bandar Setia Alam saw a 7% y-o-y price increase to RM760,000 with monthly rental rates climbing 1.9% to RM1,630, yielding 2.6%. Kota Kemuning also saw a 1.4% increase to RM710,000 with rental rates rising to RM1,750, providing a 3% yield.

Bandar Bukit Raja saw a slight dip to RM620,000, but rental demand remained strong with a 5.6% increase to RM1,690, resulting in a 3.3% yield. Fong says this coincides with YCH Group breaking ground on its RM500 million Supply Chain City Malaysia project, which may be supporting rental growth in the area.

In Klang, Bandar Bukit Tinggi saw a 6.2% y-o-y price increase to RM690,000, while rental rates surged to RM1,630 per month, yielding 2.8%. The upcoming LRT3, now expected to commence operations by year end after final testing, is seen to boost further demand in Bandar Bukit Tinggi and its surrounding areas, according to Fong.

Meanwhile, the semi-detached housing sector in Selangor showed an overall positive trend in 2Q2025, with price increases recorded across most of Savills’ monitored areas.

“In 2Q2025, Selangor’s semidee housing market registered positive growth, with prices increasing in most key locations. Rental yields held steady within the range of 1.9% to 3.9%. New project launches, including UEM Sunrise Bhd’s (KL:UEMS) Allegro at Symphony Hills in Cyberjaya, indicate that demand for semidee homes in Selangor remains strong,” says Fong.

Although developers remain cautious about launching new projects in 2Q2025, Fong observes that selected developments in established locations are starting to attract interest, suggesting cautious optimism throughout the industry. This explains why developers are pacing their launches strategically, adjusting key performance indicators and tightening cost management in preparation for a potentially more supportive market environment in 2H2025.

Looking ahead, Fong believes that the reduction of the overnight policy rate (OPR) to 2.75% in July will complement the SRR cut by lowering borrowing costs and enhancing affordability for homebuyers.

“Together, these measures signal a more accommodative stance from Bank Negara and are likely to support housing demand in the coming months. The Greater KL residential market is stabilising but remains uneven. The clearest opportunities are found in affordability-driven [projects] and TODs, where demand has proven to be most resilient. In contrast, the luxury segment offers selective upside as absorption improves in prime locations, although high construction costs continue to temper growth,” he notes.

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