This article first appeared in City & Country, The Edge Malaysia Weekly on August 10, 2026 - August 16, 2026

In Malaysia, homes priced below RM300,000 are considered the most affordable in the market. However, the latest data from the National Property Information Centre (Napic) shows that 14,201 completed residential units remained unsold as at the first quarter of this year. These units are valued at RM2.77 billion and account for 43.3% of the country’s total residential unsold completed stock. The bulk of such homes are concentrated in the Klang Valley, Johor and Perak.

Rahim & Co Chestertons senior director of research and consultancy Sulaiman Saheh believes that the affordability paradox cannot be solved simply by lowering prices.

“The country’s long-running affordability challenge stems from a mismatch between what is being built and what buyers actually need,” says Sulaiman, adding that the issue is far more nuanced and encompasses a wide range of factors.

“It is not just about the price. Price has been the main angle people look at, but location, the product itself and even buyer preferences all play a role.”

He traces the origins of today’s unsold completed units to the strong property cycle of the early 2000s, when developers responded to robust demand by launching similar projects simultaneously. While each development may have appeared viable individually, the cumulative supply eventually outpaced demand.

“The market was moving quite healthily and urbanisation was strong. Everybody saw projects doing well and wanted to [do the same]. Individually it made sense, but collectively the supply exceeded demand,” he says.

Beyond the initial oversupply, Sulaiman has identified four reasons why completed units remain unsold today: unsuitable locations, products that do not match buyers’ lifestyles, affordability constraints and a disconnect between how “affordable housing” is defined and what consumers actually want.

For example, simply capping prices does not necessarily create affordable housing if projects are built far from job locations or lack amenities and connectivity.

“Some projects are marketed as affordable because they meet a certain price point. But if I have to travel far just to buy a carton of eggs, then it is not really affordable from a living perspective,” says Sulaiman.

Likewise, he notes that smaller apartment units may suit young professionals seeking temporary accommodation but are less practical for households intending to raise families.

Echoing similar sentiments,  Henry Butcher Real Estate Sdn Bhd chief operating officer Tang Chee Meng says the current unsold inventory points to an affordable housing model that is not reaching the buyers it was built for, and the weak take-up can be traced to several interlocking factors: poor locations, the bumiputera quota mismatch, unsupported buyer financing and unsuitable designs.

“The locations of these houses are often unsuitable for intended buyers because they are too far from workplaces, schools, retail amenities, public transport and the family support networks that many depend on, such as parents who help with childcare,” Tang says.

Beyond location, he points to a bumiputera quota mismatch.

“[There are] requirements for houses to be sold only to bumiputeras to meet the quota set by approving authorities, but the response is not so satisfactory,” he says.

Tang adds that many buyers in the B40 segment also lack the means to cover the down payment, the loan differential sum and the incidental costs of a purchase. Product design further compounds the problem, with small high-rise units often failing to meet the space requirements of families or buyers accustomed to landed homes.

“The size and design of the units may not meet the needs of targeted buyers who are used to more space in a kampung environment,” he points out.

Looking ahead, Sulaiman believes preventing future unsold completed units is more important than merely dealing with today’s stock. He calls for more rigorous and independent market studies to be carried out before new projects are approved, arguing that feasibility assessments should not rely solely on developers’ own projections.

“The independence of the study is very important. You need competent people interpreting the data objectively rather than studies that simply justify a project,” says Sulaiman.

He adds that market analysis should go beyond headline sales percentages, taking into account actual unit numbers, demographic demand, income levels and competing developments in the pipeline.

To strengthen planning, he proposes a central coordinating body working alongside state governments to monitor supply and demand more holistically, while recognising that land remains a state matter. Such an agency could better coordinate development pipelines across regions, standardise affordability definitions and ensure projects reflect genuine local demand instead of broad national targets.

“What people want is not just a RM300,000 house. They want a RM300,000 house that’s of the right size and in the right location with all the necessary facilities and a reasonable travel distance,” says Sulaiman.

As for the country’s existing unsold completed units, Sulaiman acknowledges that solutions are considerably more difficult to find because the mismatch has already occurred.

For developments located in reasonably accessible areas, he suggests improving last-mile connectivity, neighbourhood infrastructure and public amenities to enhance their attractiveness.

Where outright sales remain difficult, he believes developers should consider repurposing unsold units into rental housing or co-living schemes instead of relying solely on sales.

“We should not only look at ownership. We should also look at rental because securing a roof over someone’s head can be achieved through both ownership and renting,” he says.

However, Sulaiman warns against aggressive price cuts, noting that doing so could unfairly disadvantage existing purchasers while affecting developers’ profitability and banks’ loan books.

“If one party alone has to absorb the pain, it becomes very difficult,” he says, adding that any solution would require shared responsibility among developers, financiers and the government.

Meanwhile, Tang notes that instead of pushing for mandatory home ownership, housing policy should place greater emphasis on alternative models such as rent-now-own-later, or rent-to-own (RTO), schemes.

He explains, “While having a roof over one’s head is a basic human need, a segment of the B40 group is simply not in a position to purchase a home. Under an RTO framework, low-income households rent in the immediate term while holding the option to buy once their finances stabilise.”

Tang also suggests that a dedicated government agency could acquire the unsold affordable units from developers and lease them to eligible B40 households. Such an agency could be funded through budgetary allocations or by issuing public property investment units.

Recent federal measures point in the right direction, Tang says. Budget 2026 allocated RM20 billion under the Housing Credit Guarantee Scheme (SJKP), double the amount in the previous fiscal budget, which is projected to support financing for about 80,000 first-time buyers.

Another RM672 million has gone to urban renewal and social housing under the Residensi Rakyat and Rumah Mesra Rakyat programmes, with several projects due for completion next year.

To draw more private developers into social housing, Tang recommends pairing demand-side and supply-side support. On the demand side, that means lower interest rates, higher financing margins and targeted down payment loans. On the supply side, it means tax credits, reduced statutory contributions and fees, and higher permitted densities.

He also highlights overseas frameworks worth adapting locally. For instance, under the UK’s shared ownership scheme, buyers take an initial stake of 25% to 75% of a property, which requires less capital outlay, and pay subsidised rent on the remainder as a step towards full ownership. In Germany, the government subsidises private developers in building affordable units that are then leased to low-income tenants at controlled rents.

Sulaiman says affordability should be defined according to local market conditions rather than a single nationwide price threshold, noting that a RM300,000 home carries very different implications across Malaysian states and districts.

Concurring with Sulaiman, Tang argues that the pricing benchmark itself is too rigid. He says the price ceiling of RM300,000 for affordable housing nationwide is a figure that ignores how sharply markets differ across the country.

“Both income level and the cost of living differ significantly between urban and rural settings. [City dwellers] face higher living costs, leaving them with less disposable income despite earning higher salaries,” says Tang. “Instead of a nationally fixed rate, the pricing of affordable housing should therefore take into account income levels — which reflect purchasing power and cost of living — with lower price thresholds in rural and semi-rural locations, and higher ones in urban settings.”

Tang adds that the pricing policy could be more dynamic in responding to and accommodating local income and cost of living differences. Location and land go together, in his view. As central urban land commands high prices, affordable homes are pushed to the periphery, where land is cheaper but jobs and public transport are scarce.

Tang proposes two ways to close the gap. The government can upgrade the transport links between outlying developments and urban employment hubs, or it can release urban land to private developers at subsidised rates, provided that they build a fixed allocation of affordable homes at controlled prices for lower-income buyers.

The mandatory affordable housing allocation imposed on private developments has anchored national policy for years, and Tang credits it with expanding the stock beyond what the government could deliver on its own.

“The mandatory affordable housing policy has undergone a number of changes over the years. To a certain extent, it has helped increase the stock of affordable housing for the B40 group, which the government on its own may not have been able to fulfil,” he says.

The volume of unsold completed units recorded by Napic, however, shows the mechanism needs refining rather than replacing, he says. The government should keep refining it so that homes built for the B40 group sit in the right locations, fall within buyers’ budgets, and are well served by the public transport the group so relies on.

Looking ahead, the cost of inaction, Tang warns, lands on developers first.

“If the affordable homes remain unsold, it would be a big strain on the cash flow of the private developers who built them. This may ultimately affect their financial capacity to undertake more projects, which could then result in fewer affordable homes being built in the future.”

He adds that the current inventory decay over time poses a second issue. “The physical condition of unsold houses could deteriorate over time, requiring developers to spend money on repairs and upkeep.”

Ultimately, Sulaiman says no single policy can resolve Malaysia’s affordable housing challenges because the issue cuts across planning, financing, income growth, infrastructure and governance.

“There is no single right mix. All stakeholders — developers, banks, local authorities, policymakers and buyers — have a role. Housing affordability is a multi-

actor issue, so the solution must also be multi-pronged.”

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