Why Malaysia needs a vacancy tax and how to make it work

New Straits Times

2 days ago

In the world of real estate, what you don't see can hurt you. In Malaysia, what you don't see are the thousands of housing units—neatly painted, quietly lit, but ghostly empty.
More than 22,000 completed homes across the country remained unsold for over nine months as of mid-2024 (NAPIC 2024).
These so-called "overhang units", worth over RM14 billion, represent something far more troubling than unsold inventory—they are a silent indictment of a housing market that has drifted from real need to speculative excess. And experts are beginning to call this what it is: a market failure.
Enter the idea of a vacancy tax. At first blush, it may sound like just another punitive policy. But if done right, it could become one of the most important tools in aligning Malaysia's housing market with its development goals.
Much like how climate activists have pushed for carbon pricing to internalize environmental costs, a vacancy tax puts a price on housing inefficiency and speculative hoarding.
It's not about punishing success or property ownership—it's about ensuring homes are built for living, not just for flipping.
The proposed tax wouldn't need to come from the top. In fact, it might work better if it trickles up from the local level, through Malaysia's Pihak Berkuasa Tempatan (PBTs).
These municipal councils already have the legal tools, like the Local Government Act 1976, which empowers them to collect property assessments.
With some political will and smart engineering, those assessment frameworks can be expanded to include vacancy surcharges.
Think of it as a localized nudge, not a national crackdown. And here's the kicker—state-level by-laws could be passed faster than federal legislation, allowing high-vacancy states like Selangor or Penang to pilot solutions that others can emulate.
That said, some level of federal coordination through KPKT may still be needed, especially in setting national standards, sharing data infrastructure, and harmonizing enforcement across jurisdictions.
Malaysia wouldn't be alone in this experiment. Vancouver, Melbourne, Singapore and Paris have all taken steps to tax homes left empty or held purely for investment.
These cities learned two lessons: first, vacancy taxes can work; and second, they need to be smart, clear, and enforceable. No one wants a Kafkaesque housing policy.
So how do you define vacancy? In a digital age, it's not that hard—use utility consumption thresholds, absence of tenancy registrations and supplement this with transparent public digital registries.
If your water and power usage fall below 10 per cent for six straight months, that's not a home—it's a hollow asset.
Still, any new tax brings risk. If you get it wrong, you might push prices up or create a backlash. So the tax should be graduated—one per cent for second properties, more for third and beyond.
And yes, developers may resist, but perhaps that's the kind of feedback the system needs to realign supply with demand. Offer a grace period—maybe 12 or 18 months post-completion—before taxing unsold units. That's fair.
But past that, hoarding stock should carry a price. And we can't stop at taxes. Pair the stick with a few carrots.
Offer rebates to owners who rent out empty units to B40 or M40 households. Set up public-private rent-toown schemes to absorb overhang units.
Give developers who shift toward demandaligned, sustainable housing faster zoning approvals or density bonuses.
Want to get really creative? Launch a state-level housing buyback fund, where unoccupied properties are converted into civil servant housing or refugee accommodation.
But here's the real issue—Malaysia's housing market has become a mirror of its inequality. Affordable homes are being bought not by those who need them, but by those who can afford to sit on them.
Speculation is no longer just a market behavior; it's a structural distortion. And like all distortions, it warps the very purpose of housing—to shelter people, build families, and grow communities.
When you have nearly 20 per cent vacancy in high-growth states like Selangor and Penang (DOSM 2020), something is broken.
So if we want to rebuild the Malaysian housing dream, we need to treat housing as infrastructure, not just investment. We need a market that rewards circulation, not stagnation.
We need a policy environment where flipping is discouraged, not celebrated. And we need to start asking: Who are we really building for?
A well-designed vacancy tax may not solve everything—but it could spark the kind of mindset shift that modern Malaysia needs: from trading homes like chips on a roulette table, to making homes livable, affordable, and equitable again.
That's not just smart economics—it's nation-building.