Property mismatch: Construction up, sales down
KUALA LUMPUR: The fall in property transactions in the first quarter of 2025 (1Q25), despite a spike in construction activity and new launches, indicates a mismatch between actual market demand and developers' projections or ongoing project commitments.
Property analysts told Business Times that this may stem from projects that were planned during more optimistic market conditions now coming to fruition, while buyers are growing more cautious amid economic uncertainties, stricter lending conditions, and affordability challenges.
According to the Valuation and Property Services Department, the country's property market slipped in Q1, with transaction volume down 6.2 per cent and value down 8.9 per cent.
Its director general Abdul Razak Yusak said the total transactions amounted to 97,772, valued at RM51.42 billion, compared to 104,194 transactions worth RM56.47 billion in the same period of 2024.
Abdul Razak said although the property transactions began on a slower note, the pace of construction activity and increase of residential new launches were supported to balance the property market growth and sustain its positive momentum in 2025.
Universiti Teknologi Malaysia associate professor in property economics Dr Muhammad Najib Razali said Malaysia has long faced an imbalance between supply and demand, especially in the affordable housing segment.
"To address this, developers must strengthen their market analysis and ensure new launches are aligned with real, localised demand, not just general market trends, to avoid oversupply in the wrong segments," he said.
Juwai IQI co-founder and group chief executive officer Kashif Ansari said while it may appear contradictory to see a drop in transactions alongside a surge in construction, it is actually a reflection of two separate timelines.
"Much of the construction we are seeing now was planned and financed months or years ago. Developers are betting on the future, not just the moment.
"The strong results in 2024 gave them even more confidence. The value of construction work done surged 20 per cent last year to RM158.8 billion, with residential building growing nearly 40 per cent," he added.
Kashif said while fewer people and companies bought any kind of real estate in the first quarter, that hides the fact that some segments actually improved.
"Residential made up 61 per cent of all transactions, demonstrating sustained demand. And look at terraced homes, where prices climbed by 2.2 per cent in a single quarter," he added.
Temporary Slowdown
Najib said although the first quarter reflects a slowdown, it is too early to conclude that this signals a long-term trend.
He said Malaysia's property market has historically been cyclical, and seasonal or short-term factors (such as timing of launches, interest rate expectations, or political developments) can influence quarterly numbers.
"However, if economic uncertainties persist or consumer confidence weakens, we could see the softer trend continue through the mid-year, though pockets of resilience might remain, especially in affordable housing or niche market segments," he added.
Meanwhile, Kashif said the first-quarter slowdown appears to be a temporary pause, pointing out that the beginning of the year is typically quieter and that global uncertainties likely caused some buyers to hold back.
"But Malaysia has solid fundamentals, like stable interest rates and steady job growth, and I expect momentum to return in the second quarter and third quarter.
"The number of transactions will increase because buyers who held back out of worries about the global situation will go ahead with their purchases.
"One thing that gives me confidence is the rise in new launches. Developers do not commit unless they believe demand will follow," he added.
Kashif said sales activity typically rebounds within a quarter or two, and if sentiment remains stable, many of the delays seen in the first quarter could translate into transactions in the second half of the year.
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