Budget 2026: Will Malaysia’s Property Market Finally Reset?

As Budget 2026 heads to Parliament on October 10, expectations are running high across the property industry. This year’s budget isn’t just about fiscal policy — it could represent a defining moment for Malaysia’s housing sector, one that determines whether the market experiences a long-awaited reset or slides further into imbalance.

With overhang issues, affordability challenges, and legislative shifts dominating the conversation, Budget 2026 is shaping up to be the most consequential property-related fiscal plan in recent years.

1. Tackling the Overhang: Beyond Building, Toward Matching Demand

The National Property Information Centre (Napic) reports that Malaysia’s residential overhang improved in 2024 but remains deeply structural.

Overhang Hotspots

State	Unsold Units	Value (RM billion)
Kuala Lumpur	4,234	3.38
Johor	2,964	2.89
Perak	2,844	—
Penang	2,796	2.09

Condominiums and apartments make up nearly 60% of all overhang, or about 13,900 units.

Industry expert Faizul Ridzuan, CEO of FAR Capital, summed up the issue succinctly:

“The real crisis isn’t under-supply or over-supply, it’s mis-supply. We don’t have a shortage of homes; we have a shortage of the right homes in the right locations at the right price points.”

He adds that data-driven planning, not guesswork, is key to preventing another cycle of speculative overbuilding.

If Budget 2026 is to make a difference, it must integrate data analytics into housing policy, ensuring new launches correspond with genuine demand — both by income segment and geographic need.

2. The Build-Then-Sell Debate: Buyer Protection vs. Market Strain

Rumours are swirling that Budget 2026 could revive the Build-Then-Sell (BTS) model — where developers must complete projects before selling units.

This policy, long discussed but rarely implemented, could significantly alter the balance between buyer protection and developer financing.

The Case For BTS

Protects homebuyers from abandoned projects.
Ensures developers deliver completed, quality-assured units.
Builds trust and accountability in the housing market.

The Case Against

Raises capital requirements for developers.
Could limit supply, especially among smaller developers.
Might slow down housing delivery if financing channels remain weak.

Faizul Ridzuan notes:

“If Malaysia is serious about BTS, we need to back it with transparent demand analytics and financing mechanisms that don’t cripple smaller developers. Done right, BTS could rebuild trust between buyers and developers, but done halfway it will simply choke project pipelines and reduce supply.”

A balanced approach may involve phased adoption, starting with high-risk categories such as small-scale projects or developers with weak track records.

3. Rent-to-Own: A Missed Opportunity for Affordability

Rent-to-Own (RTO) schemes were once hailed as a bridge between renting and homeownership, but real-world results have been underwhelming.

Only Maybank’s HouzKEY programme has gained notable traction.
Other banks have been reluctant to participate.
Developers sometimes use RTO schemes to offload unsold or overpriced inventory.

The problem isn’t the idea — it’s the execution.

For RTO to work, it must:

Be backed by more financial institutions, not just one.
Be tied to step-up financing structures, where early-year payments are lower to enhance affordability.
Avoid being misused as a dumping ground for unsold stock.

Budget 2026 could reignite RTO’s potential by introducing tax incentives for participating banks, data transparency requirements, and clear qualification standards to ensure fairness.

4. Legislative Tightening: Developers & Councils Under Scrutiny

Recent amendments to Malaysia’s Solid Waste and Public Cleansing Management Act, Street, Drainage and Building Act, and Local Government Act are reshaping how developers and municipal councils operate.

Expect Budget 2026 to allocate funding for:

ESG compliance enforcement, especially waste management and energy efficiency.
Digitisation of local councils, improving planning transparency.
Performance-based grants, rewarding municipalities that streamline approvals and adopt sustainable urban standards.

These changes mark a broader shift toward accountability and sustainable development — a welcome move for investors seeking long-term value stability in the Malaysian property market.

5. Affordable Housing: Time to Redefine “Affordable”

Budget 2026 is also expected to refine affordable housing incentives, but this time with tighter definitions and income-based calibration.

The Problem

Malaysia’s “affordable” homes are often too expensive for the target demographic. Many are priced between RM300,000–RM500,000, beyond the reach of lower-middle-income earners.

The Benchmark

In Singapore, affordable housing under the Housing & Development Board (HDB) model includes a wide range of units — 1-bedroom to 4-bedroom — catering to different family sizes and incomes.

In Malaysia, however, the focus remains narrow:

“We’re still stuck defining affordable housing as two-bedroom units,” notes one developer, “when urban families increasingly need three or four-bedroom homes that remain affordable.”

To truly work, incentives must:

Reflect actual household income brackets.
Be paired with public-private partnerships to reduce land and construction costs.
Introduce targeted subsidies rather than blanket price caps.

This would not only narrow the affordability gap, but also make the housing market more equitable.

Looking Ahead: Market Reset or More of the Same?

Malaysia’s property sector stands at a crossroads.

With 23,149 unsold homes, rising construction costs, and tightening regulations, the industry is due for a structural reset.

What Buyers Should Expect

Greater protection under potential BTS and consumer-focused laws.
Improved transparency through data-driven policies.
Better access to genuine affordable housing if income-based thresholds are revised.

What Developers Must Prepare For

Higher compliance costs under ESG and new municipal standards.
Pressure to align projects with real demand, not speculative trends.
Possible incentives for those who embrace green, smart, or affordable housing initiatives.

Conclusion

As Budget 2026 approaches, one truth stands out: Malaysia doesn’t have a housing supply problem — it has a supply mismatch problem.

Fixing this requires not just new policies, but a cultural shift in how the property market measures success. Quantity must give way to quality, relevance, and inclusivity.

If policymakers use data to guide planning, expand housing definitions, and strengthen buyer protections, Malaysia’s property market could finally turn a corner — becoming more sustainable, equitable, and transparent.

Whether this budget brings a true reset or more of the same, the next chapter of Malaysia’s housing story will depend on how closely developers, banks, and the government align with real demand — not just economic ambition.