Malaysia’s Housing Loan Growth Slows to 6.9% in 2024, But Remains Sound and Owner-Driven
Malaysia’s housing loan market remained stable in 2024, despite a slight year-on-year (y-o-y) slowdown in growth to 6.9%, compared to 7.3% recorded in 2023. According to Bank Negara Malaysia’s (BNM) Financial Stability Review — Second Half 2024, the primary drivers behind this sustained growth were owner-occupiers, particularly first-time homebuyers.
This trend indicates a market that continues to serve its intended purpose—providing housing to genuine buyers—rather than being skewed by speculative investment activity.
Owner-Occupiers Lead Loan Growth
As of end-December 2024, individuals with a single housing loan contributed a significant 5.2 percentage points to the overall growth, affirming that demand for housing remains solid among real homeowners. This segment largely includes first-time homebuyers and those upgrading to better homes for their families.
In contrast, speculative investment activity appears limited. BNM’s report highlighted that the contribution from borrowers with three or more housing loans was minimal—just 0.03 percentage points, and even slightly negative mid-year in June 2024 at -0.01 percentage points.
This is a strong indication that lending practices remain focused on sustainability rather than speculation, supported by BNM’s strict housing loan guidelines and prudent borrower profiling.
Low Impairment Rates Indicate Strong Loan Quality
BNM also reported that the quality of housing loans in Malaysia remains strong across all borrower categories, with the overall impairment ratio holding steady at just 1.2%.
Interestingly, individual property investors showed a lower impairment ratio of 0.9%, compared to 1.3% for owner-occupiers. This suggests that investors in the market are typically well-capitalised, with 80% earning more than RM5,000 monthly—a key threshold for affordability and creditworthiness.
This robustness in repayment behaviour supports a low-risk environment for financial institutions, even as the broader property market continues to adjust in response to economic changes.
Healthy LTV Ratios Provide Cushion Against Price Correction
Another key indicator of market resilience is the median loan-to-value (LTV) ratio, which stood at 69.7% at the end of 2024. This metric reflects a healthy level of borrower equity and ensures sufficient buffer in the event of house price fluctuations.
With such prudent lending practices, Malaysia’s housing market is well-shielded from systemic risks associated with overleveraging, as observed in more volatile property markets globally.
BNM reassures that with current stable economic conditions, a severe correction in house prices is unlikely. The central bank also noted that the overall downside risks to financial stability remain low, owing to a combination of strong underwriting standards, income-based loan assessments, and cautious risk management by banks.
Positive Outlook for Malaysia’s Residential Property Market
Despite rising global interest rates and economic uncertainties, Malaysia’s residential mortgage landscape remains relatively stable and driven by end-user demand. The gradual moderation in loan growth does not signal a slowdown in the housing sector but rather reflects a more balanced and sustainable market environment.
The continued health of the mortgage market supports confidence among:
- Homebuyers seeking to make long-term investments
- Developers planning owner-occupier-focused launches
- Banks managing asset quality and credit growth prudently
With a strong base of owner-occupiers, low impairment rates, and prudent LTV levels, Malaysia’s property financing sector is positioned for resilient growth in 2025, particularly in the affordable and mid-tier housing segments.
