Malaysia is sitting on a counter-intuitive housing puzzle. Homes priced below the RM300,000 affordability cap - the very segment policy is meant to deliver - are increasingly the ones piling up unsold, while urban demand for accessible homes continues to outstrip what developers are actually launching where buyers want to live.

The paradox in numbers

According to the National Property Information Centre (NAPIC), more than 30% of Malaysia's residential overhang - completed homes that have stayed unsold for at least nine months after launch - is priced below RM300,000, the official affordable housing ceiling set by the Ministry of Housing and Local Government (KPKT) in 2019. Total unsold inventory rose to 32,801 units worth RM16.37 billion in 1Q 2026, according to JPPH data summarised by EdgeProp.my on 14 May 2026.

The contradiction is most visible in the price-band breakdown. New Straits Times reported on 17 May 2026 that the bulk of overhang in recent quarters is concentrated in the RM200,000 to RM600,000 bracket - i.e. the mid-range and "affordable" segment, much of it serviced apartments and condominiums in outlying locations. Even more telling, NAPIC figures show that 39.2% of new residential launches in 1H 2024 were already priced below RM300,000, yet the absorption gap has only widened in the quarters since.

REHDA's 2H 2025 survey, released in March 2026, reinforces the diagnosis. 17,971 residential units were launched in the second half of 2025 but only 3,784 were sold, dragging take-up to 21% from 38% a half-year earlier. 72% of surveyed developers reported financing-related sales obstacles, while 83% cited end-financing difficulties for buyers - meaning loans were declined rather than offers withdrawn.

Why the cheapest homes are not selling

The first and most cited reason is location. NAPIC's data confirms that many overhang affordable units sit in far-flung pockets, often without easy access to public transport, schools, healthcare or jobs. Urban centres with the demand are saturated and expensive, while the new builds priced for affordability sit on land that was cheap precisely because it is poorly served - a classic supply-demand mismatch that policy has not yet corrected.

The second reason is financing. Even at RM300,000, a 90% loan over 35 years requires a household income that excludes a large slice of B40 and lower-M40 earners once existing debt commitments - car loans, personal loans, education loans - are factored in. Mortgage rejection rates in the broader affordable band run between 31% and 45% according to the REHDA survey, with the RM500,001 to RM700,000 range hit hardest. Gig and self-employed buyers, who form a growing share of the workforce, struggle to provide the income documentation banks expect.

The third reason is product fit. Many "affordable" units are studio or one-bedroom serviced apartments built for investor yield rather than owner-occupier liveability. Young families seeking entry-level housing increasingly prefer terraced homes - which were the single largest new-launch category in 1H 2025 - over compact urban high-rise that lacks layout flexibility for growing households.

The state breakdown reinforces the point. Johor carries Malaysia's heaviest residential overhang by value at RM2.83 billion as of Q3 2025, concentrated in condominiums priced below RM500,000 in pockets without strong daily transit. Pulau Pinang follows at RM2.04 billion, with WP Kuala Lumpur close behind at RM2.4 billion - and a meaningful share of KL's 2,287 overhang units sits in the RM200,001 to RM300,000 band. In other words, even the capital, with the country's deepest urban demand, has projects in the "affordable" tier that genuine end-buyers will not take up at the offered location and configuration.

Why this matters for Malaysian buyers

For first-home buyers, the paradox creates two distinct opportunities. Completed-but-unsold affordable stock often comes with developer rebates, absorbed legal and stamping fees, and in some cases assured rental schemes - meaning the effective entry cost is well below the headline ticket price. Buyers with stable employment and a clean Central Credit Reference Information System (CCRIS) profile can sometimes secure better financing terms on overhang stock than on hot new launches, because developers are motivated to clear inventory before year-end.

For policymakers, the data argues for moving beyond price-cap definitions of "affordability". KPKT's RM300,000 ceiling, frozen since 2019, says nothing about location, layout or accessibility. The NST Leader editorial published this month called for a fundamental rethink of what affordable housing means in a country where mortgage rejection - not nominal price - is the binding constraint for most aspiring owners.

For investors, the paradox is a warning against generic "buy affordable" theses. Yield-hunters who bought into investor-targeted serviced apartments at sub-RM300,000 entry tickets between 2019 and 2022 are now sitting on flat or negative capital appreciation, with sub-sale exits competing against developer stock at sharper discounts. The mid-range and "affordable" condo segment has become the structural weak spot of the national overhang.

For developers, the message is equally pointed. The 21% take-up reading in REHDA's 2H 2025 survey is the lowest in recent memory, and the next set of launches will need to demonstrate genuine accessibility - proximity to MRT, LRT or KTM Komuter stations, walkable amenities, and family-suitable layouts - to clear at any price point. Cosmetic affordability without the infrastructure that makes daily life workable is now a recognisable risk profile in the underwriting models of the major Bursa-listed names.

Editorial view

The right diagnosis is that Malaysia does not have an affordability problem in the price sense - average transacted prices have risen just 1.7% in the past year per JPPH's MHPI, far below household income growth across the same period. What it has is a delivery problem: the right product, in the right place, on financing terms the right households can actually meet. Until KPKT and state planning authorities require new affordable launches to anchor on transit nodes, employment clusters and supporting amenities, the overhang will keep refilling no matter how many sub-RM300,000 units are completed.

The next quarterly NAPIC release will be a real test. If 2Q 2026 shows the affordable-segment overhang easing while mid-range continues to swell, the policy mix is working. If both keep rising, the conclusion is harder to avoid - Malaysia is building homes for a demand profile that does not exist where the homes are. Watch the August 2026 print closely. Rummah News

Practical takeaways

Treat the official "affordable" tag as a starting point, not a guarantee - verify location, transit access and amenities before signing the OTP.
Check CCRIS and Debt Service Ratio before viewings; rejection rates of 31% to 45% in the affordable band mean financing approval is the real gatekeeper.
EPF Account 2 withdrawals can bridge the deposit gap; pair this with a 90% margin of financing to maximise leverage on overhang stock.
Look at completed-but-unsold projects in transit-accessible suburbs - developer incentives can shave 5% to 8% off the effective entry price.
Avoid sub-400 sq ft serviced apartments unless the rental yield model is independently verified; these dominate the affordable overhang and have struggled to appreciate.
Run the loan numbers via a qualified mortgage broker or the Rummah loan qualifier before committing.

Until Malaysia recalibrates its affordable housing definition to include location and accessibility, the country's overhang will keep growing in the very band it is trying to clear. For aspiring owners, the silver lining is real: buyers willing to navigate the maze of overhang stock have rarely had more leverage. Browse current Selangor listings and Kuala Lumpur listings on Rummah to gauge where developer rebates are running deepest.