Construction Activity in Malaysia: What the Data Reveals

I. Introduction: A Different Story

Let me tell you something that might surprise you.

If you've been following property news, you probably know that transaction volumes softened a bit in early 2025. Buyers were cautious. Deals took longer to close. The mood wasn't exactly electric.

But here's the thing that most people missed: while property sales were cooling, construction was on fire.

Record values. Double-digit growth. Every single sub-sector expanding.

Why does this matter to you? Because construction data tells you where developers and the government are placing their bets. It's a forward-looking indicator. Before a property is sold, it has to be built. And right now, a lot is being built.

So let me walk you through what the latest construction data actually reveals to not just the numbers, but what they mean for you as a buyer, investor, or someone just trying to understand where this market is heading.

II. The Big Picture: Construction Is Booming

Total construction work done in 2025 reached a record value, with double-digit annual growth. We're not talking about a small bump. This is significant expansion across the board.

What's driving this? The private sector remains the main driver, contributing the majority of work done value. Developers aren't just sitting on land banks to they're actively building.

The sector expanded across all sub-sectors to residential, non-residential, and civil engineering to though at a more measured pace than the explosive growth we saw in 2024. Think of it as a strong, sustainable surge rather than a wild spike.

Now, here's where it gets interesting. If construction is booming, what exactly are they building? Let me break it down by category.

III. What the Data Reveals About Residential Construction

Completed residential units surged significantly in early 2025. More homes finished means more supply entering the market. For buyers, that's the choice. For sellers, that's competition.

Housing starts also recorded strong growth. This is important. Housing starts to the number of new units that began construction to tell you where developers see demand. They wouldn't be breaking ground if they didn't think people would buy.

New residential launches more than doubled compared to the previous year. Yes, you read that right. Doubled. After a few years of cautious launching, developers have stepped on the accelerator.

But here's the twist. Planned new developments declined. That sounds contradictory, right? More launches, but fewer planned developments?

Here's what's happening: developers are launching projects they already have in the pipeline, but they're not planning as many new ones beyond that. They're working through existing approved plans rather than submitting new ones. This suggests they're cautiously managing future supply building now, but thinking carefully about what comes next.

So residential construction is strong today, but developers are already signalling a potential slowdown in new project approvals. That's worth watching.

IV. What the Data Reveals About Non-Residential Construction

Non-residential buildings recorded the strongest growth among all sub-sectors. Not residential. Not civil engineering. Non-residential think shops, offices, factories, warehouses, schools, hospitals.

This tells me something important: demand for commercial, industrial, and institutional spaces is rising.

What's behind this?

• Commercial spaces: Retail lots, shop lots, office buildings. The same commercial property market we talked about in previous articles.
• Industrial spaces: Factories, logistics hubs, data centres. This is a booming segment right now.
• Institutional spaces: Schools, universities, healthcare facilities.

And here's a key driver most people overlook: government-driven projects. Budget 2025 allocated significant funds for new schools and healthcare facilities across the country. Those buildings don't build themselves. The construction data captures all of it.

So while you've been watching condo launches, the real growth has been happening in commercial and institutional construction.

V. What the Data Reveals About Civil Engineering

Civil engineering expanded at a slower pace compared to buildings. It's still growing, just not as fast as residential or non-residential construction.

What falls under civil engineering? Think big infrastructure:

• Roads and highways
• Railways and MRT/LRT extensions
• Bridges and flyovers
• Utility projects (water, sewerage, electricity, telecommunications)
• Drains and flood mitigation

Within this sub-sector, utility projects and roads/railways dominate. These are the backbone projects that make everything else work. You can't build a new township without roads. You can't attract businesses without reliable utilities.

And here's why this matters for the long term: infrastructure spending under Budget 2025 and RMK-13 (the 13th Malaysia Plan) continues to support this segment. The government has committed billions to transport and utility projects over the next several years.

Slow and steady growth in civil engineering means the underlying infrastructure is being built to support future property development. That's good news for the long-term health of the market.

VI. Which States Lead Construction Activity

The majority of construction work value is concentrated in just four states and territories.

Selangor remains the largest contributor. No surprise here. Ongoing projects in places like Petaling Jaya, Shah Alam, Cyberjaya, and Klang keep Selangor at the top. The growth is driven by both non-residential (commercial and industrial) and residential buildings.

Johor ranks second. And this is interesting. Johor's construction activity is primarily supported by non-residential building projects to think industrial facilities, logistics hubs, and developments tied to the Johor-Singapore Special Economic Zone (JS-SEZ). The residential story in Johor is more mixed, but commercial and industrial construction is booming.

Sarawak rounds out the top four along with Wilayah Persekutuan (Kuala Lumpur). Sarawak's activity reflects state-level infrastructure and housing projects. Kuala Lumpur's remains driven by high-rise residential and commercial developments.

What about Penang? Still active, but not in the top four by total value. The concentration of construction in these four states tells you where developers and the government are focusing their resources.

VII. Government Initiatives Driving Construction

Let me give credit where it's due. A lot of this construction activity isn't just private developers building condos. The government is playing a major role.

Program Residensi Rakyat (PRR) and Projek Rumah Mesra Rakyat (RMR) are accelerating affordable housing construction across the country. These aren't luxury projects. They're targeted at lower-income Malaysians. But they add to the total construction numbers and create activity in areas that private developers might ignore.

Strategic infrastructure projects are also driving development:

• The Forest City Special Financial Zone: Love it or hate it, construction is happening.
• The Johor-Singapore Special Economic Zone (JS-SEZ): This is a massive driver of non-residential construction in Johor. Factories, logistics centres, supporting infrastructure to all being built now to support future operations.

Budget 2025 allocations for multiple ministries support institutional construction to new schools, clinics, hospitals, and government facilities. Every new school requires a building. Every building shows up in the construction data.

VIII. The Overhang Paradox

Now let me address something that seems confusing at first glance.

Residential overhang, unsold completed units increased marginally despite strong construction activity.

How can construction be booming if units aren't selling?

Here's the reality: construction is rising, but not all new units are finding buyers. Developers are building, but buyers aren't buying everything being built.

What's happening?

• Some projects are in locations where demand is weak
• Some units are priced above what buyers are willing to pay
• Some property types (luxury high-rise in certain areas) simply don't match what the market wants

This reveals a fundamental disconnect: the product-market fit problem persists. Developers are building the wrong units in the wrong locations. Or at least, they're building units that don't match what today's buyers actually want.

What does this mean for you? It means you can't assume that just because construction is strong, every new property is a good investment. Some will sit empty. Some will require price cuts. Construction data tells you what's being built. It doesn't tell you what's being bought.

IX. What the Data Means for Buyers

• More completed units = more choices. You have better selection for move-in-ready or rent-ready properties than a year ago. Use that leverage.
• Use rising completions as bargaining power. Developers with unsold inventory face holding costs. Negotiate hard: they want to sell.
• Future supply may tighten. Fewer new projects are being planned. The current oversupply could correct itself in 1 to 2 years.
• Buy before SST increases costs. Sales and Service Tax on construction materials will raise development costs: likely passed to buyers. Buying sooner could save you money.
• Construction data gives you timing signals. Use it to time your entry, not just pick a location.

X. Outlook for Construction Activity

Let me look ahead.

The construction industry is expected to maintain positive momentum through 2026. We're not looking at a one-quarter wonder. The pipeline is solid.

Investments in industrial projects, data centres, and transport infrastructure will drive growth. These aren't speculative. Companies are committing real money to real facilities. That creates sustained demand for construction services.

Government pipeline projects worth billions support sustained activity. Once a government project is budgeted and approved, it tends to move forward. That provides a reliable base level of activity even if private sector spending fluctuates.

Special economic zones, particularly JS-SEZ, will fuel Johor's construction boom. Johor's construction activity isn't a flash in the pan. The JS-SEZ is a multi-year, multi-billion ringgit initiative. Construction related to it will continue for years.

So the outlook is positive. But positive for construction doesn't automatically mean positive for property prices. Keep that distinction clear.

XI. Final Directive: What You Should Do

Let me leave you with some straight talk.

Do not confuse strong construction activity with strong property sales. They are different indicators telling different stories. Construction measures what's being built. Sales measure what's being bought. One can be up while the other is down.

Use construction data to identify which states and sub-sectors are growing. Selangor and Johor for non-residential. Sarawak for state-level activity. KL for high-rise residential. Follow the construction money to understand where developers see opportunity.

Monitor planned new developments as a leading indicator of future supply. When planned developments decline, future supply may tighten. When they surge, future supply may loosen. This is your early warning system.

Act before July 2025 if you want to avoid SST-driven price increases. I've mentioned this already, but it bears repeating. The SST changes will affect construction costs. Those costs eventually flow to buyers. If you're on the fence about a purchase, the timing argument favours acting sooner rather than later.

One Final Thought

Construction data is useful, but it's not the whole story. It tells you where cranes are in the sky, where land is being cleared, and where concrete is being poured. That's valuable information.

But a building under construction isn't yet a successful investment. That requires the right location, the right price, the right tenant profile, and the right timing.

Use the data to guide your choices. But don't let it replace your own judgment. Walk the sites. Talk to the neighbours. Visit at different times of day. Do the legwork.

And if you want to talk through what the construction data means for your specific situation, you know where to find me.