Why Some Property Projects Struggle to Sell in Malaysia?

I. The Paradox of 30,000 Unsold Units

The contradiction in Malaysia's property market is profound.

There is still strong demand for housing. The nation continues to experience hundreds of thousands of transactions each year for residential real estate. First-time homeowners are actively looking for affordable housing, housing is still being built every day, and household formation and urbanisation are trends that are continuing to grow.

However, despite all of this activity, there are still over 30,000 finished (completed) residential units that have not been sold.

This creates the question of how these two realities can coexist?

The answer is pretty simple. There are buyers in the housing market, and there are homes in the housing market; however, the two do not always come together.

This has become one of the most significant takeaways from Malaysia's residential property market data for 2025. The issue isn't necessarily that there is a lack of housing stock, but that there is a lack of a connection between supply and demand.

Some projects are designed for buyers who do not exist in sufficient numbers. Others are priced beyond what local incomes can support. Some suffer from poor accessibility, while others struggle because competing projects flood the same neighbourhood simultaneously.

The result is what industry practitioners often refer to as "stuck projects" which are developments that remain on the market long after launch, accumulating unsold inventory despite various sales campaigns and incentives.

It is important to distinguish between normal sales cycles and genuine market failure.

A project that takes six to twelve months to achieve healthy take-up rates is not necessarily underperforming. In today's more cautious market environment, such timelines are increasingly common.

A project that remains burdened with substantial unsold inventory three years after completion is a different story altogether.

At that point, the issue is no longer sales execution.

It is usually a product, pricing, location, or structural problem that was embedded into the project long before the first sales gallery opened.

Understanding why projects struggle is not merely an academic exercise. For buyers, it helps identify potential risks before committing to a purchase. For investors, it reveals how market fundamentals influence long-term performance. And for developers, it offers valuable lessons about what today's market is willing and unwilling to absorb.

II. Price Detached from Local Income

The most common reason projects struggle to sell is surprisingly straightforward.

They are simply priced beyond what local buyers can afford.

Developers often benchmark against neighbouring projects, construction costs, or future aspirations for an area. Buyers, however, benchmark against one thing above all else: their monthly income.

Property affordability is ultimately determined by financing capacity.

A commonly used lending guideline is that monthly housing commitments should not exceed roughly 40% of household income. This creates what many market analysts describe as the "1.7x rule" in practical affordability assessments.

For example, a household earning RM6,000 monthly can typically support repayments associated with a loan significantly lower than what would be required for a RM600,000 property.

This creates a fundamental mismatch.

Consider a project launched at RM600,000 in a locality where average household incomes realistically support financing closer to RM350,000 or RM400,000.

Even if buyers like the project, approval rates become constrained.

Even if banks remain supportive, affordability concerns remain.

Even if developers offer rebates, furnishing packages, or legal fee incentives, the affordability gap may simply be too large to bridge.

This phenomenon has been particularly visible in selected suburban markets around Johor Bahru and parts of Selangor, where property prices have occasionally outpaced local income growth.

The challenge becomes even more pronounced when economic conditions become uncertain.

Households facing higher living costs tend to become more conservative in financial commitments. Buyers may qualify for a loan but still choose not to stretch their finances.

Developers often focus on what they can build profitably.

Buyers focus on what they can comfortably afford.

When those two numbers diverge too far, projects begin accumulating unsold units.

And once a project gains a reputation for slow sales, momentum becomes increasingly difficult to rebuild.

III. Wrong Product for the Location

Even correctly priced projects can struggle if the product itself does not match local demand.

This is where some of the industry's most expensive mistakes occur.

Property development is often driven by margins. Certain product types may appear attractive on spreadsheets because they maximise gross development value.

The problem is that buyers do not purchase spreadsheets.

They purchase homes that fit their lifestyle.

A classic example is the proliferation of luxury SOHO developments in locations primarily occupied by families.

Developers may see higher density and stronger pricing potential. Buyers see limited living space, higher maintenance costs, and unsuitable layouts for long-term family use.

The opposite problem also exists.

Large landed homes may be launched in areas dominated by young professionals and renters who prioritise affordability, convenience, and proximity to employment centres.

In such cases, demand exists but for a completely different product category.

The result is predictable.

Units remain unsold despite broader market activity.

The issue becomes particularly visible in the SOHO segment.

Thousands of SOHO units remain unsold or under-occupied across various markets, with occupancy levels in some developments failing to reach sustainable thresholds.

The challenge is not merely pricing is relevance.

Buyers can immediately recognise when a project has been designed around development economics rather than actual market needs.

When that happens, sales campaigns become increasingly difficult because the fundamental mismatch remains unresolved.

IV. Bumiputera Lot Gridlock

One of the less discussed contributors to unsold inventory involves Bumiputera lot allocations.

Under existing policies, a portion of units within many developments must be reserved for Bumiputera purchasers.

The objective is important and socially significant.

However, in certain projects, unsold Bumiputera units can create substantial inventory bottlenecks.

In some cases, these units remain unsold while demand exists among non-Bumiputera buyers.

Developers may apply for release mechanisms through state authorities, allowing unsold units to be sold more broadly. The challenge is that approval processes can take considerable time.

Holding costs continue throughout this period.

Interest expenses accumulate.

Marketing costs continue.

Completed units remain vacant.

Projects with higher Bumiputera allocations often experience longer inventory holding periods when release approvals are delayed.

For developers, this creates a financial burden.

For the broader market, it contributes to overhang statistics that may not necessarily reflect a complete absence of demand.

The units exist.

Potential buyers exist.

Administrative processes sometimes prevent the two from meeting efficiently.

V. Developer Reputation or Track Record

Property is ultimately a promise.

Buyers commit today for something that may only be completed years later.

Because of this, trust becomes one of the most valuable assets a developer can possess.

A developer with a strong delivery history enjoys advantages that are difficult to replicate through marketing alone.

Conversely, a developer associated with delays, abandoned projects, or repeated customer complaints often faces an uphill battle regardless of product quality.

Buyers have access to a wealth of knowledge about their purchases today. They read reviews from all over the web. They look at past projects to see how they were built. They share experiences with others using social media and property forums. A well-designed display suite does not make up for years of negative perception of the product in the marketplace.

The most common quality in project failures is buyer uncertainty about the delivery of the final product. Uncertainties cause buyers to have questions.

Will the builder continue to build the product as scheduled? Will the builder be on time or late with the delivery of vacant possession? Will the builder provide the features they said they would after the completion? All these questions influence the buyer's decision style.

Trust will not be re-established via a brochure, but rather through the completed product. The establishment of that trust usually takes several years.

VI. Location Fundamentals Broken

"Location, location, location": a common saying amongst real estate professionals and referring to an incredibly simple reason for using this phrase; the most challenging factor that cannot be altered post completion is the location of a development. A developer is able to do the following to improve their project by other means; redesign layout, modify pricing and enhance amenities, but they will not be able to relocate the project.

As an example of this in real estate, some projects are experiencing poor location fundamental issues and have therefore been struggling as a result. Examples of poor location fundamental issues include:

• Severe traffic congestion
• Limited access to public transportation
• No feeder bus networks
• No schools or medical facilities in close proximity
• Limited access to retail amenities

For the above reasons, buyers will pay more for properties if they have a very higher level of daily convenience; however, if it requires an individual to sacrifice their quality of life, then buyers may not be able to accept such a high price.

A two hour daily commute can become an insurmountable issue for people because no sales incentive can offset such an impact on their quality of life.

Accessibility for transportation-oriented development has become increasingly relevant, therefore projects that do not have access or connection to major transportation infrastructure will encounter greater challenges than ever before.

What was once considered to be a competitive advantage of many projects is now an expectation that must be met.

VII. Oversupply in a Micro-Market

The primary reason projects experience challenges is competition.

That competition typically is not from a different city. It's not from a different state. It's from the developer's proximity to a competing project.

In many locations in Malaysia, multiple developers are delivering similar products in the same time frame.

A suburban area could suddenly see:

• 4 condo buildings
• 3 serviced apartments
• Multiple SOHO projects

...all aiming to capture the same buyer pool.

This can result in an oversupplied micro-market.

The problem isn't that demand has stopped.

The problem is that consumers suddenly have so many alternatives available that they cannot make a decision.

Having multiple options can be a good thing, but it can also be paralyzing.

When buyers have too many options, they take longer to make a decision.

They evaluate incentives.

They hold off for discounts.

They delay their commitments if they feel they will receive a better offer.

Even strong projects can have difficulty in this environment.

Even though one development may be far superior than others, it still will have slow sales because it is transfixed by the numerous competing products that it must fight to secure its sales target.

In an oversupplied market, the chance of success is largely based on differentiation of the product versus the level of quality of the product.

It is difficult to create differentiation if all the competing developers are selling virtually identical products.

VIII. The Struggling Project Profile

When market analysts examine long-running overhang projects, a clear pattern often emerges.

Rarely does a project fail because of a single mistake.

Instead, failure usually occurs through accumulation.

A typical struggling development might look something like this:

• RM550,000 to RM700,000 pricing
• Located in a suburban market with weak public transport
• High concentration of competing launches nearby
• Significant Bumiputera inventory awaiting release
• Developed by a company with mixed delivery history
• Product type mismatched to local demographics

Any one of these issues might be manageable.

Two issues create friction.

Three or more often become highly problematic.

This multiplier effect explains why some projects remain unsold for years despite aggressive marketing efforts.

For buyers evaluating new launches, several warning signs deserve attention:

• *Red Flag #1: Pricing significantly above surrounding market affordability.
• *Red Flag #2: Multiple competing developments launching simultaneously nearby.
• *Red Flag #3: Weak transport connectivity and limited future infrastructure plans.
• *Red Flag #4: Product concept appears disconnected from local demographics.
• *Red Flag #5: Developer has a history of delivery delays or unresolved customer issues.

The presence of one red flag does not necessarily indicate a poor investment.

The presence of several should prompt deeper investigation.

IX. Conclusion: Failure Is Never One Reason

In conclusion, poor property sales are rarely caused by a single factor. More often, they result from a combination of issues relating to pricing, location, market demand, and product positioning. As such, successful developments must address these factors collectively. For buyers and investors, it is important to look beyond marketing promotions and show units, and instead assess a property's fundamental strengths, including its location, pricing, and long-term market prospects.