Homeownership among Malaysia’s middle-income M40 group has dropped below that of the lower-income B40 group, highlighting growing affordability pressures in the housing market.

Rehda Institute chairman Datuk Jeffrey Ng Tiong Lip said the shift reflects deeper structural issues in the way housing is developed and priced in Malaysia.

Cross-Subsidisation Raises Open-Market Home Prices

Speaking at the Rehda CEO Series 2026 conference yesterday, Ng said the current development model relies heavily on cross-subsidisation. Under this approach, developers fund price-controlled housing by charging higher prices for open-market units.

He explained that developers shoulder most of the responsibility and risk for delivering affordable homes, including compliance costs and project uncertainties. As a result, prices for non-subsidised homes are pushed higher to offset these obligations.

This has contributed to broader market inflation and worsened affordability for many households.

M40 Ownership Rate Now Below B40

Ng noted that while B40 households continue to face challenges in buying homes, M40 homeownership has declined more sharply. The latest data shows M40 homeownership at 75.9%, compared with 76.3% for the B40 group.

For middle-income earners, rising prices and tighter financing conditions are making it increasingly difficult to enter or remain in the property market, despite incomes that exceed eligibility thresholds for many affordable housing schemes.

Project Viability Under Strain

According to Ng, higher costs have also affected project viability across the industry. Developers are facing tighter margins, leading to delays, financial stress, and, in some cases, abandoned housing projects.

Drawing on past Rehda Institute research, Ng said these problems are systemic rather than the result of individual developer behaviour. He stressed that solutions require coordination across the entire housing ecosystem.

Housing Affordability Linked To Systemic Delivery Issues

Ng said housing challenges should not be viewed solely through the lens of affordability. Instead, they reflect weaknesses in delivery sustainability and ecosystem resilience.

He pointed to interconnected factors such as land policies, financing structures, infrastructure and utility costs, compliance requirements, and approval processes. When one party bears a disproportionate share of these burdens, the system becomes fragile.

This fragility, he said, ultimately leads to delays, financial strain, and abandoned developments, which affect buyers and the wider economy.

Banks And Utilities Urged To Share The Load

Ng called on the financial sector to take on a more active role, not just as lenders but as delivery partners. This could include preferential financing for first-time homebuyers, longer loan tenures, income-responsive repayment structures, and targeted risk-sharing mechanisms supported by policy incentives.

He also said utility providers should adopt fairer cost-sharing arrangements for infrastructure provision, easing pressure on project costs and timelines.

State and local governments, Ng added, play a key role by streamlining approval processes and shortening time to market. Coordinated action between federal ministries, Bank Negara Malaysia, state and local authorities, banks, utility companies, and developers would help strengthen the housing ecosystem and improve outcomes for the broader economy.

Industry Seeks Review Of Higher Stamp Duty On Foreign Buyers

Separately, Ng said the property industry is calling for a review of the proposed increase in stamp duty on foreign home purchases to 8%, up from 4%, as announced in Budget 2026.

He noted that foreign buyers, including participants under the Malaysia My Second Home programme, make up around 0.5% of total property transactions and are largely concentrated in the high-end market. As such, they do not compete directly with local buyers.

Ng added that foreign purchases generate spillover benefits for the economy, supporting jobs and spending in sectors such as retail, education, healthcare, and services.

Gradual Approach Suggested To Protect Investment Appeal

Ng warned that a sudden doubling of stamp duty could discourage foreign investment and weaken Malaysia’s appeal to international talent and foreign direct investment.

He said the industry is proposing either maintaining the current 4% rate or implementing a moderate, phased increase instead. This approach, he said, would continue to attract long-term international families who contribute to local spending, without affecting local homeownership opportunities.

The proposal remains under consideration, with no changes yet gazetted or in force.

Why Higher Incomes No Longer Guarantee Homeownership

The drop in M40 homeownership below the B40 level highlights a structural gap in Malaysia’s housing system. While income remains a key determinant of affordability, it no longer guarantees access to homeownership for middle-income households.

B40 households are supported through targeted housing programmes with controlled pricing, while M40 buyers often fall outside these eligibility limits. At the same time, they face open-market prices that reflect rising development and compliance costs, particularly in urban areas where job opportunities are concentrated. 

As a result, higher earnings do not consistently translate into greater access to homeownership for the M40 group.

How Pricing And Financing Combine To Exclude M40 Buyers

Higher selling prices affect not only purchase decisions, but also loan eligibility. Financing assessments are tied to property prices, debt service ratios, and household cash flow. As prices rise, even financially stable households can see their borrowing capacity reduced.

For M40 buyers, this can result in loan approvals that fall short of required amounts, higher down payments, or delayed entry into the market. Over time, these constraints translate into lower ownership rates, even when demand remains present.

Delivery Costs Eventually Show Up In Buyer Prices

The cross-subsidisation model described by Ng helps explain why open-market homes have become more expensive. When developers absorb the cost of price-controlled units, infrastructure, and regulatory compliance, these costs are recovered through higher-priced homes.

From a buyer’s perspective, this means affordability pressures persist even when supply is available. The issue is not the absence of homes, but the mismatch between what is built, how it is priced, and what middle-income households can realistically finance.

Why System Coordination Shapes Household Outcomes

The decline in M40 homeownership illustrates how housing outcomes are shaped by the entire development ecosystem. Financing terms, approval timelines, infrastructure costs, and policy design all interact to determine whether a household can move from intent to ownership.

For middle-income Malaysians, the challenge is less about aspiration and more about structural access. Without adjustments across these systems, higher incomes alone may no longer translate into higher homeownership.

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