By Samantha Wong

One enduring trend in urban development has ridden the investment wave to deliver significant value but only to a targeted segment of the market. In many urban developments today, apartment layouts are getting smaller, car park bays are maximised along minimum baselines and any facilities provided within the development are designed with short-term tenants at the forefront. This trend has grown increasingly common over time as cities and hubs bloom nationwide, reflecting the simple reality that some projects are clearly built for investors rather than owner-occupiers as the primary buyers. So when investment demand drives development decisions, the units become more suited as rental assets and less for long-term living.

Not only does investor demand have an influence on pricing but it can also shape how homes are designed and marketed. According to Henry Butcher Malaysia chief operating officer Tang Chee Meng, developments primarily aiming at investors tend to prioritise rental appeal instead of long-term living needs. This, in turn, translates to smaller units, bare minimum car park allocations and facilities geared more towards short-stay tenants over families.

“When developers design projects mainly for investors who intend to rent out their units, the apartments are often smaller so that the selling price remains attractive,” said Tang, adding that such units are typically targeted at tenants who are single or have smaller households.

Tang noted that buildings where short-term rentals are common can also feel different from owner-occupied communities, with higher turnover and less privacy for residents. Because of this, he said developers should be transparent if a project is expected to accommodate short-term rentals through platforms such as Airbnb, especially for apartments built on commercial titles.

The investor-driven development trend is a very clear indicator of a broader shift in many urban property markets, where housing is bought merely to be a financial asset rather than purely a place to live. While Malaysia’s property market has always opened its arms to both local and foreign investors, the policies designed to attract capital can sometimes sideline the people who actually want to live in these homes. As prices climb and neighbourhoods hollow out, the challenge is finding a balance between investment flows and everyday liveability.

The investor-first model

Malaysia’s property sector has historically leaned on investment demand to drive growth. Foreign buyer programmes, developer incentives and policies that favour rapid launches have helped channel capital into the market. But from a macroeconomic perspective, the logic is pretty straightforward. Property investment brings in foreign funds, supports construction activity and creates jobs across related industries from materials to legal services. For developers, investor buyers also provide a very reliable early sales base, allowing projects to quickly secure financing and move forward.

When homes become commodities

What happens when prices become investment-oriented? Those very prices could detach from how much regular families can afford to fork out. Units are bought with the expectation of capital appreciation rather than occupancy. In some developments, particularly in city centres, a significant share of units may remain vacant or used only occasionally. The result is unsettling. Picture apartments with every unit occupied, yet the neighbourhood has no one walking around and socialising.

Owner-occupiers, meanwhile, face rising barriers to entry. Even middle-income households may struggle to compete with buyers who are motivated by portfolio diversification rather than immediate housing needs. This dynamic has been observed in countries like Singapore and Germany where policymakers have introduced measures to curb such speculative demand. These typically include taxes like higher stamp duties, stricter loan-to-value (LTV) ratios and resale restrictions.

Liveability costs

The effects extend beyond housing affordability. Neighbourhoods with large numbers of investor-owned or short-term rental units can experience higher turnover and weaker community ties. Local businesses may struggle if residents are transient or if occupancy rates fluctuate.

Infrastructure planning can also become more complicated. Schools, public transport and community facilities are designed based on expected population patterns but investor-heavy developments can distort these assumptions. For cities trying to build vibrant, walkable communities, a high proportion of non-owner-occupied units can undermine those goals.

Balancing act

Foreign investment will always have a spot on the priority list for economic growth and for sustaining large-scale developments. But policymakers should make sure that housing is still accessible and affordable for residents whose incomes are tied to the local economy. Measures like minimum price thresholds for foreign buyers, real property gains tax (RPGT) and various affordable housing initiatives have tried their best to address this balance. Yet the challenge is not just about restricting investors. It is about designing a market that encourages long-term occupancy and stable communities.

Several policy approaches could help strike a better balance. One possible option is to draw up clear differentiations between speculative and long-term investment. Slapping taxes on vacant properties or short-term flippers could affect purely speculative purchases while leaving room for actual, genuine investment. Another approach is to prioritise owner-occupiers through targeted financing support, such as favourable mortgage schemes or first-time buyer incentives. Urban planning also plays a role. Mixed-use developments, stronger neighbourhood infrastructure and diverse housing types can help ensure communities remain active and resilient.

In the end, property markets tend to function best when both investors and residents play buddy-buddy. Investment capital provides the boost to fund development and expand property supply. Owner-occupiers provide the socialising that turns buildings into neighbourhoods. The goal is not to exclude investors but to ensure that housing markets remain grounded in the needs of people who actually live and work in the city.

As Malaysia continues to urbanise and attract these global capitals, the real challenge will be making sure that homes remain more than just assets because, at the end of the day, cities are built not only by capital.

This article was first published in StarBiz 7.