KUALA LUMPUR: Malaysia is building homes priced beyond what most Malaysians can afford, contributing to the country’s growing residential housing overhang.

Deputy Economy Minister Mohd Shahar Abdullah said Malaysia must directly confront the affordable housing mismatch.

“The market is telling us something clear. The mismatch is not in demand. The mismatch is in what is being built versus what most Malaysians can actually afford,” he said in his keynote address at Malaysia Building & Property Summit 2026 today.

Mohd Shahar said that as of the first quarter of 2026, Malaysia held 32,801 unsold, completed residential units, valued at RM16.37 billion. “The serviced apartment segment alone accounts for nearly 19,263 of those units, with close to 60% priced between RM500,000 and RM1 million.”

He said housing reform will be one of the priorities under the 13th Malaysia Plan (13MP), with the government focusing on increasing the supply of quality and inclusive affordable housing, improving home financing access and strengthening housing regulatory efficiency.

The property and construction industry will play a critical role in supporting Malaysia’s economic resilience amid a more challenging global environment shaped by geopolitical fragmentation, rising energy prices and tighter fiscal conditions worldwide, he added.

“We meet at a critical juncture when global energy markets are unsettled, fiscal conditions are tightening worldwide, and the building and property industry sits at the centre of how Malaysia responds.”

Mohd Shahar said the construction industry contributes between 3.5% and 4.5% to Malaysia’s gross domestic product and has broad spillover effects across steel, cement, transport, urban development and household wealth creation.

He noted that Malaysia entered 2026 from a position of strength, supported by robust 5.2% economic growth in 2025, stable inflation of between 1.5% and 2%, un-employment of about 2.9% and a stable Overnight Policy Rate of 2.75%.

However, rising geopolitical tensions and disruptions to global energy flows were beginning to place pressure on public finances and construction costs, he said.

“The conflict in the Middle East and the disruption to global energy flows have moved Brent crude prices from Budget 2026’s working as-sumption of US$60 to US$65 (RM238 to RM258) per barrel to roughly US$87 in recent weeks. The fuel subsidy bill is under significant pressure, and the government has initiated an expenditure review to maintain fiscal discipline.”

Mohd Shahar said rising steel, cement, transport fuel and site equipment costs were already placing pressure on industry margins. “In fact, the World Bank forecasts overall commodity prices to rise by around 16% in 2026. Margins will be tested.”

He added that public-sector projects will be prioritised more selectively going forward, with stronger focus on projects capable of generating measurable economic and social returns. “It also means the public sector project pipeline will be sequenced more tightly, with sharper prioritisation of catalytic projects that demonstrate measurable returns.”

Despite the near-term pressures, Mohd Shahar described the current challenges as a “temporary deviation rather than a structural break” as Malaysia’s financing conditions, domestic demand and investment pipeline remained resilient.

He said 13MP will also place greater emphasis on catalytic regional development and infra-structure integration, particularly through projects such as the Johor-Singapore Special Economic Zone, MRT3, the East Coast Rail Link and the Pan Borneo Highway.

According to him, projects aligned with national spatial, environmental and social priorities will receive stronger government support through faster approvals, infrastructure co-ordination and financing facilitation.

Mohd Shahar said public-private partnerships (PPP) will become increasingly important as fiscal space tightens.

“Public-private partnership becomes essential, not optional. This is not a retreat from the government’s role; it is a recalibration. PPP frameworks under RMK13 (13MP) would be strengthened across affordable housing, transit-oriented developments, urban regeneration and brownfield redevelopment.”

Mohd Shahar highlighted the growing importance of technology adoption across the property and construction ecosystem, including Building Information Modelling, Industrialised Building System (IBS), proptech and AI-driven solutions.

He said the government will continue supporting proptech and IBS adoption through targeted incentives, including Green Invest-ment Tax Allowance incentives and AI-related deductions announced under Budget 2026.

At the same time, he said, Malaysia must gradually reduce its dependence on low-skilled foreign labour within the construction sector through greater automation, tech-nical and vocational education and training expansion and workforce upskilling initiatives.

“Every low-skilled foreign worker represents a remittance outflow from our economy. Conversely, every upskilled Malaysian construction professional represents productivity that stays in the domestic economy,” Mohd Shahar said.

The summit, themed “Powering Smart and Sustainable Development in the New Geoeconomic Era” discusses how Malaysia’s building and property sectors could adapt and thrive in an increasingly complex global environment.

Speaking at the summit, Tan Sri Michael Yeoh, president of KSI Strategic Institute for Asia Pacific and moderator for the technology session, said the property and construction sectors are entering a defining period of transformation.

“The future of the building and property industry will depend on how effectively we integrate sustainability, technology and human-centric development. MBPS 2026 demonstrated that industry leaders are prepared to rethink traditional models and work collaboratively towards smarter and more resilient growth,” he added.