More Debt, Fewer Buyers: Malaysia’s Property Loan Stock Swells Even As Demand Cools

KUALA LUMPUR, 12 OCTOBER 2026 —

Malaysia’s outstanding property loans topped RM1.23 trillion in August 2026, yet the pipeline of new borrowers is shrinking, with loan applications slipping for the first time in five months and approvals falling 13.1 percent, according to data compiled by BIM B Securities Research and MBSB Investment Bank.

BIM B calculated the RM1.23 trillion figure from Bank Negara Malaysia (BNM) data, showing that property loans now represent 50.3 percent of the total banking system’s loan portfolio of RM2.45 trillion. Residential property loans alone stood at RM925.48 billion, a year‑on‑year increase of 5.3 percent and accounting for 37.8 percent of total system loans. Non‑residential property loans rose 7.7 percent year‑on‑year to RM304.66 billion, making up 12.5 percent of the overall loan book.

By contrast, the banking system’s total loan growth in August was 5.7 percent.

Bank financing to the property sector grew 11.9 percent year‑on‑year to RM134.41 billion in August, a 2.4 percent rise from July and representing 5.5 percent of total loans. BIM B noted that household financing growth held steady at 5.0 percent, while property‑related financing expanded unevenly: the sector as a whole posted double‑digit growth, but residential purchases advanced at a slower pace.

The quality of the loan book shows early signs of strain. The gross impaired loan ratio for residential property purchases edged up to 1.2 percent in August from 1.1 percent in July, according to BIM B. The ratio for non‑residential property remained at 1.4 percent, matching the overall banking system’s impaired loan ratio.

MBSB Investment Bank reported that property loan applications fell 4.0 percent year‑on‑year to RM58.4 billion in August, marking the first decline in five months. Approved property loans dropped 13.1 percent to RM23.8 billion, and the approval ratio slipped to 40.8 percent from 45.0 percent a year earlier. MBSB attributed the pull‑back to consumers’ caution amid higher costs and persistent inflationary pressures.

Unsold completed residential units increased for the seventh consecutive quarter, reaching 33,094 units in the second quarter of 2026, up from 26,911 a year earlier, MBSB said. The overhang was most pronounced in Johor, Selangor and Perak, where the highest levels of unsold homes were recorded.

The juxtaposition of a growing loan stock with a cooling demand pipeline underscores a potential mismatch between financing supply and market appetite. While banks continue to extend credit to the property sector, the decline in new applications and approvals, coupled with rising inventories of completed homes, may prompt lenders to tighten underwriting standards or reassess exposure to the sector in the months ahead.