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

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Outstanding loans for residential and non-residential property purchases in Malaysia reached about RM1.23 trillion in August 2026, according to BIMB Securities Research.

The research house calculated the figure from Bank Negara Malaysia (BNM) data.

That works out to 50.3% of total banking system loans of RM2.45 trillion.

Loans for residential property purchases stood at RM925.48 billion, up 5.3% year-on-year, accounting for 37.8% of total system loans.

Non-residential property loans reached RM304.66 billion, up 7.7% year-on-year. This segment makes up 12.5% of total loans.

Overall banking system loan growth was 5.7% in August.

Property Sector Financing Grows Faster

Separately, bank financing to the property sector grew 11.9% year-on-year to RM134.41 billion in August, rising 2.4% from July and accounting for 5.5% of total loans.

BIMB Securities Research said household financing growth stayed at 5.0%. It added that property-related financing grew unevenly, with double-digit growth for the property sector and a slower pace for residential purchases.

The gross impaired loan ratio for residential property purchases was 1.2% in August, up from 1.1% in July. The ratio for non-residential property was 1.4%, the same as the overall banking system.

The construction sector recorded 4.4%.

Loan Demand Softens

MBSB Investment Bank said property loan applications fell 4.0% year-on-year to RM58.4 billion in August, the first decline in five months.

Approved property loans dropped 13.1% to RM23.8 billion. The approval ratio fell to 40.8% from 45.0% a year earlier.

MBSB said consumers remained cautious amid higher costs and persistent inflationary pressures.

Unsold completed residential units rose for the seventh consecutive quarter to 33,094 in the second quarter of 2026, from 26,911 a year earlier, MBSB said. Johor, Selangor and Perak recorded the highest overhang levels.

The stock of property loans keeps growing while new applications and approvals slow and unsold homes pile up.

READ MORE: Banks Can Legally Sell Bad Loans, Says SKP

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