Too wealthy
for government subsidised housing yet priced out of the soaring luxury market.
Referred to as the invisible middle class, Malaysia’s middle 40% (M40)
households form the backbone of the workforce, yet their housing realities are
increasingly strained. Within this group, the lower-middle tiers are commonly
referred to as M1 and M2. They are also the most financially vulnerable.
During the
pandemic, around 20% of M40 households experienced income declines that pushed
many into the bottom 40% (B40) category. Although the M40 makes up 40% of
households, it holds only about 38.2% of national income, compared to 45.1% for
the top 20% (T20), according to the Statistics Department (DOSM).
In urban
centres such as Kuala Lumpur and Selangor, this pressure is amplified. A large
share of income is absorbed by housing, transport and childcare, leaving
limited room for savings or upward mobility. They are, in many ways, stuck in
the middle. Too qualified for subsidised schemes like Rumawip and Perumahan
Rakyat 1Malaysia or PR1MA, yet unable to sustain RM700,000-plus urban housing.
Source: https://en.wikipedia.org
For the
average household, the mathematics of property no longer adds up. It is
becoming increasingly misaligned with income reality. DOSM reports that the
median monthly income for the lower M40 is around RM5,250. Based on the median
multiple rule, affordable housing for this group should ideally fall between
RM300,000 and RM450,000.
The
Property Market Report 2025 by the National Property Information Centre (Napic)
shows the national average house price has risen to RM502,922. In major urban
centres, the gap is even wider still. Kuala Lumpur has shot past RM810,000
while Selangor averages RM567,505. Buyers are worried because this mismatch is
leading to a structural imbalance that will resonate years down the line.
Napic data
shows a 31.6% rise in unsold completed units as of late 2025. While 52% of
transactions are still going strong below RM300,000, new supply is still
skewing toward higher-priced, high-density developments with high ownership
costs. Monthly maintenance fees today can range between RM300 and RM500 per
month, though this can easily rise to over RM700 in luxury developments. This
quickly becomes a tipping point between mortgage approval and rejection. For
many households, affordability is not only about loan eligibility but about
sustaining long-term ownership.
Many buyers
are venturing out from city centres in search of affordability. Locations such
as Semenyih, Nilai and Rawang offer good entry points in the RM300,000 and
RM400,000 range. However, these savings tend to get offset by longer commutes,
higher fuel costs and increased vehicle maintenance.
Budget 2026
expanded the Housing Credit Guarantee Scheme, allocating up to RM10bil to
support first-time buyers and gig workers. Developers have also done their part
in introducing step-up financing models that reduce any early repayment
burdens. These are all done in anticipation of income growth. However,
financing is still a problem.
Recent
findings from the Real Estate and Housing Developers’ Association Malaysia
(Rehda) show that 72% of developers report financing-related difficulties among
buyers, with end-financing loan rejections reaching as high as 31% to 45% for
properties priced between RM500,000 and RM700,000.
Malaysia’s
housing market is no longer grappling with oversupply issues alone. For a large
segment of the M40, ownership is increasingly filtered through financing
barriers, recurring costs and structural affordability constraints. In that
sense, the question is no longer whether housing exists for the middle class
but whether the middle class still exists within the current housing system.
Reference:
The invisible M40, Samantha Wong, The Star, 3 May 2026