By Joseph Wong

Malaysia’s rental market has reached a five-year high, driven by post-pandemic economic recovery, increased demand for rental properties and a surge in living costs. According to the latest IQI Malaysia Home Rental Index report, released by real estate giant IQI, national rental prices have risen steadily, marking a significant shift in the property landscape.

The Malaysia Home Rental Index, which analyses nearly 100,000 rental transactions since 2018, revealed that average national rents rose by 3.9% year-over-year, reaching an average of RM2,052 per month. This marks the highest rental levels seen since early 2020. However, the report also suggests that the market is stabilising rather than experiencing extreme price hikes.

“National rents rose 3.9% year-over-year to an average of RM2,052 to hit a five-year high though growth remained steady rather than extreme,” said Juwai IQI co-founder and group chief executive officer Kashif Ansari. “In the specific states, Kuala Lumpur rents stabilised at RM2,847 after a volatile period while Selangor rents showed a mild recovery. The results suggest the market is trending towards stability. The fact that rents are stabilising rather than surging ahead should be good news for renters worried about the cost of living.”

What it means for renters

The report further states that the Malaysia Home Rental Index in Q4 2024 reached its highest level since Q1 2020, when the rental market suffered a decline due to the economic downturn caused by the Covid-19 pandemic. Compared to its lowest point in 2020, rental rates are now 24% higher, although they still remain RM442 lower per month than in 2019.

Rental prices grew by 2.8% in Q4 2024 compared to the previous quarter and were 3.9% higher than at the end of 2023. This trend signals a return to pre-pandemic levels, though at a measured pace. IQI’s forecast for 2025 suggests continued moderate growth rather than another major boom or crash.

Thankfully, rental rates have stabilised, said Ansari, adding that the nation can expect to avoid the extreme volatility seen in 2020 and 2021, when rents fluctuated by as much as 26% year over year.

Rents stabilise after volatile years

Kuala Lumpur, the country’s rental hotspot, saw average rents hold steady at RM2,847 in Q4 2024, which is just RM1 lower than Q3 2024. However, compared to 12 months ago, KL’s rental prices have actually fallen by 10.2%, marking the first annual decline in three years.

This unexpected drop is attributed to two factors:

1. High rental prices driving tenants away – Some renters may have sought more affordable alternatives in suburban areas.
2. A surge in home purchases – Many tenants have transitioned to homeownership as real estate transactions hit a record high in 2024, according to NAPIC (National Property Information Centre).

Despite the 2024 decline, KL rents remain 35% higher than their lowest point during the pandemic. This suggests that while the market has softened slightly, it is far from experiencing a downturn.

Selangor: A mild recovery

In Selangor, rental rates also showed some interesting trends. Quarterly growth was recorded at 1.0% in Q4 2024, with rents increasing from RM1,820 to RM1,839. However, compared to Q4 2023, rental prices are still 1.2% lower year-over-year.

The demand for rental properties in Selangor has weakened slightly, with the Selangor Home Rental Index peaking at 94.3 in Q3 2023. Despite this, Selangor’s rental market remains stronger than the national average, with its rental index outperforming Malaysia’s overall rental index of 76.2.

“Both Indexes have the same starting point, so this means Selangor rents have performed more strongly than national rents over recent quarters. For Selangor, 2024 was a big change compared to 2023. In the latter year, rents jumped decisively, by 11.6%.

“Selangor still outperformed Kuala Lumpur, where, as I said earlier, average rents fell 10.2%. That indicates greater market resilience. If these trends continue, the market is likely settling into a new normal rather than returning to the rapid price increases of 2023,” said Ansari.

Why are rents rising?

Several key factors have contributed to the rental market surge:

1. Post-pandemic economic recovery: With the economy rebounding, more people have returned to the workforce, increasing demand for rental properties, particularly in urban areas.
2. Rising cost of living: Inflation and increased utility costs have made homeownership more expensive, forcing many individuals to remain in the rental market rather than buy properties.
3. Supply constraints: Some landlords have exited the market due to high maintenance costs and increased property taxes, reducing the supply of rental homes.
4. Migration to urban areas: The return of students and professionals to city centers has further driven up demand, particularly in KL and Selangor.
5. Surging demand from foreign tenants: An influx of expatriates and digital nomads has increased competition for rental units, especially in high-demand locations.

What this means for tenants and landlords

For tenants, rising rental costs mean tighter household budgets and potentially longer commute times as many are forced to move farther from city centers in search of affordability. With rental prices stabilising, the risk of further sharp increases appears low but renters should still expect moderate growth in 2025.

For landlords, the trend is largely positive. With a strong rental market, property owners can expect consistent rental income, especially in well-located areas. However, landlords must remain competitive by offering well-maintained units, as tenants have more choices due to increased supply in some areas.

While rental prices have reached a five-year high, the signs of stability in KL and Selangor suggest that Malaysia is unlikely to experience another housing crisis or extreme rental hikes. Instead, the market appears to be adjusting to post-pandemic economic realities.

“In summary, Malaysia’s rental market has hit a five-year high but growth is slowing in two of its largest cities. That should reassure renters that their cost of living will likely be relatively stable in the year ahead,” said Ansari. 

Looking forward, experts predict that rental prices will continue to rise moderately in 2025, in line with inflation and economic trends. While affordability remains a concern, tenants can expect a more predictable rental environment than in previous years.

For those seeking to rent or invest in property, understanding these trends can help them make more informed decisions in Malaysia’s evolving real estate market.