From Kampung to City - How Urbanization is Shaping Malaysia’s Property Market.
Currently, 76.9% of Malaysia’s population now resides in urban areas, according to data from worldometers.info, which shows and reflects a significant shift in rural vs. urban demographics over the decades.
In 1975, rural areas accounted for 6.8 million people compared to just 4.5 million in urban settings. At the time, development was still in its early stages. By 2000, over a span of 25 years, the rural population grew modestly to 8.5 million, while urban areas surged to 14.3 million. Fast forward to 2024, rural numbers have declined to 8.2 million, while urban areas have ballooned to 27.3 million.
This tremendous shift highlights a key trend that towns and cities have become far more developed, offering better opportunities, infrastructure, and living standards compared to earlier times. These numbers not only chart demographic changes but also underscore the rapid urbanization that continues to shape Malaysia's growth and affect property prices.
Urbanization has driven the need for high-density housing options like condominiums and apartments to accommodate a growing city population. People’s demand for proximity to workplaces, schools, and amenities makes these developments especially appealing to city dwellers.
With the move from Traditional Homes in smaller towns to City Apartments. The migration from rural to urban areas signifies a lifestyle shift. Traditional standalone homes are increasingly being replaced by compact, modern city apartments. Urban living prioritizes convenience, with features like gyms, swimming pools, and 24-hour security becoming essentials rather than luxuries.
What Does Urbanization Means for Property Values in Suburbs and Smaller Cities?
With improved infrastructure, such as public transport and highways, it will make urban living more viable, potentially boosting property values. Let's look at the price ratio, data shared by NAPIC.
The ratio of house prices in Kuala Lumpur compared to other states highlights the influence of demand, urbanization, and population movement toward cities. Urban-centric states such as Selangor, Penang, and Johor Bahru show price ratios ranging between 1.5 to 1.9 only comparatively to Kuala Lumpur.
In contrast, other states like Negeri Sembilan, Perak, Melaka, Kedah, Pahang, Terengganu, Kelantan, and Perlis range from 2.5 to 3.5 against Kuala Lumpur’s house prices. This significant gap emphasizes the slower pace of property price growth in less urbanized states, but nevertheless they are also experiencing a ripple effect. Locations once considered secondary are now targets hotspots for development as cities expand, a good example would be more houses are being built nearer to cities as commuting are easier now, such as Negeri Sembilan with only an hours drive from Kuala Lumpur, hence the price ratio is at 2.5 comparatively to other smaller states like Perlis at 3.4 price ratio.
The continued urbanization of Malaysia is set to drive the evolution of the property market further, with developers focusing on creating innovative solutions to meet the demands of a highly urbanized population. Whether you're an investor, buyer, or renter, understanding these trends is key to navigating the dynamic real estate landscape.
