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THE residential property market has demonstrated notable resilience and stability, with projections indicating continued improvement. 

Interest remains concentrated in landed residential properties within prime areas, driven by location desirability, supply scarcity, the financial strength of middle-upper income buyers, and appreciation potential.

To further stimulate this sector, industry observers recommend that the State government consider reducing the Real Property Gains Tax (RPGT) and stamp duty while accelerating infrastructure upgrades. 

The market’s health will ultimately depend on multiple factors: development location, pricing strategy, buyer income strength, Bank Negara’s monetary policy, loan approval rates, and development features that attract purchasers. Notably, high-density developments are increasingly entering the market.

In response to the acute shortage of affordable housing – exemplified by the deteriorating conditions in Tanjung Aru’s low-cost flats, Sembulan’s water stilt squatter settlements, and Sapangar’s informal squatter housing – the State government has launched ambitious initiatives.

The Rumah Mesra SMJ (Sabah Maju Jaya) programme aims to deliver 3,000 affordable housing units for homeless families and individuals, while a formal request to the federal government seeks an additional 5,000 units under the People’s Housing Programme (PPR).

These efforts represent a comprehensive strategy to address housing inequality and relocate residents from squatter settlements.

In the commercial property sphere, the market has remained stable with financially capable owners typically adopting long-term holding strategies rather than seeking near-term disposal unless compelled by necessity or attractive offers.

Shop offices in the city centre (CDB) and prime locations continue to see growing demand and occupancy, though the steady appreciation witnessed over the past decade has moderated recently. 

The improved business environment and increased retail consumption have driven rental rate growth, while the scarcity of commercial development land in Kota Kinabalu has enabled developers to command premiums for new shop office projects.

This shortage has also prompted developers to explore secondary locations such as Papar and Tuaran, as well as other major towns, for new commercial developments. Investors are drawn to this segment by favourable rental yields, price appreciation potential, and manageable property oversight.

The purpose-built office (PBO) sub-sector, however, faces persistently low and stagnant demand. 

Local businesses continue to favour shop offices due to lower overhead costs and the absence of substantial management fees. 

Additionally, the scarcity of large corporations – beyond government agencies – capable of occupying such spaces has constrained growth, resulting in stagnant rental rates.

Sabah’s economic vitality remains deeply intertwined with its oil and gas sector, which consistently contributes approximately half of the state’s revenue.

This foundational strength in natural resources creates a ripple effect throughout the broader economy; when state finances are robust and foreign investment flows increase, the property market inevitably benefits from heightened demand and improved investor confidence.

Yet this prosperity has not been uniformly distributed across the state, as fundamental infrastructure deficits continue to constrain both quality of life and property market potential in many regions.

Persistent challenges with power and water shortages plague numerous communities, while inadequate drainage and irrigation systems leave areas vulnerable to recurrent flash floods.

Road conditions, particularly in rural outskirts, remain poor with potholes marring many routes. 

Recognizing these impediments, the government has allocated substantial infrastructure budgets specifically designed to address these systemic issues.

Should implementation proceed effectively, these improvements could fundamentally transform property investment sentiment across Sabah by enhancing liveability and accessibility.

The property market itself presents a mosaic of divergent performances. 

Projects boasting strategic locations and attractive pricing have demonstrated strong market absorption, typically selling out within six to twelve months of launch.

However, beneath this surface success lies a growing socioeconomic disparity. 

Middle to upper-income groups exhibit robust purchasing power, driving sustained demand for prime landed properties and strategically located land parcels that continue to appreciate in capital value.

Conversely, lower-end properties in less desirable locations have experienced stagnant demand and flat pricing, reflecting the target demographic’s limited financial capacity. 

Some secondary developments that were previously overpriced have even witnessed value corrections.

Infrastructure development extends beyond basic utilities to major connectivity projects. 

Sabah anticipates the commencement of Phase 1B of the Pan Borneo Highway, which will extend the network to Kota Belud and Kudat at a contract value of RM9.7 billion.

This expansion promises to enhance road connectivity for residents while unlocking the market potential of previously inaccessible land parcels. 

The federal government’s commitment is evident in Sabah’s allocation of RM6.7 billion in development expenditure – the highest among all states – underscoring the priority placed on improving fundamental infrastructure including roads, clean water supply, and electricity.