As of December 2017, the Malaysian household debt relative to gross domestic product stood at nearly 85%, of which half of them were the residential housing loans. When the level of household indebtedness reaches high, it posts a negative impact on both households and financial institutions in the event of adverse external shock. Hence, there is a need for a deeper understanding of the default risk factors for residential properties. This paper unveiled the determinants of the Malaysian banks’ residential properties nonperforming loans (NPLs) using the Autoregressive Distributed Modelling (ARDL) framework. In the sample period of 2006 to 2017, households bore inflation risk whereby a reduction in the household income adjusted for inflation affected their debt repayment obligation. Besides that, households were found vulnerable during the period of unemployment therefore would be more likely to default when they lost their future income. Further, a negative global crude oil shock and a higher overnight policy rate worsened the level of purchase of residential properties NPLs. Finally, the global financial stress index showed no significant impact, indicating the Malaysian households were less affected by external financial shock in the given context.