Get 20M+ Full-Text Papers For Less Than $1.50/day. Start a 14-Day Trial for You or Your Team.

Learn More →

Determinants of house prices in Malaysia

Determinants of house prices in Malaysia This paper aims to empirically examine the relationship between macroeconomic factors and housing prices in Malaysia from 1991 to 2016.Design/methodology/approachThis study was based on annual macroeconomic data from 1991 to 2016. For the model that was constructed, house prices were treated as the dependent variable and other variables, namely, the interest rate, the gross domestic product (GDP) and the consumer price index (CPI) as explanatory or regression variables. All these data come from the annual publication of the World Bank’s statistical report. In the meantime, data on house prices have been obtained through the publication of the National Property Information Centre in the form of an index. In the study, the bounds testing approach for cointegration was used because the Engel Granger cointegration tests can be used only if all the series are stationary at first difference. And it is against this background the author could not use it because our variables are a combination of series integrated of orders I (0) and I (1).FindingsThe results of this study revealed a positive equilibrium relationship in the long run between interest rate, CPI and housing prices and negative for the GDP. In addition, in the short run, housing prices were shown to have a positive relationship with GDP and CPI, but no relationship with the interest rate, based on the assumption that “all other things being equal”.Research limitations/implicationsThe data on economic factors (GDP, RI and CPI) used in this study are secondary and not from the Malaysian Department of Statistics and Economic Studies. Furthermore, the result of this research only reflects the Malaysian reality, and therefore, cannot be generalised to the entire housing market worldwide.Practical implicationsThe result of this study can be used for housing valuation by Malaysian property market players, investors and especially policymakers.Social implicationsThis study’s findings can help Malaysian policymakers to limit the high price fluctuation in the housing industry and help Malaysian citizens to buy their own homes at a reasonable price.Originality/valueThe contributions of this study are structured around two points. The first is the contribution to the body of knowledge, where the results of the study will contribute to the growing number of literature in the housing sector. Moreover, the second contribution of this document is the strength of its recommendation to policymakers. This is because it analyses only the main macroeconomic determinants (IR, GDP and CPI) that are essential to better influence the housing sector as quickly as possible, as opposed to those that use many variables that could lead to possible specification errors. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png International Journal of Housing Markets and Analysis Emerald Publishing

Determinants of house prices in Malaysia

Download PDF
15 pages

Loading next page...
 
/lp/emerald-publishing/determinants-of-house-prices-in-malaysia-8jVG1k6RSt

References (43)

Publisher
Emerald Publishing
Copyright
© Emerald Publishing Limited
ISSN
1753-8270
eISSN
1753-8270
DOI
10.1108/ijhma-09-2021-0105
Publisher site
See Article on Publisher Site

Abstract

This paper aims to empirically examine the relationship between macroeconomic factors and housing prices in Malaysia from 1991 to 2016.Design/methodology/approachThis study was based on annual macroeconomic data from 1991 to 2016. For the model that was constructed, house prices were treated as the dependent variable and other variables, namely, the interest rate, the gross domestic product (GDP) and the consumer price index (CPI) as explanatory or regression variables. All these data come from the annual publication of the World Bank’s statistical report. In the meantime, data on house prices have been obtained through the publication of the National Property Information Centre in the form of an index. In the study, the bounds testing approach for cointegration was used because the Engel Granger cointegration tests can be used only if all the series are stationary at first difference. And it is against this background the author could not use it because our variables are a combination of series integrated of orders I (0) and I (1).FindingsThe results of this study revealed a positive equilibrium relationship in the long run between interest rate, CPI and housing prices and negative for the GDP. In addition, in the short run, housing prices were shown to have a positive relationship with GDP and CPI, but no relationship with the interest rate, based on the assumption that “all other things being equal”.Research limitations/implicationsThe data on economic factors (GDP, RI and CPI) used in this study are secondary and not from the Malaysian Department of Statistics and Economic Studies. Furthermore, the result of this research only reflects the Malaysian reality, and therefore, cannot be generalised to the entire housing market worldwide.Practical implicationsThe result of this study can be used for housing valuation by Malaysian property market players, investors and especially policymakers.Social implicationsThis study’s findings can help Malaysian policymakers to limit the high price fluctuation in the housing industry and help Malaysian citizens to buy their own homes at a reasonable price.Originality/valueThe contributions of this study are structured around two points. The first is the contribution to the body of knowledge, where the results of the study will contribute to the growing number of literature in the housing sector. Moreover, the second contribution of this document is the strength of its recommendation to policymakers. This is because it analyses only the main macroeconomic determinants (IR, GDP and CPI) that are essential to better influence the housing sector as quickly as possible, as opposed to those that use many variables that could lead to possible specification errors.

Journal

International Journal of Housing Markets and Analysis – Emerald Publishing

Published: Jan 2, 2023

Keywords: Malaysia; Bounds-testing approach; Housing prices index; Interest rate; Gross domestic product; Consumer price index (CPI)

There are no references for this article.