Abstract
Housing is a major industry where price mechanisms or market regulations are applied for efficiency, and house provision is controlled by governments. Malaysia is one of the countries that are facing an upward trend in demand for housing, and the increase in housing prices has become worrying. This paper investigated the impact of macroeconomic variables in the house price index in Malaysia from the period 1988 until 2017 by annually. The selected macroeconomics variables for this study are gross domestic product, consumer price index, base lending rate, and money supply. Autoregressive Distributed Lag (ARDL) estimation was used to investigate the short-run and long-run elasticities of the proposed econometric model based on the selected macroeconomic variable mention above. The results from the Augmented Dickey-Fuller and Phillips-Perron tests of stationarity indicated that all the variables were non-stationary at the level I (o) but stationary at the first difference I (1). The long-run elasticities showed that gross domestic product and base lending rate is significant and positively influenced house price index in Malaysia. Consumer price index and money supply have a negative impact on house price index in the long run.
Highlights
Malaysia is facing rapid economic development throughout this past decade, which has become the major factor for the increase in demand for residential housing, in urban areas
There was a sign at standard significant (1% significant level), and a positive sign detected between gross domestic product (LNGDP) and housing price index (LNHPI) in Malaysia. 1% increase in LNGDP, LNHPI increased by 0.525%
Positive sign and shows a 1% significant level detected between the base lending rate (LNBLR) and house price index (LNHPI) in Malaysia. 1% increase in LNBLR, LNHPI increased by1.605%
Summary
Malaysia is facing rapid economic development throughout this past decade, which has become the major factor for the increase in demand for residential housing, in urban areas. The house price index is critical to the housing market because it is unpredictable and lead to the volatility of the real estate market. The housing market is a strong positive relationship with the growth of the economy based on the housing price index (Afiqah et al, 2014). In the short run, changes in inflation are significantly positive and impressively impact real estate prices. Ball (2016) examined how the relationship between urbanization processes and economic growth will affect housing prices, which is the money supply has a lagged effect on current housing returns, implying a possible refutation of market efficiency. Monetary policy and nominal interest rates play an important role in the determination of real estate prices, as well as money shocks by generating remarkably very volatile housing investors. Studies of Ong (2013) Grum and Govekar (2016) Zandi et al (2015) Zandi et al (2015) Ong (2013) Roger (2001) Tse et al (2014) Zhu (2006) Barakova (2003) Greiber and Setzer (2007) Kim (1993) Dennis and Yang (2008)
Sign-in/Register to view highlights & summary Sign-in/Register to access full text options 
Free) 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a call
