Liberalization and its Impact Based on House Types

Abstract

Abstract

The purpose of the research is to examine the long-term relationship between house price in Malaysia and housing related macroeconomic variables. The secondary aim is to compare the macroeconomic variables’ impact on different house types in order to observe which residential types are affected the most during post-liberalisation period. Time-series analysis was used based on data span between 1999 and 2012. This study employed three unit root tests (ADF, PP, and KPSS), Johansen cointegration test, and VECM. Findings suggest that liberalisation poses similar impacts on the prices of high-rise, terrace, and semi-detached houses. The high impact on high-rise’s price is expected as demand for houses is focused on the urban and economically active areas. Although the terrace type is not a goal of foreign buyers, high liberalisation through low interest rates has ‘trapped’ potential terrace owners. It was suggested that terrace prices are affected by the same magnitude as high-rise prices, although the potential buyer groups are different. Therefore, liberalisation policy needs to be reviewed, as the openness has affected even the residential market for the bottom billion population.