Long Run Cointegration between Macroeconomic Variables and Serviced Apartment Price Index: Case Study in Kuala Lumpur

Kang, Wang Ching (2020) Long Run Cointegration between Macroeconomic Variables and Serviced Apartment Price Index: Case Study in Kuala Lumpur. Final Year Project (Bachelor), Tunku Abdul Rahman University College.

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Abstract

Over the past few years, there is a conspicuous rising demand of serviced apartments in Asia Regions including Malaysia. Follow by high potential development opportunities in serviced apartment market, lack of proper reference data for serviced apartment market has proceed to facilitate this study. Two research objectives are developed in this study, which are to construct the price index of serviced apartment in Kuala Lumpur, Malaysia, and to investigate its relationship with three macroeconomic variables - Gross Domestic Product (GDP), Inflation rate, and Bank Lending Rate. Total 40 quarters of JPPH transaction data from year 2009 to 2018, had been collected for the first research objectives. By employing Hedonic Regression Model, the Serviced Apartment Price Index (SAPI) had been constructed successfully after its price composition is identified to be made up of built-up area, number of rooms, tenure and location. Moreover, SAPI, GDP, Inflation rate (CPI), and Bank Lending Rate as non-stationary series, examined by Augmented Dickey Fuller Test, are therefore been taken into application of Johansen Cointegration Test and Fully Modified Ordinary Least Square, to substantiate the presence of long term relationship. As proven in both tests, GDP and CPI have long term association with SAPI. All these research outcomes will provide valuable contributions to housebuyers and investors in term of purchasing decisions of serviced apartment, to government and policy makers in improving relevant housing policy, and also to pave for future researches in similar industries.