Determinants of Housing Prices in Malaysia

Loh, Jeng Fai (2025) Determinants of Housing Prices in Malaysia. Final Year Project (Bachelor), Tunku Abdul Rahman University of Management and Technology.

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Abstract

This study examines the key macroeconomic factors influencing housing prices in Malaysia, with a particular focus on the Housing Price Index (HPI). Using annual time-series data spanning from 1999 to 2023, the research investigates how inflation, interest rates, and gross domestic product (GDP) affect housing price movements over time. The data were obtained from reliable sources, including Bank Negara Malaysia and the Department of Statistics Malaysia. The analysis employs the Toda-Yamamoto Granger causality test and Johansen cointegration technique to explore both short-run and long-run relationships among the variables. The results show that interest rate and GDP significantly influence housing prices in the short run, while inflation does not demonstrate any direct causal impact. Additionally, the study finds evidence that housing prices Granger-cause GDP, highlighting the role of the housing sector in driving economic performance. However, no reverse causality is observed for the other variables. These findings suggest that macroeconomic conditions, particularly monetary policy and economic growth, play an important role in shaping the housing market. The study concludes with practical policy recommendations aimed at promoting housing affordability and supporting Malaysia’s long-term economic stability.