Determinants of housing prices: Evidence from Malaysia and Singapore
List of Authors
  • Muhammad Irfan Azlan , Yvonne Lee

Keyword
  • Housing price; Macroeconomic variables; Singapore, Malaysia

Abstract
  • The purpose of this research is to study the determinants of housing prices in Malaysia and Singapore. The research analyses the relationship between the housing price index with four other macroeconomic variables which are gross domestic product, interest rate, inflation rate and unemployment rate. The methodology that is used in this research is the multiple linear regression analysis. This research also performs diagnostic checking through normality test and multicollinearity test. The data is collected from the World Bank and the Bank for International Settlements covering the period of 1979 to 2019. The results revealed that for both Malaysia and Singapore, gross domestic product is significantly related to housing price. Apart from the relationship between inflation rate to housing price, Malaysia and Singapore’s macroeconomic variables (GDP, interest rate, and unemployment rate) are similarly related to housing price. Policymakers in charge of macroeconomic policies should take heed that these macroeconomic indicators have an impact on housing price, as shelter is one of the basic needs of citizens.

Reference
  • 1. Abdul Latif, N.S., Majeed, K.M.R., Rozzani, N. & Saleh, S.K. (2020). ‘Factors affecting housing prices in Malaysia: A literature review’, International Journal of Asian Social Science, 10(1), pp.63-67, https://doi.org/10.18488/journal.1.2020.101.63.67. 2. Belke, A. & Keil, J. (2017). ‘Fundamental determinants of real estate prices: A panel study of German regions’, International Advances in Economic Research, 24, 25-45. 3. Chow, H. K. & Xie, T. (2016). ‘Are house prices driven by capital flows ? Evidence from Singapore’, Journal of International commerce, Economics and Policy, 7(1), pp1–21. https://doi.org/10.1142/S179399331650006X 4. Faiz, M., Rahman, A., & Ridzuan, A. R. (2020). ‘Factors that determine house price index in Malaysia’, International Journal of Academic Research in Accounting, Finance and Management Sciences, 7(2), pp. 351–359. https://doi.org/10.6007/IJARAFMS/v10-i1/7224 5. Farrar, D. E., & Glauber, R. R. (1967). ‘Multicollinearity in regression analysis: The problem revisited’, The Review of Economics and Statistics, 49(1), pp. 92-107, https://doi.org/10.2307/1937887 6. Ganeson, C., & Abdul Muin, I. M. (2015). ‘An analysis of the factors affecting house prices in Malaysia – An econometric approach’, Social Sciences Postgraduate International Seminar (SSPIS) 2015, School of Social Sciences, Pulau Pinang, Malaysia [online] Available at: [Accessed 24 January 2021] 7. Glass, M. R., & Salvador, A. E. (2018). ‘Remaking Singapore’s heartland: Sustaining public housing through home and neighbourhood upgrade programmes’, International Journal of Housing Policy, 18(3), 479–490. 8. Glindro, E. T., Subhanij, T., Szeto, J., & Zhu, H. (2011). ‘Determinants of house prices in nine Asia-Pacific economies’, International Journal of Central Banking, 7(3), 163–204. https://doi.org/10.2139/ssrn.1333646 9. Hoo, Q.K., Lee, J.M., Tzai, Y,Y. & Voo, C.N. (2016). ‘Fundamental determinants of housing price in Malaysia: Empirical and statistical investigation’, (Undergraduate Thesis, Faculty Business and Finance, University Tunku Abdul Rahman, Kampar, Malaysia) [online] Available at: [Accessed 24 January 2021]. 10. Housing & Development Board (HDB) (2021). Public Housing – A Singapore Icon, [online] Available at: [Accessed 7 December 2021]. 11. International Bank of Settlement (2021a). Malaysia: House Price Index, [online] Available at: [Accessed 24 January 2021]. 12. International Bank of Settlement (2021b). Singapore: House Price Index, [online] Available at: [Accessed 24 January 2021]. 13. Ismail, S., Jalil, N., & Muzafar, P. (2015). Making Housing Affordable, Khazanah Research Institute, Malaysia. 14. International Monetary Fund (IMF) (2020). Malaysia, IMF Country Report No. 20/57, 20, [online] Available at: >https://www.imf.org/-/media/Files/Publications/CR/2020/English/1MYSEA2020001.ashx> [Accessed 7 December 2021]. 15. Jacobsen, D. & Naug, B. (2005). ‘What drives house prices?’ Central Bank of Norway: Economic Bulletin, pp. 29-41, [online] Available at: [Accessed 7 December 2021]. 16. Khan, T.S. (2010).’ Asian Housing Markets: Bubble Trouble?’, An Eye On East Asia and Pacific, pp. 1–9. [online] Available at: [Accessed 7 December 2021]. 17. Kurniawan, I., & Purwono, R. (2017). ‘Property price bubble: regional analysis in Indonesia’, JDE (Journal of Developing Economies). 02(June), pp. 1–11. 18. Lim, S.Y., Sim, S.L., Tan, C.Y., Tan, S.F., & Tan, W.C. (2016). Determinants of Housing Price in Malaysia. (Undergraduate Thesis, Faculty Business and Finance, University Tunku Abdul Rahman, Kampar, Malaysia) [online] Available at: [Accessed 24 January 2021]. 19. National Property Information Centre (NAPIC). (2020). Volume and Value of Property Transaction by Sub-sector Year 2001-2019, [online] Available at: [Accessed 7 December 2021]. 20. Ong, T.S. (2013) ‘Factors affecting the price of housing in Malaysia’, Journal of Emerging Issues in Economics, Finance and Banking, 1(5), Art. no. 4. pp. 414-429. ISSN 2306-367X 21. O'Neill, A. (2021, July 15). Singapore - Unemployment Rate 2020. Statista, [online] Available at: from https://www.statista.com/statistics/378643/unemployment-rate-in-singapore/> [Accessed September 10, 2021] 22. Phang, S. Y., & Helble, M. C. (2016). ‘Housing policies in Singapore’. ADBI Working Paper, Asian Development Bank, No. 59, 559. https://doi.org/10.2139/ssrn.2753487 23. Pinjaman, S., & Kogid, M. (2020). ‘Macroeconomic determinants of house prices in Malaysia’. Jurnal Ekonomi Malaysia, 54(1), 153–165. 24. Rangel, G. J., & Ng. J.W.J. (2017). Macroeconomic drivers of Singapore private residential prices: A Markov- switching approach, Capital Markets Review, Malaysian Finance Association, vol. 25(2), pages 15-31. 25. Savva S. C. (2018). ‘Factors affecting housing prices: International evidence’, Cyprus Economic Policy Review, 12(2), pp. 87-96. 26. Startz, R. (2019). EViews Illustrated, IHS Global Inc. [online] Available at: [Accessed 24 January 2021]. 27. Studenmund, A. H. (2017). Using Econometrics: A Practical Guide (7th ed.). Addison-Wesley. 28. Schnure, C. (2005). ‘Boom-bust cycles in housing: The changing role of financial structure’, IMF Working Papers, 05(200), 1. https://doi.org/10.5089/9781451862195.001 29. Tsatsaronis, K., & Zhu, H. (2004). ‘What drives housing price dynamics? Cross-country evidence’. BIS Quarterly Review, March, pp. 65–78. 30. Trofimov, I.D., Md Aris, N., Xuan, D.C.D. (2018). ‘Macroeconomics and demographic determinants of residential property price in Malaysia’, Zagreb International Review of Economics and Business, 21(2), pp. 71-96. 31. Wolff, E. N., & Zacharias, A. (2009). ‘Household wealth and the measurement of economic well-being in the United States’, Journal of Economic Inequality, 7(2), 83–115. https://doi.org/10.1007/s10888-007-9068-6 32. World Bank (2021a). Overview: Malaysia. [online] Available at: [Accessed 24 January 2021]. 33. World Bank (2021b). Overview: Singapore, [online] Available at: [Accessed 24 January 2021]. 34. Yeap, G. P., & Lean, H. H. (2017). ‘Can the housing policies sustain house prices in Malaysia?’ Malaysian Journal of Economic Studies, 54(2), 301–314. https://doi.org/10.22452/mjes.vol54no2.8 35. Zandi, G., Supramaniam, M. A., Aslam, A., & Theng, L. K. (2015). ‘The economical factors affecting residential property price: The case of Penang Island. International Journal of Economics and Finance, 7(12), 200. https://doi.org/10.5539/ijef.v7n12p200 36. Zainon, N., Mohd-Rahim, F. A., Sulaiman, S., Abd-Karim, S. B., & Hamzah, A. (2017). ‘Factors affecting the demand of affordable housing among the middle-income groups in Klang Valley Malaysia’. Journal of Design and Built Environment, 17, 1–10. https://doi.org/10.22452/jdbe.sp2017no1.1