The Macroeconomic perspective of demand-supply gap and prices of condominiums in Kuala Lumpur

The reality of a property market, among other things, is characterised by variation in demand-supply gap. A property market is also likely to exhibit variation in prices of properties. While the actual causes of demand-supply gap and price variations are by no means definite, the economic theory allows some hypotheses to be made against the possible factors responsible for these phenomena. Given the set of such factors from a macro perspective, one may be curious to know whether they influence variation in demand-supply gap more than variation in prices, or vice versa. This paper aimed at addressing this issue by taking condominium property sub market in Kuala Lumpur as a case study. Two time-series regression models were estimated taking five macroeconomic factors as the explanatory variables against demand-supply gap and condominium prices as dependent variables. The results have shown that base lending rate, gross domestic product, consumer price index, unemployment, and changes in construction cost have caused more variation in condominium demand-supply gap than in condominium prices. Other impacts have also been compared and it was found that these macroeconomic factors were more important to changes in the demand-supply situations. The policy implication of this finding was that, if there is anything at all that the government will do to improve Malaysian property market, then, it is perhaps more meaningful to correct demand and supply situations than to tackle price issues.