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Causality of Residential Properties Price Movements in Malaysia

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  • Abdul Aziz, Ahmad Faizal
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    Abstract

    Many studies had been previously conducted to analyse factors that affects price of residential properties but none of these research addresses the issue specifically to Malaysia. This paper serves the purpose to fill in the gap whereby factors which were empirically proven to affect price of residential properties are tested with Malaysian data, covering the period from 1990 to 2009. Data used in this study were collected from Government’s official sources, i.e. as published by the Central Bank of Malaysia (Bank Negara Malaysia), Department of Statistics Malaysia and National Property Information Centre (NAPIC) of the Valuation and Property Services Department of Malaysia. The time series techniques namely cointegration, vector error correction model and variance decomposition were used to estimate the significance of identified variables to the price of residential properties. It is important for policymakers especially the Federal Government to know the variables that significantly influenced the price of residential properties as to control the price so as to preserve the wealth effect and to balance racial composition in an area.

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    Bibliographic Info

    Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 47682.

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    Date of creation: May 2011
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    Handle: RePEc:pra:mprapa:47682

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    Keywords: Malaysia; Residential Properties; Econometrics;

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    1. Case, Karl E. & Quigley, John M. & Shiller, Robert J., 2012. "Comparing Wealth Effects: The Stock Market versus The Housing Market," Department of Economics, Working Paper Series qt6px1d1sc, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
    2. Steven C. Bourassa & Patric H. Hendershott, 1995. "Australian Capital City Real House Prices, 1979-1993," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 28(3), pages 16-26.
    3. Campbell, John Y. & Cocco, Joao F., 2007. "How do house prices affect consumption? Evidence from micro data," Journal of Monetary Economics, Elsevier, vol. 54(3), pages 591-621, April.
    4. Engle, Robert F & Granger, Clive W J, 1987. "Co-integration and Error Correction: Representation, Estimation, and Testing," Econometrica, Econometric Society, vol. 55(2), pages 251-76, March.
    5. Balazs Egert & Dubravko Mihaljek, 2007. "Determinants of House Prices in Central and Eastern Europe," William Davidson Institute Working Papers Series wp894, William Davidson Institute at the University of Michigan.
    6. Joe Peek & James A. Wilcox, 1991. "The measurement and determinants of single-family house prices," Working Papers 91-7, Federal Reserve Bank of Boston.
    7. Simon G. Gilchrist & Ben Bernanke & Mark Gertler, 1994. "The financial accelerator and the flight to quality," Finance and Economics Discussion Series 94-18, Board of Governors of the Federal Reserve System (U.S.).
    8. Rui Yao, 2005. "Optimal Consumption and Portfolio Choices with Risky Housing and Borrowing Constraints," Review of Financial Studies, Society for Financial Studies, vol. 18(1), pages 197-239.
    9. Karl E. Case & Christopher J. Mayer, 1995. "Housing price dynamics within a metropolitan area," Working Papers 95-3, Federal Reserve Bank of Boston.
    10. Plamen Iossifov & Martin Cihák & Amar Shanghavi, 2008. "Interest Rate Elasticity of Residential Housing Prices," IMF Working Papers 08/247, International Monetary Fund.
    11. Baffoe-Bonnie, John, 1998. "The Dynamic Impact of Macroeconomic Aggregates on Housing Prices and Stock of Houses: A National and Regional Analysis," The Journal of Real Estate Finance and Economics, Springer, vol. 17(2), pages 179-97, September.
    12. G. Donald Jud & Dan T. Winkler, 2002. "The Dynamics of Metropolitan Housing Prices," Journal of Real Estate Research, American Real Estate Society, vol. 23(1/2), pages 29-46.
    13. Peter Abelson & Roselyne Joyeux & George Milunovich & Demi Chung, 2005. "Explaining House Prices in Australia: 1970-2003," The Economic Record, The Economic Society of Australia, vol. 81(s1), pages S96-S103, 08.
    14. Vahram Stepanyan & Tigran Poghosyan & Aidyn Bibolov, 2010. "House Price Determinants in Selected Countries of the Former Soviet Union," IMF Working Papers 10/104, International Monetary Fund.
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