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Can the Housing Policies Sustain House Prices in Malaysia?

Author

Listed:
  • Geok Peng Yeap

    (Economics Program, School of Social Sciences, Universiti Sains Malaysia)

  • Hooi Hooi Lean

    (Economics Program, School of Social Sciences, Universiti Sains Malaysia)

Abstract

In addition to economic factors, this paper examines the impact of housing policies in sustaining house prices in Malaysia at both aggregate and disaggregate levels. By using autoregressive distributed lag (ARDL) framework, we develop a model of house price determination with a focus on two major housing policies – mortgage interest tax relief (MITR) and Developer Interest Bearing Scheme (DIBS). Although aggregate house prices do not react to any economic variable in the long run, it responds positively to interest rate and DIBS in the short run. At the disaggregate level, population and housing stock influence house prices in the long run. Nonetheless, MITR and DIBS have a statistically significant positive impact on the price of high-rise houses. We conclude that while demand and supply variables are important determinants of house prices in the long run, house price changes are affected by housing policies in the short run. For policy recommendation, we suggest to strictly prohibit DIBS to ensure a stable growth in the housing market. Besides that, MITR should be implemented to ensure housing affordability and to stimulate the housing market during recession

Suggested Citation

  • Geok Peng Yeap & Hooi Hooi Lean, 2017. "Can the Housing Policies Sustain House Prices in Malaysia?," Malaysian Journal of Economic Studies, Faculty of Business and Economics, University of Malaya & Malaysian Economic Association, vol. 54(2), pages 301-314, December.
  • Handle: RePEc:mjr:journl:v:54:y:2017:i:2:p:301-314
    DOI: 10.22452/MJES.vol54no2.8
    as

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    More about this item

    Keywords

    Developer interest bearing scheme; house prices; housing policies; Malaysia; mortgage interest tax relief;
    All these keywords.

    JEL classification:

    • R21 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Housing Demand
    • R30 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - General
    • R38 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Government Policy

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