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Base Lending Rate And Housing Prices: Their Impacts On Residential Housing Activities In Malaysia

Listed author(s):
  • Tan Teck-Hong

    (Sunway University College, School of Business)

Registered author(s):

    The construction sector, which had grown rapidly in the early 1990s, encountered slower grows after the financial crisis. The decline in the construction industry, however, is cushioned by the residential property construction. This paper examines empirically whether the increasing trend in residential property construction is related to changes in base lending rate and house prices. Pooled EGLS model (Cross Section Seemingly Unrelated Regression) is used to analyze the impact of lending rate and housing price upon the trading volume of residential housing activities. The results show base lending rate is the key determinant of residential housing activities. However, changes in housing prices may not necessarily influence residential housing activities in the country when there is a mismatch between current and desired housing for all. In view of the substantial number of housing left unsold, several recommendation and precautionary measures for housing provision should be made before it leads to a property glut. This study is crucial to housing developers and policy makers as any housing decisions not always should be made just on the basis of interest rates and house prices, but should pay more attention to the efficiency and effectiveness of housing delivery system in the country.

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    Paper provided by Conference Master Resources in its series International Conference on Business and Economic Research (ICBER 2010) Proceeding with number 2010-060.

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    Length: 10 pages
    Date of creation: Mar 2010
    Publication status: Published in Proceeding of ICBER 2010, March 2010
    Handle: RePEc:cms:1icb10:2010-060
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