Macroeconomic Drivers of House Prices in Malaysia

Shanmuga Pillaiyan


This paper investigates the macroeconomic drivers of house prices in Malaysia using VECM, over a fifteen year period. The key macroeconomic factors investigated were real GDP, bank lending rate,  Consumer Sentiment, Business Condition, Money Supply, number of loans approved, Stock market (KLSE) and Inflation. The macroeconomic factors found to be significantly related to the Malaysian housing prices were inflation, Stock Market (KLSE), Money Supply (M3) and number of residential loans approved. The results hint at the potential of a housing price bubble as GDP wasn’t identified as a driver of house prices.


house price, Malaysia, VECM, real GDP, Money Supply, inflation, number residential loan approved, housing bubble

Full Text:



Adalid, R., & Detken, C. (2007). Money’s role in asset price booms. ECB Working Paper No 732.

Barakova, I., Bostic, R. W., Calem, P. S., & Wachter, S. M. (2003). Does credit quality for homeownership. Journal of Housing Economics,12(4), 318-336.

Borio, C., & McGuire, P. (2004). Twin peaks in equity and housing prices? BIS Quarterly

Review, March, 79-93.

Case, B., Goetzmann, W., & Rouwenhorst, K. G. (2000). Global real estate markets — Cycles and fundamentals. NBER Working Paper No. 7566.

Case, K. E. (1986). The Market for Single Familly Homes in the Boston Area. New England Economic Review, May/June, 38-48.

Case, K. E., & Shiller, R. J. (1989). The efficiency of the market for single familly homes.

American Economic Review, 79(1), March, 125 - 137.

Chen, N. K. (2001). Bank net worth, asset prices and economic activity. Journal of Monetary Economics, 48, 415-36.

Goodhart, C., Hofmann, B., & Segoviano, M. (2004). Bank Regulation and Macroeconomic Fluctuations. Oxf Rev Econ Policy (Winter) 20(4), 591-615.

Goodhart, C., & Hofmann, B. (2008). House prices, money, credit, and the macroeconomy. Oxf Rev Econ Policy (2008) 24(1), 180-205.

Goodness, C. A., & Balcilar, M., & Gupta, R. (2011). Long- and short-run relationships between house and stock prices in South Africa: A nonparametric approach. Working Papers 201136, University of Pretoria, Department of Economics.

Greiber, C., & Setzer, R. (2007). Money and housing – Evidence for the Euro Area

and the US. Deutsche Bundesbank Discussion Paper, Series 1: Economic, Studies, No. 12/2007

Hii, W. H., Latif, I., & Nasir, A. (1999). Lead-lag relationship between housing and gross domestic product in Sarawak. Paper Presented at The International Real Estate Society Conference 26-30th July.

Johansen. (1988). The mathematical structure of error correction models. Contemporary Mathematics.

Kenny, G. (1998). The housing market and the macroeconomy: Evidence from Ireland. Research Technical Papers 1/RT/98, Central Bank of Ireland.

Kapopoulos, & Siokis. (2005). Stock and real estate prices in Greece: wealth versus “credit price” effect (pp.125-128). Applied Economics Letters, Routledge Publications.

Lean. (2012). Wealth effect or credit-price effect? Evidence from Malaysia. Procedia Economics and Finance, 1, 259-268

Lum, S. K. (2004). Property price indices in the commonwealth: Construction methodologies and problems. Journal of Property Investment & Finance, 22(1), 25-54.

Mansor, H. I., & Law, S. H. (2014). House prices and bank credits in Malaysia: An aggregate and disaggregate analysis. Habitat International, 42, 111-120,

Ramazan, S., Bradley, T. E., & Bahadir, A. (2007). Macroeconomic variables and the housing market in Turkey. Emerging Markets Finance & Trade, 43(5), 5-19

Sutton, G. (2002). Explaining changes in house prices. BIS Quarterly Review, September, 46-55.

Tze, S. O. (2013). Factors affecting the price of housing in Malaysia. Journal of Emerging Issues in Economics, Finance and Banking (JEIEFB). An Online International Monthly Journal (ISSN: 2306 367X), 1(5).

Wit, & Dijk. (2003). The global determinants of direct office real estate return. Journal of Real Estate Finance & Economics, 26(1), 27-45.

Zainuddin, Z. (2010). An empirical analysis of Malaysian housing market: Switching and non-switching models. A thesis submitted in partial fulfilment of the requirements for the degree of doctoral of philospohy in Finance. Lincoln University.

Zhu, H. B. (2004). What drives housing price dynamics: Cross-country evidence. BIS Quarterly Review, March.



  • There are currently no refbacks.

Copyright (c) 2015 Canadian Social Science

Share us to:   


  • How to do online submission to another Journal?
  • If you have already registered in Journal A, then how can you submit another article to Journal B? It takes two steps to make it happen:

1. Register yourself in Journal B as an Author

  • Find the journal you want to submit to in CATEGORIES, click on “VIEW JOURNAL”, “Online Submissions”, “GO TO LOGIN” and “Edit My Profile”. Check “Author” on the “Edit Profile” page, then “Save”.

2. Submission

  • Go to “User Home”, and click on “Author” under the name of Journal B. You may start a New Submission by clicking on “CLICK HERE”.
  • We only use three mailboxes as follows to deal with issues about paper acceptance, payment and submission of electronic versions of our journals to databases:;;

 Articles published in Canadian Social Science are licensed under Creative Commons Attribution 4.0 (CC-BY).


Address1020 Bouvier Street, Suite 400, Quebec City, Quebec, G2K 0K9, Canada.

Website: Http:// Http://,

Copyright © Canadian Academy of Oriental and Occidental Culture