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Jurnal Ekonomi Malaysia

53 (3) 2019 117 – 128

Constructing an Enhanced House Price Index Model: Empirical Evidence
Membina Model Indeks Harga Rumah yang Dipertingkatkan: Bukti Empirik

Faculty of Business and Accountancy
University of Selangor
Shah Alam Selangor
MALAYSIA

nnamalina@unisel.edu.my

Islamic Business School
Universiti Utara Malaysia
Sintok 06010 Kedah
MALAYSIA

norazlina.aw@uum.edu.my

Universiti Utara Malaysia Kuala Lumpur
50300 Kuala Lumpur
MALAYSIA

rosylin@uum.edu.my

Abstract

The objective of this study is to construct an enhanced house price index model in Malaysia. Having reviewed the current model of the Malaysian House Price Index (MHPI), it is currently found that this index is constructed based on the demand-driven variables. Previous studies explained that both macroeconomic factors (income levels, interest rates, and labor market) and supply factors are included in the construction of the house price index. This study begins by examining the determinants of the existing house price index in Malaysia. This study employs the Autoregressive Distributed Lag Model (ARDL) to discover the short and long-run dynamics between the variables. The study considers the quarterly data from the first quarter of 2008 to the fourth quarter of 2017. The findings reveal that construction cost (CC) and housing loan (HLN) are significant in determining HPI while Overnight Policy Rate (OPR) and land supply (LS) are insignificant with HPI. Then, the housing loan was found to be the most significant variable in determining HPI in Malaysia. Hence, we propose a new enhanced house price index that incorporates new demand and supply variables, by using the Laspeyres approach to calculate the new enhanced HPI. The analysis shows that the enhanced house price index has also recorded the same trend but with a lower value of prices as compared to the current MHPI. This enhanced HPI model may reflect the real situation of the housing market in Malaysia and it is expected to increase the affordability of the society in fulfilling their basic needs. This study may provide evidence for the involved parties to have some policy ramifications to further monitor and take appropriate measures to control the prices of property.

Keywords

House price index; Laspeyres Approach; Malaysia

Author’s Acknowledgement

The authors wish to express gratitude to the Ministry of Higher Education Malaysia - TRGS (so Code: 13166) for funding this project. We would also wish to thank those who have contributed to the successful completion of this project.

http://dx.doi.org/10.17576/JEM-2019-5303-9
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Nik Mohd Sukrri, , Abd. Wahab, , & Mohd. Yusof, (2019). Constructing an Enhanced House Price Index Model: Empirical Evidence. Jurnal Ekonomi Malaysia, 53(3), 117–128. http://dx.doi.org/10.17576/JEM-2019-5303-9

@article{sukrri2019constructing,
  title={Constructing an Enhanced House Price Index Model: Empirical Evidence},
  author={Nik Mohd Sukrri, Nik Nor Amalina and Abd. Wahab, Norazlina and Mohd. Yusof, Rosylin},
  journal={Jurnal Ekonomi Malaysia},
  volume={53},
  number={3},
  pages={117—128},
 

year={2019},
}

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