Can the Housing Policies Sustain House Prices in Malaysia?

Geok Peng Yeap, Hooi Hooi Lean
2017 Malaysian Journal of Economic Studies  
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
more » ... 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 highrise 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. 1 Calculated as the percentage change in house price index for the respective states between 2010 and 2015. 2 Calculated as the percentage change in consumer price index between 2010 and 2015. 3 Calculated as the percentage change in gross domestic product at constant prices between 2010 and 2015. MJES V54N2 8Yeap_Lean.indd 301
doi:10.22452/mjes.vol54no2.8 fatcat:hescviqhdzdzbj2rcnlrypuh74