Macroeconomic Drivers of House Prices in Malaysia

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