FACTORS THAT INFLUENCE HOUSING

PRICE IN MALAYSIA

MOHD SHAKIB BIN ISHAK

2012619382

BACHELOR OF BUSINESS ADMINISTRATION

WITH HONOURS (FINANCE)
FACULTY OF BUSINESS MANAGEMENT
UNIVERSITY TECHNOLOGY MARA
SHAH ALAM

JANUARY 2017
FACTORS THAT INFLUENCE HOUSING PRICE IN MALAYSIA

MOHD SHAKIB BIN ISHAK

2012619382

Submitted in Partial Fulfilment of the

Requirement for the
Bachelor in Office Systems Management with Honours

FACULTY OF BUSINESS MANAGEMENT

UNIVERSITY TECHNOLOGY MARA
SHAH ALAM

JANUARY 2017

i
 DECLARATION OF ORIGINAL WORK

BACHELOR OF BUSINESS ADMINISTRATION

WITH HONOURS (FINANCE)
FACULTY OF BUSINESS MANAGEMENT
UNIVERSITY TECHNOLOGY MARA
DECLARATION OF ORIGINAL WORK

I, , (I/C Number : )

Hereby, declare that:

This work has not previously been accepted in substance for any degree,

locally or overseas, and is not being concurrently submitted for this degree

or any other degrees.

This project paper is the result of my independent work and investigation

work, except where otherwise stated.

All verbatim extracts has been distinguished by quotation marks and

sources of my information have been specifically acknowledged.

Signature : _____________________________ Date : January 2017

ii
 LETTER OF SUBMISSION

Mohd Shakib Bin Ishak

2012619382

Bachelor of Bachelor Of Business Administration With Honours

Faculty of Business Management 2017

Puan Fatimah binti Setapa

Head of Program (BM222)

Faculty of Business Management

University Technology Mara, Shah Alam

TITLE: SUBMISSION OF FINAL PROJECT PAPER JANUARY 2017

I am submitting herewith 1 hard bound report and 1 CD of my thesis entitle

FACTORS THAT INFLUENCE HOUSING PRICE IN MALAYSIA for your kind

perusal and consideration.

Thank You.

Your faithfully,

__________________________

MOHD SHAKIB BIN ISHAK

2012619382

iii
 ACKNOWLEDGEMENTS

I would like to take this opportunity to express my sincere gratitude to

Puan Fatimah binti Setapa for his expert guidance, give me valuable suggestions

and encouragement at every stage during the completion of this research. It was

pleasant and inspiring experience for me to work under her guidance. A special note

of admiration and gratitude to my families and friends, without their moral support, it

would have been impossible for me to go through this piece of work.

Mohd Shakib bin Ishak

January, 2017

Faculty of Business Management

University Technology MARA Malaysia

iv
 TABLE OF CONTENT

Page

TITLE i

DECLARATION OF ORIGINAL WORK ii

LETTER OF SUBMISSION iii

ACKNOWLEDGEMENTS iv

TABLE OF CONTENT v

LIST OF FIGURE xi

LIST OF TABLES xii

LIST OF ABBREVIATIONS xiii

ABSTRACT xiv

CHAPTER 1 - INTRODUCTION 1

1.1 Introduction 1

1.2 Background of The Study 2

1.3 Problem Statement 3

1.4 Research Objective 5

1.5 Research Questions 5

1.6 Significance of Study 6

1.7 Scope and Limitation of Study 7

1.8 Definition of Terms 9

1.8.1 Housing Price 9

1.8.2 Interest Rate 9

v
 TABLE OF CONTENT

Page

1.8.3 Inflation Rate 9

1.8.4 Gross Domestic Product 9

1.8.5 Population (Malaysia) 10

1.8.6 Stock Price 10

CHAPTER 2 - LITERATURE REVIEW AND RESEARCH FRAMEWORK 11

2.1 Introduction 11

2.2 The relationship of the interest rate with the housing price 11

2.3 The relationship of the inflation rate with the housing price 13

2.4 The relationship of the gross domestic product with the housing price 15

2.5 The relationship of the population with the housing price 16

2.6 The relationship of the stock price with the housing price 17

2.7 The Conceptual Framework 18

CHAPTER 3 - RESEARCH METHODOLOGY 19

3.1 Introduction 19

3.2 Data Collection 19

3.3 Variables 19

3.3.1 Dependent Variable 19

3.3.2 Independent Variables 20

3.4 Population and Sample 20

3.5 Study Design 20

vi
 TABLE OF CONTENT

Page

3.6 Unit of analysis 21

3.7 Time Horizon 21

3.8 Data Analysis and Treatment 21

3.8.1 Linear Multiple Regression Model 21

3.8.2 Economic a Priori Sign 23

3.8.3 Test of Coefficient 24

3.8.3.1 Determination of Coefficient (R2) 24

3.8.3.2 Correlation Coefficient (Simple Linear Correlation) 24

3.8.4 Test of Significant - Probability (P-valued method) 25

3.8.5 Test for Multicollinearity 25

3.8.5.1 Variance Inflation Factor 25

3.8.5.2 Durbin Watson 26

CHAPTER 4 - ANALYSIS AND FINDINGS 27

4.1 Introduction 27

4.2 Graph 27

4.2.1 Malaysia Housing Price Index Dependent Variable 27

4.2.2 Interest Rate Independent Variable 1 28

4.2.3 Inflation Rate Independent Variable 2 28

4.2.4 Gross Domestic Product Independent Variable 3 29

4.2.5 Population Independent Variable 4 30

4.2.6 Stock Price Independent Variable 5 30

vii
 TABLE OF CONTENT

Page

4.3 Data Analysis and Treatment 31

4.3.1 Linear Multiple Regression Model 31

4.3.1.1 The Equation 32

4.3.2 Economic a Priori Sign 33

4.3.3 Test of Coefficient 33

4.3.3.1 Determination of Coefficient (R2) 33

4.3.3.2 Correlation Coefficient (Simple Linear Correlation) 34

4.3.4 Test of Significant - Probability (P-valued method) 34

4.3.7 Test for Multicollinearity 35

4.3.7.1 Variance Inflation Factor 35

4.3.7.2 Durbin Watson 35

CHAPTER 5 - CONCLUSION 37

5.1 Introduction 37

5.2 Conclusion 37

5.3 Recommendation 38

REFERENCE 39

Journals 39

Websites 42

viii
 TABLE OF CONTENT

Page

APPENDICES 43

Final Data had been choose for analyse by annually basis

APPENDIX 1 43
with 3 Independent variable

APPENDIX 1.1 : Historical data 43

APPENDIX 1.2 : Model of Multiple Linear Regression 45

APPENDIX 1.3 : Model of Correlation 45

APPENDIX 1.4 : Model of Variance Inflation Factors 45

APPENDIX 1.5 : Scatter Plots Relationship MHPI with INT 46

APPENDIX 1.6 : Scatter Plots Relationship MHPI with INF 46

APPENDIX 1.7 : Scatter Plots Relationship MHPI with KLCI 47

APPENDIX 2 Data Analysis using 5 independent variable by Annually Basis 48

APPENDIX 2.1 : Model of Multiple Linear Regression 48

APPENDIX 2.2 : Model of Correlation 48

APPENDIX 2.3 : Model of Variance Inflation Factors 48

APPENDIX 3 Data Analysis using 4 independent variable by Annually Basis 49

APPENDIX 3.1 : Model of Multiple Linear Regression 49

APPENDIX 3.2 : Model of Correlation 49

APPENDIX 3.3 : Model of Variance Inflation Factors 49

ix
 TABLE OF CONTENT

Page

Data Analysis using 4 independent variable by Semi-Annually

APPENDIX 4 50
Basis

APPENDIX 4.1 : Model of Multiple Linear Regression 50

APPENDIX 4.2 : Model of Correlation 50

APPENDIX 4.3 : Model of Variance Inflation Factors 50

APPENDIX 5 Data Analysis using 4 independent variable by Quarterly Basis 51

APPENDIX 5.1 : Model of Multiple Linear Regression 51

APPENDIX 5.2 : Model of Correlation 51

APPENDIX 5.3 : Model of Variance Inflation Factors 51

APPENDIX 5 Turn It In Final Result 52

x
 LIST OF FIGURE

Page
Graph 1 Malaysia Housing Price 27
Graph 2 Interest Rate 28
Graph 3 Inflation Rate 28
Graph 4 Gross Domestic Product 29
Graph 5 Population 30
Graph 6 Stock Price 30
Graph 7 Durbin Watson 35

xi
 LIST OF TABLES

Page
Table 1 Economic a Priori Sign Before Result 23
Table 2 Range Correlation Coefficient (Simple Linear Correlation) 24
Table 3 Range Test for Multicollinearity Variance Inflation Factor 25
Table 4 Multiple Linear Regressions Analysis 31
Table 5 Economic a Priori Sign Result 33
Table 6 Correlation Coefficient 34
Table 7 Variance Inflation Factors 35

xii
 LIST OF ABBREVIATIONS

MHPI Malaysia Housing Price Index

INT Interest Rate

INF Inflation Rate

GDP Gross Domestic Product

POP Population

KLCI Kuala Lumpur Composite Index

CPI Consumer Price Index

BLR Base lending Rate

PR1MA Projek Perumahan Rakyat 1Malaysia

PPA1M Perumahan Penjawat Awam 1Malaysia

KRI Khazanah Research Institute

xiii
 ABSTRACT

The purpose of this study is to provide an analysis on the FACTORS THAT

INFLUENCE HOUSING PRICE IN MALAYSIA. The researcher had revised the

independent variable and had chosen interest rate (BLR), inflation rate (CPI), and

stock price (KLCI) as an independent variables and dependent variable is Malaysia

housing price index (MHPI). The researcher has achieved the main objective from

the research of Factors That Influence Housing Price in Malaysia. The objective is to

identify whether interest rate, inflation rate, and stock price are significant or not

significant in affecting Malaysia housing price index. Another objective is to

determine the relationship and to identify the most dominant that has significant

between independent variables and Malaysia housing price index as a dependent

variable. Using Multiple Linear Regression Model, the result show the inflation rate is

1 of 3 independent variables have significant positive relationship with Malaysia

housing price index. In other hand, interest rate and stock price as independent

variables has not significant positive relationship with Malaysia housing price index.

However, inflation rate is the most dominant that has significant between

independent variables.

xiv
 CHAPTER 1

INTRODUCTION

1.1 Introduction

Chapter one will discuss regarding the background of study, problem

statement, research question, research objective, significant of study and summary

regarding Factors That Influence Housing Price in Malaysia.

In background of study, Malaysia Housing Price index is dependent variable

and the independent variables are the interest rate, inflation rate, gross domestic

product, population and stock price. In this chapter also discuss about the problem

that relate in problem statement.

1.2 Background of The Study

Refer to Maslow's Hierarchy of Needs, the basic physiological are needs

human being is a shelter or home. The house is not just a place for shelter but it is

also a place to live.

In Malaysia, the Government has played an important role in implementing

policies and programs that people can get their own house. Furthermore to the

essential component in the economy, it is also a basic requirement for all Malaysians

who have been recognized by the Government. In the two parties play an important

role in the construction of housing is the public sector and the private sector that will

1
develop low-cost, medium cost and high cost. Although, by Othman on year 1999,

through the policies implemented by the Government on aspects of housing

production in the private sector focus mainly housing development schemes.

Government had launched the first project of housing production. On the topic

in The Star on 15th October 2011, My First Home Scheme had launched by

Government in their Budget 2011 with intent to help young people whose earning

RM3,000 and below for their first home. In the scheme, its allows young people to get

100% approval of the financial institutions and enabling them to own their first home

without having to pay 10% of down payment. Projek Perumahan Rakyat 1Malaysia

(PR1MA) was the second project had launched by the Government. The program is

on purpose to encourage home ownership especially among the middle earners

income by providing affordable residential properties in major cities across the

country.

Early 2013, other project was launched by Government. It is focus to allow

the lower and middle earners income to buy a house especially in the cities. The

project named Perumahan Penjawat Awam 1Malaysia (PPA1M). PPA1M was a

project of Government that affordable housing scheme for help Government staff to

own a house (Sinar Harian on 18 April 2013).

Thru New Straits times on 6th April 2016, a special product that was

introduced by the Government to help especially for the middle-income is Skim

Pembiayaan Deposit Rumah Pertama (MyDeposit). Government had allocate RM200

million as a contribution to the deposit for the purchase of a first home by one

household. MyDeposit Scheme was launched by the Government through the

Ministry of Housing and Local Government in objectives of the National Housing

Policy to increase the capacity and accessibility, for those to own households. Now a

2
days, housing price are increase, therefore Government's initiatives to introduce the

scheme and so that Malaysia people can buy a house. MyDeposit Scheme was

officially opened for application on 6th April 2016.

The Valuation and Property Services Department of the Ministry of Finance is

compile Malaysian House Price Index (MHPI) for semi-annually. The index is only for

house property and they are distinguished by their index of terraced houses, high-

rise buildings, detached and semi-detached.

There are many factors that influence housing prices. The overall factors

have a strong relationship with dependent variable. In this topic will be focus on four

factors or variables to determine the relationship with housing prices. Some variables

have a positive or negative relationship but some have both negative and positive.

1.3 Problem Statement

House is a requirement for people to stay and live. With comfortable and

complete house is one of dreams. Developer are offer various types of house for the

example, low-cost houses, terraced houses, bungalows, apartments and

condominiums.

However, in Berita Harian on 12th September 2016 had mentioned that there

are several factors is cause to have a house. The several factors that cause the

problem such as increase in house prices between 5 to 15 percent a year, developer

are depending on the location, type of home and the current economic situation. The

common factor are factor of manipulating the increase in supply and demand, price

increases, improvement of infrastructure facilities are in perfect developed, repair and

3
renovation of residential as well as increased cost of the construction and

management of the house.

Thru Utusan Malaysia on 1st September 2015, a research from Khazanah

Research Institute (KRI) regarding price of house was too expensive are not

reasonable with meaning that, by international standards the house price was 4.4

times higher than the average salary a year. On the others side, factor that cause to

the house price increase in the market are, growth of population. More population

increase, will rise the demand for own their own house.

Nowadays, because of the increasing of house price, the opportunity for

worker those are new or fresh graduate to get their own house are very difficult.

Normally, income that their earned a month is enough to cover the cost of living and

others loan such as study loan. Based on Sinar Harian on 8th April 2016, most of

them are facing financial limit for who have a family to own their own house, due to

rising of house price and cost of living.

4
1.4 Research Objective

(i) To identify whether interest rate, inflation rate, gross domestic product,

population and stock price are significant or not significant in affecting housing price;

(ii) To determine the relationship between the interest rate, inflation rate, gross

domestic product, population and stock price with housing price ; and

(iii) To identify the most dominant variable that has significant influence towards

the housing price.

1.5 Research Questions

(i) Which of the factors are significant or not significant in affecting housing

price? ;

(ii) What is the relationship between interest rate, inflation rate, gross domestic

product, population and stock price with housing price? ; and

(iii) Which is variable has the most significant influence towards the affecting

housing price?

5
1.6 Significance of Study

This analysis is to identify the relationship between the interest rate, inflation

rate, gross domestic product, population and stock price with housing price in

Malaysia which is, based on the relationship between the dependent variable and

independent variables. The analysis mentioned was a tasks and modules required

for the program BM222 Bachelor of Business Administration with Honours (Finance),

Faculty of Business Management, University Technology Mara Shah Alam.

Therefore, from this analysis for the learning process to guide researcher to

identify the problem based on the analysis and able to understand how the

information obtained. Mostly, other researcher use DataStream that provided by the

UITM to obtain accurate data and appropriate according to the study.

By refer to the relevant journal for reference and tutored by lecture it was

once of the practices to preparing a thesis and researcher also used E-View system

applicable to research data as a benchmark result.

To the end, based on this study researcher hope this study can assist as a

reference for other researcher, those who is under the program of Bachelor of

Business Administration with Honours (Finance) at University Technology Mara Shah

Alam.

6
1.7 Scope and Limitation of Study

This study focuses on the relationship between housing prices with interest

rate, inflation rate, gross domestic product, population and stock price whether the

relationship between them is positive or negative. This study uses data collected

from DataStream. This study was prepared by chapter as follows. Chapter 1

introduces the study used as the focus and problem. Chapter 2 is a literature review.

It is associated relationship between housing prices with interest rate, inflation rate,

gross domestic product, population and stock price. Followed by chapter 3, the

methodology of the model used in this study. Chapter 4 discusses the results

obtained and lastly is chapter 5, the conclusions and recommendations of the study.

This subject focuses on the relationship between housing prices with interest

rate, inflation rate, gross domestic product, population and stock price whether the

relationship between them is positive or negative and it use data collected from

DataStream. Therefore, it was prepared by chapter as follows; Chapter 1 introduces

the study used as the focus and problem. Chapter 2; is a literature review. It is

associated relationship between housing prices with interest rate, inflation rate, gross

domestic product, population and stock price. Followed by chapter 3, the

methodology of the model used in this study. Chapter 4; discusses the results

obtained and lastly is chapter 5; the conclusions and recommendations from the

results.

7
The scopes of this study are as follows:

(i) The study will use secondary data from Malaysia Housing Price Index,

Interest Rate (BLR), Inflation Rate (CPI), Gross Domestic Product

(GDP), Population and Stock Price (KLCI) from 1980 till 2015 with

36 observation;

(ii) Data are analysed by using the multiple regression analysis method

performed by computer software called The Econometric Views

(E-View9).

Below are several limitation occurred in this study;

(i) Time constraint will be one of the limitations due to commitment and

nature of the work of the researcher, it was unable to spend more time

to reviewed on more related literature and have limited precious time for

personal consultation with the advisor.

(ii) The data is limited to only a few users. Especially in the using of

database Thomson Reuters Eikon.

(iii) During the research process, lack of experience is one of the factor that

prevent researcher to produce a good research study.

8
1.8 Definition of Terms

1.8.1 Housing Price

Data released by the National Property Information Centre Malaysia. It

consists of 4 types of terrace houses, high rise, detach and semi detach. The overall

data collected and consolidated and categorized as Malaysia Housing Price Index

(MHPI). MHPI is benchmark for housing price.

1.8.2 Interest Rate

Base Lending Rate is a minimum interest rate calculated by financial

institutions based on a certain formula. This formula takes into account the

institutions cost of funds and other administrative costs. Base Lending Rate is

benchmark for interest rate.

1.8.3 Inflation Rate

Measures change in the price level of consumer goods and services

purchased by household. Consumer price index is benchmark for inflation rate.

1.8.4 Gross Domestic Product

Gross Domestic Product is the market value (money-value) of all final goods

and services produced in a geographical region, usually a country. GDP is

benchmark for gross domestic product.

9
1.8.5 Population (Malaysia)

The population estimates based on the 2000 Population and Housing Census

data which had earlier been revised for under-enumeration based on under-

enumeration rates from the Census Coverage Evaluation Survey. This population

estimates are subsequently projected to current years. These projections are derived

based on assumptions of components of fertility, mortality and migration.

1.8.6 Stock Price

In Malaysia, selling and buying stock is done by Bursa Malaysia and Kuala Lumpur

Composite Index (KLCI) currently known as the FTSE Bursa Malaysia KLCI is use as

indicator of how these performances stock. Stock prices can be affected by a number

of things including volatility in the market, current economic conditions, and popularity

of the company. Kuala Lumpur Composite Index is benchmark for stock price.

10
 CHAPTER 2

LITERATURE REVIEW AND RESEARCH FRAMEWORK

2.1 Introduction

The literature review basic to any research organization. Information research

that have been used in this study. This chapter will discuss the empirical literature in

housing prices and independent variables interest rate, inflation rate, gross domestic

product, population and stock price. In particular, will be discussing on previous

studies that have been carried out by others about the variables that affect the

housing price.

2.2 The relationship of the interest rate with the housing price

During the research from year 2001 to 2010 by monthly basis in Malaysia,

there is not significant positive relationship between the interest rate and the housing

price according to Ong (2013). Buyer or speculators also had been inform that do not

care of the interest rate charged by the bank, demand or supply that is not balance.

Because of that, the investor are confident and optimistic about the housing market.

Therefore, it mentioned that the speculator in perspective, they might not hold the

houses for the long term and in the short term the houses will be sell. The impact is

the gain are more than the cost. Currently, developers try to design and develop a

number of houses based on demand and buyer is willing to pay more to obtain their

desired type of house. So the price of the houses will increase because of the fact.

11
 The interest rate on housing price in Lagos, Nigeria during the research by

Suvita and Olanipekun (2015), for the year of 2000 to 2014 by annually basis, there

is a significant correlation regarding the housing price and the interest rate. Though,

17% of interest rate is still high and not many people can afford to take a loan

because of the percentage and it is shows that, this correlation is strong negative

relationship.

There is differential price expectation perceived by housing consumers in

differing economic situations. On year 1997, the empirical result suggest that the

interest rate effect on housing prices in Hong Kong is contras significantly positive

and negative in the deflationary by Tak Yun (2003). Research from year 1981 to

2001 by quarterly basis in Hong Kong, found evidence found that the higher

correlation displayed between housing prices, nominal interest rates and in year

1998 to 2001 it is relative to those in year 1981 to 1997.

Research by Y.Zheng (2014), in China for the year December 2012 to June

2015 thru monthly basis, stated that the high interest rate is not necessarily indicate

low housing price, although it does calm down the housing price to some extent and

more specific in the correlation is strong for the long term but not significant in the

short-term. In specific, interest rate adjustment is lagging and inflation rate has been

high end the years and caused the real interest rates to decrease.

In the other view, the positive sign on interest rate could be that high house

prices are usually a sign of high activity in the economy and interest rate is increased

to cool down the economy, which could result in high house prices at a high interest

rate and vice versa by Jonas (2007), by annually basis in Sweden and Australia from

year 1980 to 2006.

12
 By annually basis from Alabama, USA in year 1988 to 2007, the interest rate

coefficient is negative and the significant is 1 percent. Towards that, when loan

interest rate are increases by 1 percent, causally the demand for new single family

houses decreases by 0.1 percent, research by John (2009).

2.3 The relationship of the inflation rate with the housing price

The relationship between housing prices and inflation rate is significantly

positive. The impact of the CPI on housing prices is greater than that of housing

prices on the CPI, which indicates that housing purchase has been used as effective

hedge for inflation rate. However, by Wu & Tidwell (2015), have make a research

from year 1996 to 2010 by using annually basis in China mention that the inflation

rate in order to curb housing prices have to control.

Besides that, refer to the Mahdi & Masood (2011), investigates the

relationship between housing price and inflation rate from empirical perspective.

There is a positive and significant relationship between inflation housing prices.

Research from year 1989 to 2007 by using quarterly basis in Iran.

In Kenya, by using quarterly basis data from year 2004 to 2014, shows that

the negative relationship occur between the house price and inflation rate. According

to Kibunyi (2015), inflation rate affects the demand side more than the supply side as

the purchasing power of consumers is eroded. The strength of this relationship is

observed to be weak and therefore not significant. Furthermore, by the result of the

regression test which show a negative coefficient which is not significant given the p-

value of 13.3%. Inflation rate correlation negatively with house price at -0.0706 which

13
means as inflation rate increases, the purchasing power of the buyers is eroded, the

disposable incomes therefore decrease and this in turn slows demand for new

housing. This is consistent with regression results which give a coefficient of -0.5915.

As the law of supply and demand takes effect, this is bound to slow down prices

unless there is a house price bubble. This relationship is however quite weak and is

not significant at p-value 0.6610.

There is strong long term relationship between the inflation rate and the

housing price during the research period from 2000 to 2010 by quarterly basis in

Malaysia according to the Pillaiyan (2015). Same goes to Datta & Mukhopadhyay,

(2011), relationship between Inflation and Economic Growth in Malaysia - An

Econometric Review market. . Inflation rate is a constant increase in price indices on

account which also increase cost of living in the country. During inflation rate, general

public feel relatively poor because the increase in price of goods and services will

reduce the purchasing power. In the short run inflation rate plays the vital role for

affecting economic growth negatively on the other hand in the long run economic

growth leads to change positive in inflation rate by data taken from annually basis in

Malaysia for period 1971 to 2007.

However, refer to Ong (2013), by monthly basis in Malaysia during the period

of 2001 till 2010. Inflation rate is not a significant determinant of housing price and

conclude the other variables such as capital income and employment have a

significant with housing price.

14
2.4 The relationship of the gross domestic product with the housing price

The relationship of the gross domestic product has a positive connection with

housing price. While the level of gross domestic product arises, it will manipulate the

housing price according to Taltavull (2003), by using annually basis in Spain from

year 1989 to 1999.

View from Ong (2013), the gross domestic product is found to be significant

positive correlation with the housing price. By taken data from year 2001 to 2010

using monthly basis in Malaysia, conclude that increase in the gross domestic

product because of the increase in personal consumption.

The economic growth fluctuations play a major role in determining the

changes in house prices and the relationship is positive. No long run relationship

exists among the housing price and gross domestic product, by

Batayneh & Al-Malki (2015), during research period of 1985 to 2012 with using

annually basis data in Saudi Arabia.

Data taken from Kenya, using quarterly basis from year 2004 to 2014 by

Kinbunyi (2015), the strong positive correlation was observed between house prices

and gross domestic product. Its means that, the house prices move in the same

direction as the economic variables. In other words, as the economic variables

increase, the house prices also increase. However, the long run relationships were

observed between house prices and gross domestic product which lead to the

exclusion of a house bubble.

Otherwise by monthly basis data from year 1996 to 2004 in Ukraine, results of

the empirical estimation confirm that macro factors indeed influence real estate

15
market. Increase in gross domestic product level appear to have positive effect on

real estate prices. It was also concluded that real estate market respond to changes

in gross domestic product that is to economic progress with the lapse of time by

Mavrodiy (2015).

Refer case of The Economic Factors Affecting Residential Property Price in

Penang Island, the gross domestic product show positive correlation with housing

price and strong correlation towards housing price by Zandi (2015), data taken from

year 2007 to 2014 using annually basis.

2.5 The relationship of the population with the housing price

Population is significantly correlated with the increase in house price. While

the population in Malaysia increase, the demand for housing lead to rising the

housing price. The factor cause the house price increase is, more demand than

supply for housing, it will affect the price of housing and people are willing to spend

more money to buy a house when there are fewer house on the market data taken

from year 2000 to 2012 using quarterly basis by Ong (2013).

The Factors of Demand for Single Family Housing, throughout the research

period data from 1988 till 2007 by quarterly basis in Alabama, USA. The coefficient

for population was positive and significant at 1 percent level. The study found that

higher population growth tends to increase demand for new single family houses by

John (2009).

More increase of population are appear to have a positive effect on real

estate prices by Mavrodiy (2005), in Ukraine and also mention, the assumptions that

16
economic development and increase in income level as well as rise of population

induces demand and lead to increase in price level through data from year 1996 to

2004 by monthly basis.

In China, the significance of the coefficient is lower than in the static

regression analysis as only the population coefficient are significant in the long-run

equilibrium results and the sign of the long-run relationship between the population

and the house price index is negative by Stohldreier (2012), during the period of

1998 till 2011 using annually basis.

2.6 The relationship of the stock price with the housing price

Regarding the House Prices and the Collapse of the Stock Market in

Mainland China by Huang (2009), the Empirical Study on House Price Index, during

the period of 2006 till 2008 by using monthly basis data, there is a strong positive

correlation between the stock markets and housing price. Otherwise, it can be drawn

and possible that property price will slip as a result of the stock market turmoil.

However, the property market will not collapse. Furthermore, during year 1995 to

2006 by using quarterly basis in Thailand, the results from the analysis also have a

positive relationship with housing prices and stock price thru Ibrahim (2009).

The analysis from year 2003 to 2012 in China by data from quarterly basis,

for a long term, stock prices have a negative effect on house prices, indicating that

the substitution effect dominates the relationship between stock and house prices.

However, in the short term, the positive effects of stock prices on house prices are

statistically significant according to Yuan (2014).

17
 Furthermore, the stock prices influence a major role in determining the

changes in house prices and the relationship between the house prices and stock

prices is negative thru Batayneh & Al-Malki (2015), data from year 1985 to 2012 by

annually basis in Saudi Arabia.

The Change of Relationship between Real Estate and Stock Markets in China

by Cheng (2015), during analysis from year 2003 to 2013 using annually basis, state

that, the increase of Shanghai composite index has a negative influence on housing

price index will reminds investors and Chinese government of the stock markets and

real estate markets price rational return after financial crisis.

2.7 The Conceptual Framework

Independent Variable Dependent Variable

Interest Rate - BLR

(INT)

Inflation Rate - CPI

(INT)

Gross Domestic Product Housing Price

(GDP) (MHPI)

Population
(POP)

Stock Price
(KLCI)

18
 CHAPTER 3

RESEARCH METHODOLOGY

3.1 Introduction

This study will focus on the impact of interest rate (BLR), inflation rate (CPI),

gross domestic product (GDP), population (Malaysia) and stock price (KLCI)

as an independent variables towards the housing prices index (MHPI) in Malaysia as

a dependent variable.

3.2 Data Collection

All the data of housing price index, interest rate (CPI), inflation rate (BLR),

gross domestic product (GDP), population (Malaysia) and stock price (KLCI) in

Malaysia are collected from the DataStream. The latest data and previous data can

get from this e-source.

3.3 Variables

3.3.1 Dependent Variable

Dependent variable must support with the independent variables to use in

analyse the factors that affect the housing prices index in Malaysia. This variable will

19
be the one who affected by the independent variables that had been choose. The

dependent variable in this study is Malaysia housing price index (MHPI).

3.3.2 Independent Variables

This study will using interest rate (BLR), inflation rate (CPI), gross domestic

product (GDP), population (Malaysia) and stock price (KLCI) as an independent

variables. These independent variables will help to collect the information effect of

Malaysia housing price index (MHPI) as a dependent variable.

3.4 Population and Sample

Population of this study is in Malaysia. The sample that being used in this

study are Malaysia housing price index (MHPI), interest rate (BLR),

Inflation rate (CPI), Gross Domestic Product (GDP), population (Malaysia) and stock

price (KLCI). The sample period is annually basis from 1980 until 2015. All the

variables data is obtained by DataStream.

3.5 Study Design

The purpose of this study is to investigate which of the using interest rate

(BLR), inflation rate (CPI), gross domestic product (GDP), population (Malaysia) and

stock price (KLCI) is a factors influence the housing prices in Malaysia.

20
 This study involved the correlation to determine of selected independent

variables on Malaysia housing price index either existing any significant between

their means of each economic variable.

3.6 Unit of analysis

For the unit analysis, these studies use multiple regressions. These studies

are analysing the Malaysia housing price index (MHPI) as dependent variable.

Interest rate (BLR), inflation rate (CPI), gross domestic product (GDP),

population (Malaysia) and stock price (KLCI) as independent variables.

3.7 Time Horizon

The collection of data Malaysia housing price index (MHPI) as dependent

variable. Interest rate (BLR), inflation rate (CPI), gross domestic product (GDP),

population (Malaysia) and stock price (KLCI) is obtained from the time series of year

1980 until 2015 annually.

3.8 Data Analysis and Treatment

3.8.1 Linear Multiple Regression Model

Regression analysis is a statistical process for estimating the relationships

among variables. In this analysis many techniques for modelling and analysing

several variables, that focus is on the relationship between a dependent variable and

21
one or more independent variables. In linear multiple regressions model there is

more than one independent variables. The true model contains the random error

term and the true coefficients for the input variables.

Regression Model:

Yi = 0 + 1 X1 + 2 X2 + .......... + k Xk + ei

Where;

Dependent Variable = Yi

Estimated Coefficient =

Independent Variables =X

Error Term = ei

The regression analysis in this study is used to examine the relationship

between the housing price and explanatory variables such as interest rate, inflation

rate, gross domestic product, population and stock price.

Regression Model:

MHPI = 0 + 1 INT + 2 INF + + 3 GDP + 4 POP + 5 KLCI +ei

Where;

MHPI = Malaysia Housing Price Index

INT = Interest Rate (BLR)

INF = Inflation Rate (CPI)

GDP = Gross Domestic Product

POP = Population

KLCI = Stock Price

22
3.8.2 Economic a Priori Sign

This shows whether independent variables in the equation are comparable

with the postulations of economic theory; that is, if the sign and size of the

parameters of economic relationships follow with the expectation of the economic

theory.

DV IV Relationship Result
MHPI INT Positive / Negative ?
MHPI INF Positive ?
MHPI GDP Positive ?
MHPI POP Positive ?
MHPI KLCI Negative ?
Table 1 : Economic a Priori Sign Before Result

Any parameter estimates with a positive sign indicates that the independent

variables indirect or positive relationship with the dependent variable. This means

that if that particular independent variables increase, the dependent variable will

increase too. Thus, they move in the same direction. However, a negative sign

implies an inverse or negative relationship meaning that if the independent variables

increases, the dependent variable will decrease, and vice versa. Thus, they move in

opposite directions.

23
3.8.3 Test of Coefficient

3.8.3.1 Determination of Coefficient (R2)

Coefficient of determination (R2), is a summary measure that how well the

regression line fits the data. This R2 lies between 0 and 1, the closer it is to 1, the

better is the fit. If the = 0, this means none of the changes in the dependent variable

can be explained by the changes in the independent variables and vice versa.

3.8.3.2 Correlation Coefficient (Simple Linear Correlation)

Correlation Coefficient indicates the direction, strength, and significance of

the relationship among all the independent variables.

Range Status of correlation

r=1 Perfect positive linear correlation
0.75 < r < 1 Strong positive linear correlation
0.26 < r < 0.74 Moderate positive linear correlation
0.1 < r < 0.25 Weak positive linear correlation
r=0 No linear correlation
-0.1 < r < -0.25 Weak negative linear correlation
-0.26 < r < -0.74 Moderate negative linear correlation
-0.75 < r < -1 Strong negative linear correlation
r = -1 Perfect negative linear correlation
Table 2 : Range Correlation Coefficient (Simple Linear Correlation)

24
3.8.4 Test of Significant - Probability (P-valued method)

Probability is used to find the degree of freedom of each variable. The study

will reject null hypothesis when the probability is = 0.0000 If probability sign at 5% or

0.05 significant level, this shows at least one of the independent variables is

important in explaining the dependent variable.

3.8.5 Test for Multicollinearity

3.8.5.1 Variance Inflation Factor

Variance inflation factors (VIF) use to measure how much the variance of the

estimated regression coefficients are inflated as compared to when the predictor

variables are not linearly related. Also to describe how much multicollinearity

(correlation between predictors) exists in a regression analysis. The problem of

multicollinearity can increase the variance of the regression coefficients, making

them unstable and difficult to interpret.

Range Status of predictors

VIF = 1 Not Correlated

1 < VIF < 5 Moderately Correlated

VIF > 5 to 10 Highly Correlated

Table 3 : Range Test for Multicollinearity Variance Inflation Factor

25
3.8.5.2 Durbin Watson

The Durbin Watson test is a simple numerical method for checking serial

dependence. The model is assumed to be free from the autocorrelation if the

Durbin Watson value is around 2. It can easily demonstrated as

1.5 < Durbin Watson Value > 2.5.

26
 CHAPTER 4

ANALYSIS AND FINDINGS

4.1 Introduction

This study will focus on the results of relationship between the dependent

variable which is Malaysia housing price and the independent variables which are

interest rate, inflation rate, gross domestic product, population and stock price. From

the results, this study can get the answer whether the dependent variable have

strong or weak relationship with the dependent variable.

4.2 Graph

4.2.1 Malaysia Housing Price Index Dependent Variable

MHPI
240

200

160

120

80

40
1980 1985 1990 1995 2000 2005 2010 2015

Graph 1 : Malaysia Housing Price Index

27
 Graph 1 show the movement Malaysia housing price index from 1980 till 2015

by annually basis. The minimum index is 49.32 for the year in 1980 and the

maximum index is 224.7 for the year in 2015.

4.2.2 Interest Rate (BLR) Independent Variable 1

INT
12

11

10

5
1980 1985 1990 1995 2000 2005 2010 2015

Graph 2 : Interest Rate (BLR)

Graph 2 show the movement interest rate from 1980 till 2015 by annually

basis. The minimum percentage is 5.51% for the year in 2009 and the maximum

percentage is 11.25% for the year in 1984.

4.2.3 Inflation Rate (CPI) Independent Variable 2

INF
120

110

100

90

80

70

60

50

40
1980 1985 1990 1995 2000 2005 2010 2015

Graph 3 : Inflation Rate (CPI)

28
 Graph 3 show the movement inflation rate from 1980 till 2015 by annually

basis. The minimum index is 41.4 for the year in 1980 and the maximum index is

112.8 for the year in 2015.

4.2.4 Gross Domestic Product Independent Variable 3

GDP
1,200

1,000

800

600

400

200

0
1980 1985 1990 1995 2000 2005 2010 2015

Graph 4 : Gross domestic Product

Graph 4 show the movement gross domestic product from 1980 till 2015 by

annually basis. The minimum amount is RM57.61 million for the year in 1980 and the

maximum amount is RM1,157.14 million for the year in 2015.

29
4.2.5 Population Independent Variable 4
POP
32

28

24

20

16

12
1980 1985 1990 1995 2000 2005 2010 2015

Graph 5 : Population

Graph 5 show the movement population in Malaysia from 1980 till 2015 by

annually basis. The minimum population is 13.83 million for the year in 1980 and the

maximum population is 30.33 million for the year in 2015.

4.2.6 Stock Price Independent Variable 5

KLCI
2,000

1,600

1,200

800

400

0
1980 1985 1990 1995 2000 2005 2010 2015

Graph 6 : Stock Price

Graph 6 show the movement stock price from 1980 till 2015 by annually

basis. The minimum index is 233.46 for the year in 1985 and the maximum index is

1866.96 for the year in 2013.

30
4.3 Data Analysis and Treatment

The researcher had used Malaysia Housing Price as a dependent variable

and interest rate, inflation rate, gross domestic product, population and stock price as

a dependents variable by using data from year 1980 to 2015 included 36

observation. By using system E-View, the data are not fulfil the analysis. Therefore,

researcher had convert the data by using semi-annually (S1 1980 to S2 2015) and

quarterly (Q1 1981 to Q4 2015). However, the result are same as annually analysis

had mentioned above.

By using the annually data (year 1980 to 2015) that including 36 observation,

researcher had revised the independent variable and had choosen interest rate

(BLR), inflation rate (CPI), and stock price (KLCI) as an independent variables.

4.3.1 Multiple Linear Regression Model

e-View command :

LS LOG(MHPI) C LOG(INT) LOG(INF) LOG(KLCI)

Dependent Variable: LOG(MHPI)

Method: Least Squares
Date: 12/27/16 Time: 22:18
Sample: 1980 2015
Included observations: 36

Variable Coefficient Std. Error t-Statistic Prob.

C -1.565996 0.515713 -3.036565 0.0047

LOG(INT) 0.085542 0.120896 0.707571 0.4843
LOG(INF) 1.315105 0.123385 10.65855 0.0000
LOG(KLCI) 0.046392 0.053241 0.871355 0.3901

R-squared 0.949878 Mean dependent var 4.538716

Adjusted R-squared 0.945179 S.D. dependent var 0.404016
S.E. of regression 0.094596 Akaike info criterion -1.773962
Sum squared resid 0.286349 Schwarz criterion -1.598016
Log likelihood 35.93132 Hannan-Quinn criter. -1.712552
F-statistic 202.1456 Durbin-Watson stat 0.118924
Prob(F-statistic) 0.000000

Table 4 : Multiple Linear Regressions Analysis

31
4.3.1.1 The Equation

Regression Model

MHPI = 0 + 1 INT + 2 INF + + 3 KLCI + ei

MHPI = -1.565996 + 0.085542 INT + 1.315105 INF + 0.046392 KLCI

The correlation coefficient explained that all independents variable which is

interest rate (BLR), inflation rate (CPI) and stock price (KLCI) have a positive

relationship with the Malaysia housing price index (MHPI).

It explains for every 1% increase in interest rate, the Malaysia housing price

index will increase by 0.09%. The interest rate variable has the correct priori sign,

it show positive relationship between variables and Malaysia housing price index. For

inflation rate, every 1% increase in inflation rate, the Malaysia housing price index will

increase by 1.32%. Inflation rate also shows the correct priori sign positive the

relationship between Malaysia housing price index.

Lastly, the researcher had the negative relationship stock market and Malaysia

housing price in economic priori sign. However the result shows positive relationship

with stock price and Malaysia housing price index. It mean, every 1% increase in

stock price, the Malaysia housing price index will increase by 0.05%.

32
4.3.2 Economic a Priori Sign

DV IV Relationship Result Correlation

MHPI INT Positive / Negative Positive Conform

MHPI INF Positive Positive Conform

MHPI KLCI Negative Positive Does Not Conform

Table 5 : Economic a Priori Sign

Table 5 show, all the results independent variables which is interest rate,

inflation rate and stock price have a positive relationship with Malaysia housing price

index as a dependent variable. It explain when increase in independent variables, it

will increase in Malaysia housing price index.

4.3.3 Test of Coefficient

4.3.3.1 Determination of Coefficient (R2)

Show the valued R2 is equal 0.949878 or 94.99% of the variation in

dependent variable is explained by the independent variables which are interest rate,

inflation rate and stock price. Only 5.01% of the dependent variable cannot be

explained by this not included independent variables and it may be explained by

other factor.

33
4.3.2.2 Correlation Coefficient (Simple Linear Correlation)

The correlation coefficient is the degree of linear association amongst the two

variables. The coefficient of correlation undertakes the degree of ranking

between +1 and -1.

INT INF KLCI

INT 1.000000

INF -0.663668 1.000000

KLCI -0.586448 0.873003 1.000000

Table 6 : Correlation Coefficient

From table 6 above, there have 3 relationship with the independent variables.

There are moderate negative linear relationship between interest rate and inflation

rate, also interest rate and stock price. The lastly, there is strong positive linear

correlation relationship between inflation rate and stock price.

4.3.4 Test of Significant - Probability (P-valued method)

By test of significant result, it shows 1 of 3 independent variables are

significant with dependent variable. The test of significant at 5% significance level.

Refer to the research objective, inflation rate is significant positive and dominant

variable with Malaysia housing price index at 0.0000 or 0.00%. The interest rate and

stock price the result are not significant positive with Malaysia housing price index at

0.4843 or 48.43% and 0.3901 or 39.01%.

34
4.3.7 Test for Multicollinearity

4.3.7.1 Variance Inflation Factor

Variance Inflation Factors

Date: 12/27/16 Time: 22:20
Sample: 1980 2015
Included observations: 36

Coefficient Uncentered Centered

Variable Variance VIF VIF

C 0.265960 1069.971 NA
LOG(INT) 0.014616 236.5679 1.787838
LOG(INF) 0.015224 1126.717 4.931198
LOG(KLCI) 0.002835 498.7502 4.205631

Table 7: Variance Inflation Factors

According to the regression results for all variables Variance Inflation Factors

is range in 1 to 5. It means this model does not have multicollinearity.

4.3.7.2 Autocorrelation Test Durbin Watson

Durbin-Watson stat 0.118924

N / Observation 36
K / Total Independent Variables 3

Graph 7 : Durbin Watson

35
Since Durbin-Watson = 0.118924, stay in the positive auto correlation region. There

is auto correlation problem in the estimated model.

36
 CHAPTER 5

CONCLUSION

5.1 Introduction

By using the annually data (year 1980 to 2015) that including 36 observation,

the result from the chapter 4 has been discuss in this chapter. Overall after the

researcher get the data and revised to get the result from the system E-Eview, this is

the conclusion to summarize in this research and recommendation.

5.2 Conclusion

The researcher had revised the independent variable and had chosen interest

rate (BLR), inflation rate (CPI), and stock price (KLCI) as an independent variables

and dependent variable is Malaysia housing price index (MHPI). The researcher has

achieved the main objective from the research of Factors That Influence Housing

Price in Malaysia. The objective is to identify whether interest rate, inflation rate, and

stock price are significant or not significant in affecting Malaysia housing price index.

Another objective is to determine the relationship and to identify the most dominant

that has significant between independent variables and Malaysia housing price index

as a dependent variable. Using Multiple Linear Regression Model, the result show

the inflation rate is 1 of 3 independent variables have significant positive relationship

with Malaysia housing price index. In other hand, interest rate and stock price as

independent variables has not significant positive relationship with Malaysia housing

price index. However, inflation rate is the most dominant that has significant between

37
independent variables. This is confirming by another result from this research in

chapter 4.

5.3 Recommendation

For future researcher, there are advices to do more analysis for the

Factors That Influence Housing Price in Malaysia. Increase the observation is one of

to get the better result. The analysis can make by annually, semi-annually and

quarterly basis by the time series analysis. In addition, selection of the appropriate

independent variables studying in journal, not only in Malaysia but the other country.

It can make a different result from analysis with difference independent variables. For

example to choose independent variables that can be made in parallel with this

research study are as unemployment, tax, money supply, monetary policy, income

and capital gains.

Also, the future researcher can use E-Views (Econometric Views) software for

their analysis. From the econometric method, analysis can be use more deeply to get

more result. Example for another analysis is "Breusch-Godfrey (BG) test: A General

test of autocorrelation", "Newey-West standard error of procedure", "White test

(White's General Heteroscedasticity test)".

38
REFERENCES

Journals

Batayneh, K. I., & Al-Malki, A. M. (2015). The Relationship between House Prices

and Stock Prices in Saudi Arabia: An Empirical Analysis. International Journal

of Economics and Finance, 7(2), 156.

Cheng, Z., & Zheng, S. (2015). The Change of Relationship between Real Estate

and Stock Markets in China.

Datta, K., & Mukhopadhyay, C. K. (2011). Relationship between inflation and

economic growth in Malaysia-an econometric review. Int. Ferenc. Econ.

Finance. Re., IPEDR, IACSIT Press, Singapore, 4.

Huang, Y., & Ge, X. J. (2009). House prices and the collapse of the stock market in

mainland China: An empirical study on house price index. Lantian College,

Zhejiang University, Manuscript.

Ibrahim, M. H., Padli, J., & Baharom, A. H. (2009). Long-run relationships and

dynamic interactions between housing and stock prices in Thailand. Asian

Academy of Management Journal of Accounting and Finance, 5(1), 93-105.

John M. Kagochi Lesley M. Mace, (2009),"The determinants of demand for single

family housing in Alabama urbanized areas", International Journal of Housing

Markets and Analysis, Vol. 2 Iss 2 pp. 132 144

39
Jonas Berglund, (2007), Determinants and Forecasting of House Prices. Department

Of Economics, Uppsala University, Sweden

Kibunyi, D. (2015). Real estate prices in Kenya: is there a bubble? (Doctoral

dissertation, Strathmore University).

Mahdi, S., & Masood, S. (2011). The long run relationship between interest rates and

inflation in Iran: Revisiting Fisher's hypothesis. Journal of Economics and

International Finance, 3(14), 705.

Mavrodiy, A. (2005). Factor Analysis of Real Estate Prices (Doctoral dissertation,

Economics Education and Research Consortium).

Olanipekun T. Alaba, O. J. Adegoke. Effects of Interest Rate on Housing Prices in

Lagos Metropolis. American Journal of Business, Economics and

Management. Vol. 3, No. 6, 2015, pp. 384-394.

Ong, T. S., & Chang, Y. S. (2013). Macroeconomic determinants of Malaysian

housing market. Journal of Human and Social Science Research, 1(2), 119-

127.

Othman, A. (1999). The effect of the planning system on housing development: A

study of developers behaviour in kuala lumpur and johor bahru, malaysia

(Order No. U113391). Available from ProQuest Dissertations & Theses

Global. (301542557).

Pillaiyan, S. (2015). Macroeconomic drivers of house prices in Malaysia. Canadian

Social Science, 11(9), 119-130.

40
Stohldreier, M. T. (2012). The Determinants of House Prices in Chinese Cities.

Master Thesis of University of Zurich.

Tak Yun Joe Wong Chi Man Eddie Hui William Seabrooke, (2003),"The impact of

interest rates upon housing prices: an empirical study of Hong Kongs

market", Property Management, Vol. 21 Iss 2 pp. 153 170

Taltavull de La Paz, P. (2003). Determinants of housing prices in Spanish cities.

Journal of Property Investment & Finance, 21(2), 109-135.

Wu, Y., & Tidwell, A. (2015). Inflation-hedging properties of regional Chinese real

estate market: evidence from 35 cities in China. Applied Economics, 47(60),

6580-6598.

Y. Zheng, (2014), Effectiveness of monetary policies in affecting Chinese housing

prices. Faculty of Economics and Business, University of Amsterdam

Yuan, N., Hamori, S., & Chen, W. (2014). House Prices and Stock Prices: Evidence

from a Dynamic Heterogeneous Panel in China (No. 1428).

Zandi, G., Mahadevan, A., Supramaniam, L., Aslam, A., & Theng, L. K. (2015). The

Economic Factors Affecting Residential Property Price: The Case of Penang

Island. International Journal of Economics and Finance, 7(12), 200

41
Websites

http://www.bharian.com.my/node/192014

http://www.nst.com.my/news/2016/04/137711/mydeposit-scheme-launched-assist-

middle-income-first-time-house-buyers

http://www.simplypsychology.org/maslow.html

http://www.sinarharian.com.my/nasional/pm-lancar-projek-rumah-penjawat-awam-di-

putrajaya-1.151428

http://www.sinarharian.com.my/nasional/sebahagian-masalah-beli-rumah-selesai-

1.507519

http://www.thestar.com.my/story/?file=/2011/10/15/business/3304372&sec=business

http://www.utusan.com.my/rencana/harga-rumah-bertindaklah-segera-1.130406

42
APPENDICES

APPENDIX 1 : Final Data had been choose for analyse by annually basis with

3 Independent variable

APPENDIX 1.1 : Historical data of Malaysia Housing Price, Interest Rate,

Inflation Rate, Gross Domestic Product, Population and Stock

Price from 1980 until 2015 (36 observation).

BLR
INDEX INDEX MYR PERSON
INT INDEX
2000 = 100 2010 = 100 MILLION MILLION
%

YEAR MHPI INT INF GDP POP KLCI

1980 49.3220 8.5000 41.4000 57.6130 13.8300 366.7000

1981 53.9835 8.5000 45.5000 62.5790 14.1800 380.8100

1982 57.0399 8.5000 48.1000 69.9410 14.5400 291.4400

1983 59.1221 10.0000 49.9000 79.5500 14.9300 401.5900
1984 61.4090 11.2500 51.9000 77.5470 15.3300 303.5600

1985 61.6740 9.7500 52.0000 71.5940 15.7600 233.4600

1986 62.0240 9.2500 52.4000 79.6250 16.2200 252.4300
1987 62.5496 7.0000 52.9000 90.8610 16.7000 261.1800

1988 64.1304 6.7500 53.9000 102.5870 17.2000 357.3800

1989 65.9215 6.7500 55.4000 119.0810 17.7100 562.2800

1990 67.9440 7.2500 56.9000 135.1240 18.2100 500.8900

1991 70.8863 8.2500 59.3000 150.6820 18.7100 556.2200

1992 74.2752 9.0000 62.2000 172.1940 19.2000 643.9600

1993 76.9073 7.8000 64.4000 195.4610 19.7000 1275.3200

1994 79.7432 6.5500 66.7000 222.4730 20.2100 971.2100

1995 82.5084 7.7000 69.0000 253.7320 20.7300 995.1700

1996 85.3786 9.1800 71.4000 281.7950 21.2600 1237.9600

1997 87.6448 10.3300 73.4000 283.2430 21.8100 594.4400

1998 92.2855 8.0400 77.2000 300.7640 22.3600 586.1300

43
 BLR
INDEX INDEX MYR PERSON
INT INDEX
2000 = 100 2010 = 100 MILLION MILLION
%

YEAR MHPI INT INF GDP POP KLCI

1999 94.8000 6.7900 79.3000 356.4010 22.9000 812.3300

2000 100.4000 6.7900 80.5000 352.5790 23.4200 679.6400

2001 101.5750 6.3900 81.7000 383.2130 23.9200 696.0900

2002 104.7750 6.3900 83.2000 418.7690 24.4000 646.3200

2003 109.0250 6.0000 84.1000 474.0480 24.8700 793.9400

2004 113.3250 5.9800 85.3000 543.5780 25.3300 907.4300

2005 116.3000 6.2000 87.8000 596.7840 25.8000 899.7900

2006 119.3500 6.7200 91.0000 665.3400 26.2600 1096.2400

2007 124.5500 6.7200 92.8000 769.9490 26.7300 1445.0300

2008 129.5000 6.4800 97.8000 712.8570 27.2000 876.7500

2009 132.8000 5.5100 98.4000 821.4340 27.6600 1272.7800

2010 142.0250 6.2700 100.0000 821.4340 28.1200 1518.9100

2011 155.9750 6.5300 103.2000 911.7330 28.5700 1530.7300

2012 174.4000 6.5300 104.9000 971.2520 29.0200 1688.9500

2013 193.4500 6.5333 107.1000 1018.6140 29.4700 1866.9600

2014 209.8250 6.7865 110.5000 1106.4660 29.9000 1761.2500

2015 224.7000 6.7865 112.8000 1157.1390 30.3300 1692.5100

44
APPENDIX 1.2 : Model of Multiple Linear Regression (Least Squares)

Dependent Variable: LOG(MHPI)

Method: Least Squares
Date: 12/27/16 Time: 22:18
Sample: 1980 2015
Included observations: 36

Variable Coefficient Std. Error t-Statistic Prob.

C -1.565996 0.515713 -3.036565 0.0047

LOG(INT) 0.085542 0.120896 0.707571 0.4843
LOG(INF) 1.315105 0.123385 10.65855 0.0000
LOG(KLCI) 0.046392 0.053241 0.871355 0.3901

R-squared 0.949878 Mean dependent var 4.538716

Adjusted R-squared 0.945179 S.D. dependent var 0.404016
S.E. of regression 0.094596 Akaike info criterion -1.773962
Sum squared resid 0.286349 Schwarz criterion -1.598016
Log likelihood 35.93132 Hannan-Quinn criter. -1.712552
F-statistic 202.1456 Durbin-Watson stat 0.118924
Prob(F-statistic) 0.000000

APPENDIX 1.3 : Model of Correlation (Simple Linear Correlation)

LOG(INT) LOG(INF) LOG(KLCI)

LOG(INT) 1.000000 -0.663668 -0.586448

LOG(INF) -0.663668 1.000000 0.873003
LOG(KLCI) -0.586448 0.873003 1.000000

APPENDIX 1.4 : Model of Variance Inflation Factors

Variance Inflation Factors

Date: 12/27/16 Time: 22:20
Sample: 1980 2015
Included observations: 36

Coefficient Uncentered Centered

Variable Variance VIF VIF

C 0.265960 1069.971 NA
LOG(INT) 0.014616 236.5679 1.787838
LOG(INF) 0.015224 1126.717 4.931198
LOG(KLCI) 0.002835 498.7502 4.205631

45
APPENDIX 1.5 : Scatter Plots Relationship MHPI with INT

240

200

160

MHPI 120
INT

80

40

0
40 80 120 160 200 240

MHPI

APPENDIX 1.6 : Scatter Plots Relationship MHPI with INF

240

200

160

MHPI 120
INF

80

40

0
40 80 120 160 200 240

MHPI

46
APPENDIX 1.7 : Scatter Plots Relationship MHPI with KLCI

2,000

1,600

1,200
MHPI
KLCI
800

400

0
40 80 120 160 200 240

MHPI

47
APPENDIX 2 : Data Analysis using 5 independent variable by Annually Basis

APPENDIX 2.1 : Model of Multiple Linear Regression (Least Squares)

Dependent Variable: LOG(MHPI)

Method: Least Squares
Date: 12/27/16 Time: 22:11
Sample: 1980 2015
Included observations: 36

Variable Coefficient Std. Error t-Statistic Prob.

C -1.058780 1.776106 -0.596124 0.5556

LOG(INT) -0.074815 0.142901 -0.523543 0.6044
LOG(INF) 2.499252 0.739781 3.378368 0.0020
LOG(GDP) 0.105619 0.238329 0.443163 0.6608
LOG(POP) -1.927349 0.881648 -2.186076 0.0367
LOG(KLCI) 0.054967 0.069914 0.786203 0.4379

R-squared 0.957089 Mean dependent var 4.538716

Adjusted R-squared 0.949937 S.D. dependent var 0.404016
S.E. of regression 0.090397 Akaike info criterion -1.818195
Sum squared resid 0.245150 Schwarz criterion -1.554275
Log likelihood 38.72750 Hannan-Quinn criter. -1.726080
F-statistic 133.8248 Durbin-Watson stat 0.256697
Prob(F-statistic) 0.000000

APPENDIX 2.2 : Model of Correlation (Simple Linear Correlation)

LOG(INT) LOG(INF) LOG(GDP) LOG(POP) LOG(KLCI)

LOG(INT) 1.000000 -0.663668 -0.688931 -0.700842 -0.586448

LOG(INF) -0.663668 1.000000 0.994278 0.995250 0.873003
LOG(GDP) -0.688931 0.994278 1.000000 0.995405 0.901454
LOG(POP) -0.700842 0.995250 0.995405 1.000000 0.879276
LOG(KLCI) -0.586448 0.873003 0.901454 0.879276 1.000000

APPENDIX 2.3 : Model of Variance Inflation Factors (VIF)

Variance Inflation Factors

Date: 12/27/16 Time: 22:15
Sample: 1980 2015
Included observations: 36

Coefficient Uncentered Centered

Variable Variance VIF VIF

C 3.154553 13897.29 NA
LOG(INT) 0.020421 361.9441 2.735355
LOG(INF) 0.547276 44354.03 194.1201
LOG(GDP) 0.056801 8138.867 228.1630
LOG(POP) 0.777303 32339.62 196.4011
LOG(KLCI) 0.004888 941.7976 7.941556

48
APPENDIX 3 : Data Analysis using 4 independent variable by Annually Basis

APPENDIX 3.1 : Model of Multiple Linear Regression (Least Squares)

Dependent Variable: LOG(MHPI)

Method: Least Squares
Date: 12/17/16 Time: 09:12
Sample: 1980 2015
Included observations: 36

Variable Coefficient Std. Error t-Statistic Prob.

C 5.659022 4.874596 1.160921 0.2545

LOG(INT) -0.025133 0.030554 -0.822573 0.4170
LOG(INF) 0.949373 0.731478 1.297884 0.2039
LOG(GDP) 0.362106 0.189613 1.909712 0.0655
LOG(POP) -0.967400 0.747752 -1.293744 0.2053

R-squared 0.954407 Mean dependent var 4.538716

Adjusted R-squared 0.948524 S.D. dependent var 0.404016
S.E. of regression 0.091665 Akaike info criterion -1.813111
Sum squared resid 0.260475 Schwarz criterion -1.593178
Log likelihood 37.63600 Hannan-Quinn criter. -1.736348
F-statistic 162.2306 Durbin-Watson stat 0.155496
Prob(F-statistic) 0.000000

APPENDIX 3.2 : Model of Correlation (Simple Linear Correlation)

LOG(INT) LOG(INF) LOG(GDP) LOG(POP)

LOG(INT) 1.000000 -0.342653 -0.330144 -0.339337

LOG(INF) -0.342653 1.000000 0.995960 0.996009
LOG(GDP) -0.330144 0.995960 1.000000 0.994940
LOG(POP) -0.339337 0.996009 0.994940 1.000000

APPENDIX 3.3 : Model of Variance Inflation Factors (VIF)

Variance Inflation Factors

Date: 12/18/16 Time: 15:57
Sample: 1980 2015
Included observations: 36

Coefficient Uncentered Centered

Variable Variance VIF VIF

C 23.76168 101806.3 NA
LOG(INT) 0.000934 10.60368 1.153957
LOG(INF) 0.535060 42172.97 184.5745
LOG(GDP) 0.035953 24039.37 146.0948
LOG(POP) 0.559133 238740.6 145.3904

49
APPENDIX 4 : Data Analysis using 4 independent variable by Semi-Annually

Basis

APPENDIX 4.1 : Model of Multiple Linear Regression (Least Squares)

Dependent Variable: LOG(MHPI)

Method: Least Squares
Date: 12/17/16 Time: 16:26
Sample: 1981S1 2015S2
Included observations: 70

Variable Coefficient Std. Error t-Statistic Prob.

C 6.024076 3.714368 1.621831 0.1097

LOG(INT) -0.021292 0.021646 -0.983661 0.3289
LOG(INF) 1.888669 0.620033 3.046077 0.0033
LOG(GDP) 0.123403 0.172604 0.714948 0.4772
LOG(POP) -1.087003 0.519910 -2.090752 0.0405

R-squared 0.950430 Mean dependent var 5.250011

Adjusted R-squared 0.947379 S.D. dependent var 0.391989
S.E. of regression 0.089919 Akaike info criterion -1.911067
Sum squared resid 0.525552 Schwarz criterion -1.750460
Log likelihood 71.88735 Hannan-Quinn criter. -1.847272
F-statistic 311.5685 Durbin-Watson stat 0.086545
Prob(F-statistic) 0.000000

APPENDIX 4.2 : Model of Correlation (Simple Linear Correlation)

LOG(INT) LOG(INF) LOG(GDP) LOG(POP)

LOG(INT) 1.000000 -0.358354 -0.341730 -0.346321

LOG(INF) -0.358354 1.000000 0.997351 0.995589
LOG(GDP) -0.341730 0.997351 1.000000 0.995217
LOG(POP) -0.346321 0.995589 0.995217 1.000000

APPENDIX 4.3 : Model of Variance Inflation Factors (VIF)

Variance Inflation Factors

Date: 12/17/16 Time: 16:30
Sample: 1981S1 2015S2
Included observations: 70

Coefficient Uncentered Centered

Variable Variance VIF VIF

C 13.79653 119444.3 NA
LOG(INT) 0.000469 21.42374 1.214538
LOG(INF) 0.384441 83076.78 245.8879
LOG(GDP) 0.029792 36505.15 221.6511
LOG(POP) 0.270306 267189.3 127.9571

50
APPENDIX 5 : Data Analysis using 4 independent variable by Quarterly Basis

APPENDIX 5.1 : Model of Multiple Linear Regression (Least Squares)

Dependent Variable: LOG(MHPI)

Method: Least Squares
Date: 12/15/16 Time: 23:23
Sample: 1981Q1 2015Q4
Included observations: 140

Variable Coefficient Std. Error t-Statistic Prob.

C 5.810040 2.430295 2.390673 0.0182

LOG(INT) -0.020165 0.014835 -1.359272 0.1763
LOG(INF) 1.867125 0.423825 4.405410 0.0000
LOG(GDP) 0.124107 0.117359 1.057496 0.2922
LOG(POP) -1.063956 0.359563 -2.959030 0.0036

R-squared 0.950026 Mean dependent var 4.556826

Adjusted R-squared 0.948546 S.D. dependent var 0.390664
S.E. of regression 0.088616 Akaike info criterion -1.973939
Sum squared resid 1.060137 Schwarz criterion -1.868880
Log likelihood 143.1757 Hannan-Quinn criter. -1.931246
F-statistic 641.6066 Durbin-Watson stat 0.045749
Prob(F-statistic) 0.000000

APPENDIX 5.2 : Model of Correlation (Simple Linear Correlation)

LOG(INT) LOG(INF) LOG(GDP) LOG(POP)

LOG(INT) 1.000000 -0.355987 -0.338942 -0.344011

LOG(INF) -0.355987 1.000000 0.997219 0.995524
LOG(GDP) -0.338942 0.997219 1.000000 0.995091
LOG(POP) -0.344011 0.995524 0.995091 1.000000

APPENDIX 5.3 : Model of Variance Inflation Factors (VIF)

Variance Inflation Factors

Date: 12/16/16 Time: 00:08
Sample: 1981Q1 2015Q4
Included observations: 140

Coefficient Uncentered Centered

Variable Variance VIF VIF

C 5.906333 105297.5 NA
LOG(INT) 0.000220 10.46728 1.211818
LOG(INF) 0.179628 59324.90 236.6419
LOG(GDP) 0.013773 30832.48 211.0913
LOG(POP) 0.129285 230131.1 126.0471

51
APPENDIX 5 : Turn It In Final Result

52
FACTORS THAT INFLUENCE HOUSING PRICE IN MALAYSIA

MOHD SHAKIB BIN ISHAK

2012619382

BACHELOR OF BUSINESS ADMINISTRATION

WITH HONOURS (FINANCE)
FACULTY OF BUSINESS MANAGEMENT
UNIVERSITY TECHNOLOGY MARA
SHAH ALAM

JANUARY 2017
 PROBLEM STATEMENT
Increase In House Prices Between 5 To 15 Percent A Year
Berita Harian on 12th September 2016 had mentioned that there are several factors is
cause to have a house.
Developer are depending on the location, type of home and the current economic situation.

House Price Was 4.4 Times Higher Than The Average Salary A Year
Utusan Malaysia on 1st September 2015, a research from Khazanah Research Institute (KRI).
Factor that cause to the house price increase in the market are, growth of population.

New Workers Or Fresh Graduates To Get Their Own House Are Very
Difficult
Sinar Harian on 8th April 2016, most of them are facing financial limit for who have a family
to own their own house, due to rising of house price and cost of living.
 RESEARCH OBJECTIVE & QUESTION

To identify whether interest rate, inflation rate, gross domestic product, population
and stock price are significant or not significant in affecting housing price;

To determine the relationship between the interest rate, inflation rate, gross
domestic product, population and stock price with housing price ; and

To identify the most dominant variable that has significant influence towards the
housing price.

Which of the factors are significant or not significant in affecting housing

price? ;
What is the relationship between interest rate, inflation rate, gross
domestic product, population and stock price with housing price? ; and
Which is variable has the most significant influence towards the affecting
housing price?
 CONCEPTUAL FRAMEWORK
INDEPENDENT VARIABLE DEPENDENT VARIABLE

Interest Rate BLR

(INT)

Inflation Rate CPI
Malaysia Housing Price Index
(INF)
(MHPI)
Gross Domestic
Product
(GDP) X Revised the independent
Population variable and had choosen
(POP)
X interest rate BLR (INT),
Stock Price
inflation rate CPI (INF), and
stock price (KLCI) as an
(KLCI)
independent variables.
 LITERATURE REVIEW
The Relationship Of The Interest Rate With The Housing Price
STATE REFERENCE SIGNIFICANT RELATIONSHIP

Ong, T. S., & Chang, Y. S. 2013

Malaysia Macroeconomic Determinants of Malaysian
Housing Market
X +
Olanipekun T. Alaba, O. J. Adegoke, 2015
Lagos,
Nigeria
Effects of Interest Rate on Housing Prices in
Lagos -
Metropolis

Tak Yun Joe Wong Chi Man Eddie Hui William

Hong Seabrooke, 2003
Kong,
China
The impact of interest rates upon housing
prices: an empirical study of Hong Kong's
+
market
 LITERATURE REVIEW
The Relationship Of The Inflation Rate With The Housing Price
STATE REFERENCE SIGNIFICANT RELATIONSHIP

Wu, Y., & Tidwell, A., 2015

China
Inflation-hedging properties of regional
Chinese real estate market: evidence from 35 +
cities in China
Mahdi, S., & Masood, S. 2011
Iran
The long run relationship between interest
rates and inflation in Iran: Revisiting Fisher's +
hypothesis

Kibunyi, D. 2015
Kenya Real estate prices in Kenya : is there a
bubble?
X -
 LITERATURE REVIEW
The Relationship Of The Inflation Rate With The Housing Price
STATE REFERENCE SIGNIFICANT RELATIONSHIP

Ibrahim, M. H., Padli, J., & Baharom, A. H.

2009
Thailand Long-Run Relationships And Dynamic
Interactions Between Housing And Stock
+
Prices In Thailand
Batayneh, K. I., & Al-Malki, A. M. 2015
The Relationship between House Prices and
Saudi
Arabia Stock Prices in Saudi Arabia: An Empirical X -
Analysis

Cheng, Z., & Zheng, S. 2015

China The Change of Relationship between Real Estate
and Stock Markets in China
X -
 RESEARCH METHOD
DATA COLLECTION : DATASTREAM PROVIDE BY UITM

ANALYSIS DATA : TIME SERIES

SELECTED SAMPLE : ANNUALLY FROM 1980 2015 (36 OBSERVATION)
AND MEASUREMENT.

DATA ANALYSIS : THE ECONOMETRIC VIEWS (E-VIEW9)

 ANALYSIS AND FINDINGS
EVIEW COMMAND : LS LOG(MHPI) C LOG(INT) LOG(INF) LOG(KLCI)
 ANALYSIS AND FINDINGS
DETERMINATION OF COEFFICIENT (R2) AND F-STATISTIC

RESULTS NOTES

R-Squared :
94.99%
5.01%
1 Prob (F-statistic) :
0.000000
< 0.05
2
 ANALYSIS AND FINDINGS
THE EQUATION

MHPI = 0 + 1 INT + 2 INF + + 3 KLCI + ei

MHPI = -1.565996 + 0.085542 INT + 1.315105 INF + 0.046392 KLCI

RESULTS PRIORI SIGN

C MHPI -1.565996

3 MHPI INT 0.085542 CONFORM

MHPI INF 1.315105 CONFORM

DOES NOT
MHPI KLCI 0.046392
CONFORM
 ANALYSIS AND FINDINGS
CORRELATION COEFFICIENT (SIMPLE LINEAR CORRELATION)

INF INT -0.663668 Range Moderate

KLCI INT -0.586448 Range Moderate
KLCI INF 0.873003 Range Strong
 ANALYSIS AND FINDINGS
TEST OF SIGNIFICANT - PROBABILITY (P-VALUED METHOD)

4
 ANALYSIS AND FINDINGS

5
Since Durbin-Watson = 0.118924, stay in the positive auto correlation region. There is auto
correlation problem in the estimated model.
ANALYSIS AND FINDINGS
TEST FOR MULTICOLLINEARITY
VARIANCE INFLATION FACTORS
 IMPLICATION
the results from regression analysis explained that the result
show the inflation rate is 1 of 3 independent variables have
significant positive relationship with Malaysia housing price
Significant index. In other hand, interest rate and stock price as
And independent variables has not significant positive relationship
with Malaysia housing price index.
Relationship

identify the most dominant variables that have influence to the

Malaysia housing price index founds that inflation rate is the
most dominant that has significant between independent
variables.
Most Dominant
FACTORS THAT INFLUENCE HOUSING PRICE IN MALAYSIA

MOHD SHAKIB BIN ISHAK

2012619382

END SLIDE
THANK YOU