Residential Property Liberalization And Housing Affordability In Malaysia
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Date
2015-06
Authors
ZULL KEPILI, EMA IZATI
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Abstract
On April 2009, Malaysia liberalized its property sector to strengthen the country’s economy by relaxing the Foreign Investment Committee (FIC) guidelines. Its approval for property transaction valued below RM20 million was terminated. This was regarded by foreigners as a bold act of liberalization that is expected to facilitate greater property transactions and investments. From the liberalization, Malaysia is expected to boost its FDI further. However, things became tangy at the same time as house price soared, posing the question ‘does liberalization affects housing affordability?’ Variables liberalization, house supply, and amount of loan distributed are investigated against the house price; in which include terrace price, semi-D, detached and hi-rise. In addressing the FDI model, interest rate, social factors and market size are considered. Through these channels we seek to analyze in which between FDI and house price, does Malaysian really benefits from the influx of investment or actually suffers from the rising of the house price. Time-series quarterly data spanned from 1999 to 2012 were analyzed using the Johansen Cointegration Test and VECM. This study found that liberalization affects house price positively in all models, baseline, orthogonal RGDC and RLIB. Liberalization also affects all types of house price positively. Among house types, liberalization affects terrace the most and hi-rise the least indicating the impact is severe on terrace potential owner whose income is in the range of low to middle income. Does liberalization affects FDI? Yes. The impact of liberalization on housing affordability through house price channel is more severe that its impact on affordability through FDI channel, indicating that the variable has cost Malaysian affordability more the benefit they received from FDI inflows.
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Keywords
Residential Property Liberalization And Housing , Affordability In Malaysia