the determinants of terrace housing rates in malaysia
TRANSCRIPT
THE DETERMINANTS
OF TERRACE
HOUSING RATES IN
MALAYSIA1st Presenter: ASMA LIYANA JA’AFAR
2014838744
2nd Presenter: SYAHIRAH AMIRA MD. DIN
2014223624
3rd Presenter: AMIRUL NIZAM MOKHTAR
2014604954
OUTLINES 1.0
INTRODUCTION
Problem Statements
RQ & RO
Significance of Study
Limitation of Study
Scopes of Study
Definition of Terms
LITERATURE
METHODOLOGY
DISCUSSION
INTRODUCTION
Average housing prices in Malaysia increases up to 20% per
year after year 2007 (Tze San Ong,2013).
Terrace housing industry is very salient beneficial to Malaysia
especially in the process of becoming a developed country
(Jarad, 2010).
Government identifies that terrace housing is a basic need for
every citizen.
Housing scheme (PR1MA).
Malaysia’s Property Market
Slowing
Global Property Guide. (2014, June 15). Malaysia's PropertyMarket Slowing. Retrieved from Global Property Guide:http://www.globalpropertyguide.com/Asia/malaysia/Price-History
Malaysia’s nationwide houseprices rose to RM276,668
Nominal (red line): Excludesmacroeconomic factors
Real (blue line): Includesmacroeconomic factors
PROBLEM STATEMENTS
Rapid economic development has resulted in an increasing
demand in Malaysia.
The price of house increasing dramatically, which has affected
the decision making for house buyers.
This is a worrying trend for lenders and brings out a big issue. (Tze
San Ong, 2013)
Been a major problem for Malaysian middle-class incomers.
Average monthly household income increase to RM5,900 from
RM5,000 in 2012. (Malay Mail Online, 2014)
Median household income for 2014 is RM4,258 compared to
2012, RM3,626. (Malay Mail Online, 2014)
Affordability of Middle-Income
Earner & Average House Prices
Dr W. N. Azriyati, A. P. (2009). Affordability Compared to Mean Housing Price For Current Middle Income Home Owners. A Study on Affordable Housing Within The Middle Income Households in The Major Cities and Towns in Malaysia, 15.
Aidila, C. (2011, May 12). Rising House Prices Create Homeless Generation. Retrieved from Malaysia Kini: www.malaysiakini.com/news/163963
RESEARCH QUESTIONS &
RESEARCH OBJECTIVES
RESEARCH QUESTIONS
• Does terrace housing rates in
Malaysia increase when Foreign
Direct Investment (FDI) increases?
• Does increase in inflation rate
influenced the increased of
terrace housing rates in
Malaysia?
• When population growth rates
increase, does terrace housing
rate in Malaysia increases?
RESEARCH OBJECTIVES
• To identify the relationship
between Foreign Direct
Investment (FDI) with terrace
housing rates in Malaysia.
• To examine the relationship
between inflation rate with
terrace housing rates in Malaysia.
• To study the relationship between
population growth rates with
terrace housing rates in Malaysia.
SIGNIFICANCE OF STUDY
Researchers & Academicians
Government policy
Banking sector
LIMITATION OF STUDY
Availability of data
Data is available but the components are
comprehensive. Some data collected were not properly
in quarterly basis.
SCOPE OF STUDY
Identify the determinants of housing rates in Malaysia
using four theories.
Selected macroeconomic variables.
Secondary data (BNM, MIDA, DOSM & World Bank).
Quarterly basis (30 data).
Period Q3 2006 – Q4 2013.
DEFINITION OF TERMS
• Labour in various specialty in construction, material costs, and investment which can influence the property rates.
Foreign Direct Investment (FDI)
• Immediate increase in price of such “store of value” real assets that directly influence the housing rate.
Inflation rate
• Indicates that the demand for the housing is high when the population is increases.
Population growth rate
OUTLINES 2.0
INTRODUCTION
LITERATURE
Literature Review
Underpinning Theories
Research Framework
Hypothesis Statement
METHODOLOGY
DISCUSSION
LITERATURE
REVIEW
FOREIGN DIRECT INVESTMENT
(FDI) When the developer runs FDI, it will affect the cost incurred to be
increased and this will lead to upturn of property price which will
be a major problem to the purchaser (MacDonald, 2010).
Another studies conducted by David (2010) found something
more which stated that when the developer used foreign
investment on workers at low-cost property building, it is not really
appropriate as trade barriers for investment exist as uncertainty.
These correlation drawback between FDI and workers which
increase the housing price is called the shadow house price.
Wang (2013), in the other hand found the extra finding of the
impact of FDI on house price was greater than that of house price
on FDI.
INFLATION RATE An increase in the expected rate of inflation causes an immediate
increased in the relative price of such "store of value" real assets
(Felstein, 1983). So, when cost of building increase, of course the
developer will tend to charge higher price for their terrace housing
property to the purchaser. The research done by Piazzesi and
Schneider (2009) made an extension from the previous study which
commended that higher the expected inflation tends to lead to an
increase in the price-dividend ration on houses. Another finding
from McBride (2013) supported this variable which indicated that
when inflation is high, the cost of buying a home increases as
lenders raise interest rates to curb inflation. As the dollar loses some
of its purchasing power with a rise in inflation, any savings have to
put aside for a down payment loses value as well.
POPULATION GROWTH RATE
According to Ley (2010) and Ong (2013), agreed that housing prices are
related to the population. A study done stated that an increase in the
population in Malaysia increases the housing demand and therefore
increases the housing price. If there is a greater demand than a supply for
housing, it will affect the housing price too. When there are fewer houses in
the market, people are willing to spend more money to buy a house. This will
cause the housing price to increase. Another study conducted by The
finding by Swann (2013) go beyond the previous research by indicated that
the overall direction of population growth and housing increase is however
jointly upward, and population remains a major determinant of housing
requirement. This is strengthen by Pettinger (2014), emphasized that if supply
of housing fails to meet the growth in the number of households, it will
increase the cost of living, house prices and the cost of renting. This shortfall
is causing an increase in long-term house prices, reducing affordability.
UNDERPINNING THEORIES Demand and Supply Theory (Marshall, 1890)
This theory is used to determine the price of market product or services .
Quantity demanded is the amount of the good that buyers are willing to
purchase and quantity supply is the amount that sellers are willing to sell in
the market.
Maslow Hierarchy of Needs (Maslow, 1943)
This theory represented the human’s physiological needs as the base of
a triangle to show that meeting these needs are the most important in our
lives; shelter or house is one of the requirements for addressing the
physiological needs.
Quantity Theory of Money (Fisher, 1867)
The quantity theory of money states that there is a direct relationship
between the quantity of money in an economy and the level of prices of
goods and services sold.
FDI Macro-Micro Level Theory (Hymer, 1976)
The macro-level FDI theories give the macroeconomic factors that
determine the FDI and micro-level theories discuss the motivation of FDI
associated with the firm level.
RESEARCH FRAMEWORK
Foreign Direct Investment
(FDI)
Inflation Rate
Population Growth Rate
Terrace Housing
Rate
INDEPENDENT VARIABLES DEPENDENT VARIABLE
HYPOTHESIS STATEMENTS
Foreign Direct Investment (FDI)
H1: If FDI is high, then the terrace housing rates in Malaysia will
increase.
Inflation rate
H1: If inflation rate is high, then the terrace housing rates in
Malaysia will increase.
Population growth rate
H1: If population growth rate is high, then the terrace housing
rates in Malaysia will increase.
OUTLINES 3.0 INTRODUCTION
LITERATURE
METHODOLOGY
Research design
Data collection method
Regression Flows
Unit Root Test
Normality Test
Auto-Correlation Test
Multicollinearity Test
Correlation Test
Multiple Regression – Findings
DISCUSSION
RESEARCH DESIGN
Purpose of study – Causal study/Hypothesis testing
Type of investigation - Correlation
Study setting – Non-contrived
Time horizon - Longitudinal
Unit of analysis - Macro economy
DATA COLLECTION METHOD
Secondary data
Retrieved from Bank Negara Malaysia,
Department of Statistics Malaysia, MIDA & World
Bank
Using 30 data start from Quarter 3, 2006 until
Quarter 4, 2013
Journals retrieved from Emerald, UiTM Ez Access
and Google Scholar
Regression Flows
Secondary Data Collected
Unit Root Test
Multiple Regression
Analysis• F-test
• R-squared
• Significant Level
Correlation Test
Multicollinearity Test
Normality Test
Auto-Correlation TestControlling
Variables
Unit Root Test
A condition with a constant mean, constant variance,
and constant auto-covariances for each given lag.
Variables5% Significant at
Level (intercept)
5% Significant at
1st Difference
(intercept)
Housing Price
Indicator (Y)0.7609 0.0000
Foreign Direct
Investment (X1)0.3212 0.0003
Inflation Rate
(X2)0.4133 0.0128
Population
Growth Rate
(X3)
0.3731 0.0001
The data has no unit root
Normality Test Determine whether error term is normally distributed
The error term is normally distributed > 5%
Auto-Correlation Test To investigate whether there is a serial independence
for the error term
Breusch-Godfrey Serial Correlation LM Test:
F-statistic 3.986378 Prob. F(2,23) 0.0326
Obs*R-
squared7.464945
Prob. Chi-
Square(2)0.0239
Error term is serially independent > 5%
Multicollinearity Test
Whether independent variables are highly correlated
with each other or not
Independent VariablesCentered Variation
Inflation Factor
Foreign Direct Investment
(X1)1.224135
Inflation Rate (X2) 1.233808
Population Growth Rate
(X3)1.051758
There is no multicollinearity problem < 10 value
Correlation Test
If there exists any linear relationship or correlation of
the dependent variable with any of the independent
variable
There is a correlation < 5%
P-Value of T- Statistic
Foreign
Direct
Investment
(X1)
Inflation
Rate (X2)
Population
Growth
Rate (X3)
Housing
Price
Indicator
(Y)
0.420155 0.020211 0.733684
Multiple Regression - FindingsVariable Coefficient Std. Error t-Statistic Prob.
C 31.39395 4.859412 6.460443 0.0000
Foreign Direct
Investment0.839862 0.285685 2.939816 0.0070
Inflation Rate -0.186718 0.316382 -0.590168 0.5604
Population Growth
Rate-15.95356 2.784843 -5.728710 0.0000
R-squared 0.661821
Prob. F-statistic 0.000004
Most Significant : Population Growth Rate
Independent Variables
Hypothesis FindingsRelationship with
DV
Foreign Direct Investment
If FDI is high, then the terracehousing rates in Malaysia willincrease
Significant at 5%
Confidencelevel
Directly Proportional
Inflation Rate
If inflation rate is high, thenthe terrace housing rates inMalaysia will increase
Not Significant at 5%
Confidencelevel
-
Population Growth Rate
If population growth rate ishigh, then the terracehousing rates in Malaysia willincrease
Significant at 5%
Confidencelevel
Inversely Related
OUTLINES 4.0
INTRODUCTION
LITERATURE
METHODOLOGY
DISCUSSION
DISCUSSION
For future research undertakings, we recommend that the
researcher:
To use panel data, varies in term of geographical area (etc
urban/rural).
To use data period on yearly basis (widen the spurious
regression).
Using currency value instead of rate of percentage for
dependent variable.