Household Income and Housing Price Movements in Malaysia: Reassessing the Role of Interest Rates and Inflation

Abstract

This study examines the influence of macroeconomic factors on housing prices in Malaysia, with particular emphasis on household income, interest rates, and inflation. Housing affordability has become an increasingly important socioeconomic concern due to the persistent increase in residential property prices relative to household income growth. Using annual time-series data from 2002 to 2022 obtained from the National Property Information Centre (NAPIC), Department of Statistics Malaysia (DOSM), and Bank Negara Malaysia (BNM), this study applies Ordinary Least Squares (OLS) regression analysis to evaluate the relationship between selected macroeconomic variables and housing prices in Malaysia. The findings indicate that household income has a significant positive influence on housing prices, suggesting that stronger purchasing power contributes to higher housing demand and property price appreciation. In contrast, interest rates and inflation were found to have statistically insignificant relationships with housing prices during the study period. These findings highlight the dominant role of income growth in shaping housing market dynamics in Malaysia. The study contributes to the existing literature by providing updated empirical evidence on the macroeconomic determinants of housing prices within the Malaysian context. The findings may assist policymakers, financial institutions, and housing developers in formulating more effective strategies to improve housing affordability and support long-term property market stability.