ENHANCING THE HOUSE PRICE INDEX MODEL IN MALAYSIA TOWARDS A MAQASID SHARIAH PERSPECTIVE: AN EMPIRICAL INVESTIGATION

Abstract

This study seeks to investigate the determinants of the existing house
price index in Malaysia. House price index (HPI) is a statistical tool
that measures changes in prices of residential houses. In Malaysia,
house price index is made available in 1997 by the National Property
Information Center (NAPIC). Having reviewed the current model of
MHPI, it is currently found that this index is constructed based on
the demand driven variables. Previous literature has discussed that
the construction of house price index should also include the
macroeconomic factors (income levels, interest rates, labor market)
and supply factors. Hence, this study aims to offer evidence on the
determinants of the HPI. The Autoregressive Distributed Lag model
(ARDL) is adopted to explore the short and long-run dynamics
between the variables. The data used in this study consists of
quarterly data ranging from 2008 to 2015. The results suggest that
supply and institutional factors are significant in determining HPI.
Hence, we propose a new enhanced house price index which is
inclusive of new demand and supply variables. This paper may
provide evidences for the involved parties to have some policy
ramifications to further monitor and take appropriate measures to
control the property prices.