Foreign Investment and Housing Market Stability in Developing Economies: Empirical Evidence from Malaysia
Abstract
:1. Introduction
2. Theoretical Background
3. Literature Reviews
3.1. International Evidence
3.2. Evidence from Malaysia
4. Methodology
4.1. Empirical Model
- PPjt = Property price in industrial area j at time t
- PDSjt = Sub-sale of property in industrial area j at time t
- PDOjt = Property overhang in industrial area j at time t
- FDIjt = Foreign direct investment in industrial area j at time t
- DPolicyt = Housing policy at time t (DPolicy = 1 if after affordable housing policy
- implementation; DPolicy = 0 if before affordable housing policy implementation)
- GDPjt = Gross domestic product at state level of industrial area j at time t
- INFt = Inflation rate at time t
- εt = error terms
4.2. Selection of Macroeconomics Variables
4.3. Data Collection
5. Results and Findings
5.1. Trends of Kulim Hi-Tech Park (KHTP) and Batu Kawan Industrial Park (BKIP) Property Market
5.2. Relationship Between Property Price, Foreign Investment, and Macroeconomic Variables
6. Discussions and Policy Recommendations
- First, attracting more FDI to Malaysia is imperative. Increased FDI introduces new businesses and expands existing ones, generating more job opportunities for local workers and the potential for higher wages and leading to improved income levels for local workers. As employment and incomes increase, the demand for property also rises.
- Second, balancing the supply of affordable housing is imperative to prevent housing market imbalances through affordable housing policy. To increase the supply of affordable housing and manage rising property prices, several strategies and mechanisms can be implemented, including offering tax incentives to developers who build affordable housing and converting unsold or overhanging properties into affordable housing.
- Third, in order to address the need for affordable housing programs effectively, it is essential to strengthen affordable housing policies and implement robust monitoring and evaluation frameworks. These mechanisms can help mitigate the upward pressure on housing prices caused by industrial growth and ensure that rising demand does not compromise housing accessibility for local residents.
7. Conclusions and Future Research Directions
Author Contributions
Funding
Institutional Review Board Statement
Informed Consent Statement
Data Availability Statement
Acknowledgments
Conflicts of Interest
Abbreviations
BKIP | Batu Kawan Industrial Park |
FDI | Foreign direct investment |
GDP | Gross domestic product |
KHTP | Kulim Hi-Tech Park |
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Variables | Sources | Measurement Units |
---|---|---|
Property price variables | ||
House price | National Property Information Centre (NAPIC) Malaysia | Ringgit Malaysia (RM) |
House price index | National Property Information Centre (NAPIC) Malaysia | Index |
Property demand variables | ||
Overhang | National Property Information Centre (NAPIC) Malaysia | Number of units |
Sub-sale | National Property Information Centre (NAPIC) Malaysia | Number of units |
Foreign direct investment | Malaysian Investment Development Authority (MIDA) | Millions (RM) |
Macroeconomic variables | ||
Housing policy | Ministry of Housing and Local Government Malaysia | 1: housing policy 0: no housing policy |
Gross domestic product | Department of Statistics Malaysia, World Bank Open Data | Billions (RM) |
Inflation | Department of Statistics Malaysia, World Bank Open Data | Consumer price index |
Respondent (R) | Panel Expert/Agencies |
---|---|
R1 | Director of Malaysian Investment Development Authority (MIDA) |
R2, R3 | Director and Representatives of Valuation and Property Services Department (JPPH), Kulim Branch, Kedah, Malaysia |
R4, R5 | Director and Representatives of Valuation and Property Services Department (JPPH), Seberang Jaya Branch, Pulau Pinang, Malaysia |
R6 | Manager of Penang Development Corporation, Malaysia |
R7 | Director of Oriental Kedah (Property Developer) |
Variables | Kulim Hi-Tech Park | Batu Kawan Industrial Park (BKIP) | ||||
---|---|---|---|---|---|---|
N | Mean | Std. Dev | N | Mean | Std. Dev | |
Property price variables | ||||||
House price (single-story) | 23 | 133,260.9 | 64,628.46 | 23 | 146,695.7 | 80,444.47 |
House price (double-story) | 23 | 194,260.9 | 91,246.03 | 23 | 216,652.2 | 118,606.2 |
House Price Index | 23 | 116.4174 | 43.62392 | 23 | 118.3739 | 46.9084 |
Property demand variables | ||||||
Overhang (single-story) | 23 | 226.2609 | 132.2942 | 23 | 17.13043 | 22.77619 |
Overhang (double-story) | 23 | 234.2174 | 190.4189 | 23 | 169.087 | 114.612 |
Sub-sale (single-story) | 23 | 810.2609 | 252.6385 | 23 | 587.1304 | 164.9712 |
Sub-sale (double-story) | 23 | 255.2609 | 112.0889 | 23 | 539.6087 | 216.0669 |
Foreign direct investment | 23 | 4434.729 | 11,287.49 | 23 | 983.6471 | 1575.446 |
Macroeconomic variables | ||||||
Housing policy | 23 | 1 | 0 | 23 | 1 | 0 |
Gross domestic product | 23 | 28.92269 | 14.03647 | 23 | 61.91824 | 25.28303 |
Inflation | 23 | 2.084602 | 1.356198 | 23 | 2.084602 | 1.356198 |
Models | Kulim Hi-Tech Park | Batu Kawan Industrial Park | ||
---|---|---|---|---|
Probability F-Test | Probability Chi-Square | Probability F-Test | Probability Chi-Square | |
Model 1 (single-story and house price) | 0.8253 | 0.7396 0.9839 | 0.2471 | 0.2247 0.9175 |
Model 2 (single-story and house price index) | 0.5224 | 0.4453 0.8863 | 0.8180 | 0.7309 0.9755 |
Model 3 (double-story and house price) | 0.3644 | 0.3114 0.6440 | 0.7251 | 0.6280 0.9928 |
Model 4 (double-story and house price index) | 0.2882 | 0.2546 0.9404 | 0.8177 | 0.7306 0.9851 |
Models | Kulim Hi-Tech Park | Batu Kawan Industrial Park |
---|---|---|
DW Test | DW Test | |
Model 1 (single-story and house prices) | 2.0 | 2.0 |
Model 2 (single-story and house price index) | 2.0 | 2.0 |
Model 3 (double-story and house prices) | 2.14 | 2.14 |
Model 4 (double-story and house price index) | 2.14 | 2.13 |
(a) | ||||
Variables | Model 1 (single-story and house price) | Model 2 (single-story and house price index) | Model 3 (double-story and house price) | Model 4 (double-story and house price index) |
p-value | p-value | p-value | p-value | |
Property demand | 0.0776 | 0.0655 | 0.0647 | 0.0915 |
Foreign direct investment | 0.0930 | 0.0583 | 0.0792 | 0.0571 |
Housing policy | 0.0894 | 0.0918 | 0.0932 | 0.1005 |
Gross domestic product | 0.0588 | 0.0646 | 0.0552 | 0.0562 |
Inflation | 0.1406 | 0.1454 | 0.1717 | 0.1526 |
(b) | ||||
Variables | Model 1 (single-story and house price) | Model 2 (single-story and house price index) | Model 3 (double-story and house price) | Model 4 (double-story and house price index) |
p-value | p-value | p-value | p-value | |
Property demand | 0.4293 | 0.6662 | 0.6790 | 0.2174 |
Foreign direct investment | 0.1443 | 0.2883 | 0.2926 | 0.1284 |
Housing policy | 0.1103 | 0.1081 | 0.0587 | 0.0526 |
Gross domestic product | 0.0570 | 0.5683 | 0.7024 | 0.5789 |
Inflation | 0.0568 | 0.2913 | 0.0075 | 0.2139 |
Variables | Model 1 (Single-Story) Kulim Hi-Tech Park | Model 2 (Double-Story) Kulim Hi-Tech Park | Model 3 (Single-Story) Kulim Hi-Tech Park | Model 4 (Double-Story) Kulim Hi-Tech Park | Model 5 (Single-Story) Batu Kawan Industrial Park | Model 6 (Double-Story) Batu Kawan Industrial Park | Model 7 (Single-Story) Batu Kawan Industrial Park | Model 8 (Double-Story) Batu Kawan Industrial Park |
Constant | −54,390.77 * (29,368.63) | −20,340.15 (26,498.41) | 65,978.82 * (35,175.41) | 26,595.23 (35,555.29) | −17,275.75 (41,066.99) | −64,011.70 ** (30,735.38) | −57,436.14 *** (21,656.16) | −75,320.20 *** 28,629.14 |
Property demand variables | ||||||||
Sub-sale | 53.56419 ** (21.16791) | 156.1354 ** (74.43204) | −37.21230 (37.37288) | −22.08605 (40.90116) | ||||
Overhang | −123.9943 ** (52.09602) | −49.51232 (62.16881) | 54.74495 * (22.8983) | 4.784675 (56.24647) | ||||
Foreign direct investment | 1.33 × 10−06 ** (5.19 × 10−07) | 1.20 × 10−06 * (6.12 × 10−07) | 1.32 × 10−06 ** (5.27 × 10−07) | 1.45 × 10−06 ** (6.70 × 10−07) | 1.26 × 10−05 *** (4.57 × 10−06) | 1.71 × 10−05 ** (6.64 × 10−06) | 1.17 × 10−05 ** (4.63 × 10−06) | 1.61 × 10−05 ** (6.47 × 10−06) |
Macroeconomic variables | ||||||||
Housing policy | −60,315.24 ** (27,046.81) | −107,511.0 *** (29,943.54) | −50,757.47 * (27,114.76) | −103,737.3 *** (34,000.35) | −42,779.91 ** (20,106.94) | −59,752.63 ** (28,219.74) | −54,754.29 *** (17,059.85) | −68,113.37 *** (23,669.91) |
Gross domestic product | 0.006236 *** (0.001066) | 0.008632 *** (0.001212) | 0.004406 *** (0.001208) | 0.008888 *** (0.001376) | 0.003465 *** (0.000544) | 0.005412 *** (0.000563) | 0.003895 *** (0.000424) | 0.005510 *** (0.000544) |
Inflation | −4794.821 3997.993 | −5202.488 (4680.502) | −5054.580 (4056.811) | −8474.621 * (4957.182) | −2713.414 (3291.827) | −3091.621 (4865.622) | −3582.702 (3282.588) | −4051.056 (4561.714) |
Variables | Model 9 (Single-Story) Kulim Hi-Tech Park | Model 10 (Double-Story) Kulim Hi-Tech Park | Model 11 (Single-Story) Kulim Hi-Tech Park | Model 12 (Double-Story) Kulim Hi-Tech Park | Model 13 (Single-Story) Batu Kawan Industrial Park | Model 14 (Double-Story) Batu Kawan Industrial Park | Model 15 (Single-Story) Batu Kawan Industrial Park | Model 16 (Double-Story) Batu Kawan Industrial Park |
Constant | 21.55238 ** (9.638073) | 21.36952 *** (6.943556) | 29.35637 ** (11.80011) | 36.31047 *** (9.428229) | 23.48099 (15.52854) | 21.49871 *** (8.198932) | 23.05420 *** (7.901855) | 18.33813 ** (7.222788) |
Property demand variables | ||||||||
Sub-sale | 0.007885 (0.006947) | 0.045774 ** (0.019504) | −0.002846 (0.014132) | −0.001878 (0.010911) | ||||
Overhang | 1.02 × 10−5 (0.017476) | −0.017488 (0.016485) | −0.043390 (0.081696) | −0.024235 * (0.010428) | ||||
Foreign direct investment | 5.26 × 10−10 *** (1.70 × 10−10) | 4.11 × 10−10 ** (1.60 × 10−10) | 5.26 × 10−10 *** (1.77 × 10−10) | 4.75 × 10−10 *** (1.78 × 10−10) | 3.22 × 10−09 * (1.73 × 10−09) | 3.20 × 10−09 * (1.77 × 10−09) | 3.23 × 10−09 * (1.69 × 10−09) | 2.31 × 10−09 * (1.56 × 10−09) |
Macroeconomic variables | ||||||||
Housing policy | −22.69059 ** (8.876110) | −20.30096 *** (7.846308) | −20.97060 ** (9.096049) | −18.83093 ** (9.015903) | 31.36316 *** (7.602982) | 31.21234 *** (7.527864) | 30.87385 *** (6.224760) | 30.29267 *** 5.548307 |
Gross domestic product | 3.71 × 10−06 *** (3.50 × 10−07) | 3.46 × 10−06 *** (3.18 × 10−07) | 3.64 × 10−06 *** (4.05 × 10−07) | 3.52 × 10−06 *** (3.65 × 10−07) | 1.43 × 10−06 *** (2.06 × 10−07) | 1.45 × 10−06 *** (1.50 × 10−07) | 1.43 × 10−06 *** (1.55 × 10−07) | 1.46 × 10−06 *** (1.28 × 10−07) |
Inflation | −1.653952 (1.312045) | −0.947797 (1.226463) | −1.816187 (1.360917) | −1.925704 (1.314500) | 0.414404 (1.244729) | 0.434356 (1.297947) | 0.387523 (1.197744) | 0.751253 (1.089275) |
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Ismail, N.H.; Karim, M.Z.A.; Bao, H.X.H. Foreign Investment and Housing Market Stability in Developing Economies: Empirical Evidence from Malaysia. J. Risk Financial Manag. 2025, 18, 187. https://doi.org/10.3390/jrfm18040187
Ismail NH, Karim MZA, Bao HXH. Foreign Investment and Housing Market Stability in Developing Economies: Empirical Evidence from Malaysia. Journal of Risk and Financial Management. 2025; 18(4):187. https://doi.org/10.3390/jrfm18040187
Chicago/Turabian StyleIsmail, Nur Hafizah, Mohd Zaini Abd Karim, and Helen X. H. Bao. 2025. "Foreign Investment and Housing Market Stability in Developing Economies: Empirical Evidence from Malaysia" Journal of Risk and Financial Management 18, no. 4: 187. https://doi.org/10.3390/jrfm18040187
APA StyleIsmail, N. H., Karim, M. Z. A., & Bao, H. X. H. (2025). Foreign Investment and Housing Market Stability in Developing Economies: Empirical Evidence from Malaysia. Journal of Risk and Financial Management, 18(4), 187. https://doi.org/10.3390/jrfm18040187