Examining key macroeconomic determinants of serviced apartments price index: the case of Kuala Lumpur, Malaysia

Chin Tiong Cheng and Gabriel Hoh Teck Ling

International Journal of Housing Markets and Analysis, 2023, vol. 17, issue 3, 795-813

Abstract: Purpose - Increasing overhang of serviced apartments poses a serious concern to the national property market. This study aims to examine the impacts of macroeconomic determinants, namely, gross domestic product (GDP), consumer confidence index (CF), existing stocks (ES), incoming supply (IS) and completed project (CP) on serviced apartment price changes. Design/methodology/approach - To achieve more accurate, quality price changes, a serviced apartment price index (SAPI) was constructed through a self-developed hedonic price index model. This study has collected 1,567 transaction data in Kuala Lumpur, covering 2009Q1–2018Q4 for price index construction and data were analysed using the vector autoregressive model, the vector error correction model and the fully modified ordinary least squares (OLS) (FMOLS). Findings - Results of the regression model show that only GDP, ES and IS were significantly associated with SAPI, with anR2of 0.7, where both ES and IS have inverse relationships with SAPI. More precisely, it is predicted that the price of serviced apartments will be reduced by 0.56% and 0.21% for every 1% increase in ES and IS, respectively. Practical implications - Therefore, government monitoring of serviced apartments’ future supply is crucial by enforcing land use-planning regulations via stricter development approval of serviced apartments to safeguard and achieve more stable property prices. Originality/value - By adopting an innovative approach to estimating the response of price change to supply and demand in a situation where there is no price indicator for serviced apartments, the study addresses the knowledge gap, especially in terms of understanding what are the key determinants of, and to what extent they influence, the SAPI.

Keywords: Serviced apartments; Price index; Longitudinal study; Property overhang; Kuala Lumpur; Malaysia; Macroeconomic factors (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:eme:ijhmap:ijhma-10-2022-0162

DOI: 10.1108/IJHMA-10-2022-0162

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