Empirical forecasting of housing prices in Malaysia using ARIMA

AbdulLateef Olanrewaju

International Journal of Housing Markets and Analysis, 2025, vol. 19, issue 3, 747-770

Abstract: PurposeHousing provision is a fundamental driver of national development and economic prosperity. However, housing affordability remains a critical problem worldwide, affecting countries regardless of their level of development, whether developed, developing or underdeveloped. The housing price index (HPI) measures trends in residential property prices and provides valuable insights into market dynamics. This study aims to model and forecast the HPI in Malaysia. Accurate HPI predictions are essential for informing policy decisions, guiding investment strategies and ensuring sustainable housing market development.Design/methodology/approachThe autoregressive integrated moving average (ARIMA) model was used to analyse historical housing price data for modelling and forecasting housing prices for different types. The accuracy and reliability of the models and forecasts were assessed using key statistical metrics, including variance (s²), log-likelihood, Akaike information criterion, corrected Akaike information criterion and Bayesian information criterion.FindingsThe findings demonstrate that the ARIMA model improves accuracy in capturing seasonal and trend components in the Malaysian housing market, offering actionable insights for strategic decision-making. In addition, this research presents point and annual changes across different housing types that seek to offer a detailed view of price movements. By providing a reliable five-year forecast of the HPI, this study enables more informed decision-making in housing policy, investment strategy and financial planning.Practical implicationsPolicymakers can use these insights to stabilise housing markets, whereas investors and developers can anticipate market movements for better capital allocation. Homeowners and prospective buyers will benefit from understanding future price trends, allowing for more strategic decisions regarding property purchases or sales.Originality/valueThe originality of the study lies in its ability to empirically forecast housing prices for various types of housing for the next five years. This provides valuable guidance for housing-related decisions. This research contributes to the growing literature on real estate forecasting in emerging markets and underscores the relevance of advanced time series models in navigating the complexities of dynamic housing markets.

Keywords: Population; Government policy; Construction sector; Residential property; Financial investment; Homebuyers (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eme:ijhmap:ijhma-12-2024-0199

DOI: 10.1108/IJHMA-12-2024-0199

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