BDB1374 Microeconomics: Analysis of Malaysia's Housing Market Dynamics

This report examines the various demand and supply factors that influence housing prices in Malaysia, where house price increases have outstripped income levels since 2012. Demand-side factors discussed include interest rates, economic growth, demographics, location, and consumer income, detailing how each impacts housing demand and prices. Supply-side factors analyzed are producer expectations, taxes and subsidies, input prices, future trends in the construction sector, and the number of sellers. The report concludes that understanding these factors is crucial for analyzing the dynamics of the Malaysian housing market. Desklib offers a platform where students can access this and other solved assignments to aid their studies.

Running head: ECONOMICS
Economics
Name of the student
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Author note

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Table of Contents
Housing market of Malaysia......................................................................................................3
Introduction............................................................................................................................3
Interest rates...........................................................................................................................3
Growth of the economy..........................................................................................................4
Demographics........................................................................................................................4
Location..................................................................................................................................4
Income of the consumers.......................................................................................................5
Expectation of producer.........................................................................................................5
Tax and subsidies...................................................................................................................5
Input prices.............................................................................................................................6
Future trend in the housing market in Malaysia.....................................................................6
Numbers of sellers..................................................................................................................6
Conclusion..............................................................................................................................7
Reference list..........................................................................................................................8

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Housing market of Malaysia
Introduction
There are various demand and supply factors, which are known to affect the housing
prices of Malaysia. The past couple of years have experienced a large fluctuation in the
demand and supply of the housing market in Malaysia. The Malaysian economy is known to
be the third largest in the Southeast Asia. It is also the 38th largest economy in the world. The
labour productivity of Malaysia is also known to be known to higher than the neighbouring
countries. The citizens of Malaysia are known to lead an affluent lifestyle compared to the
neighbouring countries. The reason behind this is the low national income tax, low cost of the
local food, transport fuel and other essential households. In spite of all these, there have been
various fluctuations in the housing markets of Malaysia. There are various supply and
demand factors that have known to affect the housing prices, which are described below.
The demand factors that are known to affect the housing prices of Malaysia are
Interest rates
When there will be rise in the rate of interest, the mortgage lenders are known to
increase the price. As the rate of interest is higher in nature, it will be making home buying
less attractive in nature. As the majority of the home owners in Malaysia will be becoming
variable mortgages, a small change in the rate of interest rate will be having a huge impact on
the affordability of buying the house. Therefore, when the interest rate will be rising, people
will be buying less house and therefore the demand for the houses in Malaysia will decrease.
For this reason, the price will be decreasing as a result of rise in the interest rate.

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Growth of the economy
The growth of the economy also affects the demand for housing in Malaysia. When
the economy is doing well as the gross domestic product will be increasing, people will have
more money in hand and therefore will demand more house. In case of the economic boom,
the demand for houses will be growing rapidly which also states that houses will be income
elastic in nature.
Demographics
Demographics are those data, which will be describing the composition of the
population, gender, income, migration and the growth of the population. These factors will be
affecting the real estate price. Large shifts in the demographics of the nation will be having
an impact on the trend of real estate. Baby boomers and the adults who are at the retirement
age will be affecting the demand of the houses and therefore will be affecting the prices of
the housing market. The increase in the older population will lead to higher demand of the
houses and this will lead to rise in prices.
Location
The demand of the house will rise and therefore the prices will be rising when homes
are built on the popular location. The majority of the people will want to live in places close
to where they work, malls, shops and near to those places where they can enjoy themselves.
These will naturally lead to high demand for the property prices. When the houses will be
located at the good location, the demand will automatically rise and therefore the price will
also be rising.

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Income of the consumers
Another factor that will be affecting the demand of the housing prices of Malaysia is
the income of the buyers. When the consumers will be rich and will be having more money,
the demand for houses will automatically rise. Therefore, a rise in the income of the
consumers will lead to increase in demand for the houses in Malaysia. The increase in
demand will therefore lead to rise in price.
The supply side factors that will be affecting the housing market of Malaysia are:
Expectation of producer
The expectation of the Malaysian producer is one of the factors that will be affecting
the supply in the housing market. When the producers expect that the price of houses will be
rising in the future then at that time, they will not supply the houses. For this reason, the
supply will be decreasing and the price will increase in case of the housing market. If the
price of the housing market will be increasing in future, they will prefer to sell many houses
in future since at that time they can earn more profit.
Tax and subsidies
Another factor that affects the housing price is the number of subsidies and taxes
imposed. Both the subsidies as well as the taxes are known to have a huge impact on the
housing prices of Malaysia. When the taxes, which are imposed by the Malaysian
government, increase, the production cost will be increasing too. For this reason, a smaller
number of houses will be supplied and produced in Malaysia.
On the other hand, when the government provides enough subsidies to the housing
market, it will help the supplier in the production of houses. The subsidies will be then
decreasing the production cost of the houses. The subsidies will be declining the production
cost, increasing in profits and therefore will be increasing the supply.

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Input prices
The inputs of the housing market are the raw materials, labour, licensing fees, utilities
and the other necessary things which are known to affect the housing market of Malaysia.
When the prices of one or more than one inputs will be rising, the supply of houses will
decrease since the producer will have spent more on the housing materials. For this reason,
they will be earning only small profit, which will lead to reduction in the supply of house. On
the other hand, when the price of the inputs or the raw materials will be declining, the
producers will be supplying more houses for sale.
Future trend in the housing market in Malaysia
The analysis of the five years trend of the Malaysian economy shows that the
economy will be experiencing increased activities in the construction sectors and in the
capital markets in the future market. This particular factor will be affecting the supply of the
of the houses in Malaysia. the future trend of the housing price will be shifting the supply
curve to the right as the quantity of houses supplied will be increasing in nature. the size of
the society will also have a parallel relationship with the quantity demanded.
Numbers of sellers
This particular factor is quite similar to the number of consumers in Malaysia. when
the number of sellers in the housing market will increase, it will automatically increase the
supply of houses. With the rise in the numbers of sellers selling houses in Malaysia, the
supply of the houses will be increasing. This will therefore, affect the housing prices in
Malaysia.

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Conclusion
The above points mentioned are the five demand and the five supply side factors that
have known to affect the housing market of Malaysia. the demand side factors that have k
own to affect the housing prices of Malaysia are the growth of the economy, rate of interest,
location of the houses, demographics and the income of the consumers. When there will be
economic growth, rise in the rate of interest and the houses will be present in the good
location, it will automatically increase the demand for the houses which will lead to rise in
the price of the house. On the other hand, the supply side factors which will be affecting the
price of the houses in Malaysia are number of sellers, expectation of the future price, input
prices, tax and subsidies and the expectation of the producer. When the tax will increase, the
producers will find it difficult to produce more houses, when the producers expect that the
price of the houses in Malaysia will be increasing gin future, they will reduce the supply.
Also, when the input prices increase, the supply of house will also decrease.

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Reference list
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Rangel, G. J., Ng, J. W. J., Murugasu, T., & Poon, W. C. (2017). A Micro-level View of
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