THE IMPACT OF MACROECONOMIC VARIABLES ON PROPERTY PRICES IN MALAYSIA DURING THE COVID-19 PANDEMIC

Abstract

The housing market is a critical driver of economic growth and a source of financial stability. In Malaysia, residential property prices are influenced by a range of macroeconomic factors, including Gross Domestic Product (GDP), exchange rates, unemployment rates, and wage levels. The COVID-19 pandemic introduced significant disruption and volatility to the Malaysian economy, making it essential to understand the relationships between these factors and property prices. The pandemic's economic challenges, coupled with rising property prices, have exacerbated housing affordability issues. While previous studies focused on long-term trends (1991–2019), there is a gap in understanding the high-frequency (monthly) volatility specifically during the COVID-19 shock. As such,  this study aims to investigate the short- and long-term effects of GDP, exchange rates, unemployment, and wages on Malaysian residential property prices from January 2020 to March 2023 (a period of 39 months). Using the Autoregressive Distributed Lag (ARDL) model, monthly data are analyzed to examine how these variables have influenced the housing market. The results indicate that in the long term, GDP growth has no significant effect on property prices, while exchange rates and wages show significant negative impacts. Short-term findings reveal a positive influence of unemployment, potentially reflecting government interventions during the crisis. A robust adjustment mechanism toward equilibrium is confirmed by the error correction term. The study concludes that macroeconomic variables play a significant role in determining property prices during periods of crisis, with exchange rate depreciation and wage disparities intensifying affordability challenges. The positive short-term impact of unemployment likely stems from government stimulus and loan moratoriums, which temporarily buoyed the market.