Determinants of homeownership in Malaysia

The housing industry is crucial to the sustainable development in Malaysia. The efficiency and effectiveness of the housing delivery system requires housing provision for all. The housing industry, which had grown rapidly in the 1980s encountered property oversupply recently. The majority of these units remain unsold for reasons beyond price factor, ranging from poor location to unattractive houses. The main objective of this paper is to tackle property oversupply in the country by examining a detailed knowledge of home owning determinants. Homeownership should be encouraged as positive externalities of homeownership can be found in many housing surveys. Homeownership is a complex issue that is the result of many determinants, including housing characteristics (house types and property types), employment and income trends, socio-cultural and demographic descriptors. In addition to determinants, efforts needed to reduce regulatory barriers in the housing delivery system that can significantly increase the cost of producing houses. The government should make home financing more available and affordable by providing subsidies to low income families and creating incentives to save for homeownership. Efforts also needed to extend opportunities to enhance the affordability of homeownership by liberalizing rules and regulation of Employee Provident Fund (EPF) withdrawal.Homeownership, Homeownership Externalities, Malaysia

Neighborhood preferences of house buyers: the case of klang valley, malaysia

This paper attempts to examine the impacts of neighborhood types, as defined by a gated-guarded neighborhood with landscape compound and a freehold tenure neighborhood on residential property values in Klang Valley, Malaysia. A weighted least squares method together with a heteroscedasticity consistent covariance matrix estimator is used to estimate the coefficients of structural, locational, and neighborhood attributes of dwellings on house prices. Results show the gated-guarded neighborhood with landscape compound could increase residential property values by 18.1%. Additionally, the positive perception of a freehold property in the neighborhood could induce a price premium of 23.7%. It is reasonable to believe that neighborhood types play a role in determining residential property values. In order to meet the increasingly affluent and discerning house buyers, developers instead of just offering dream homes in prime locations, they should provide intangible benefits in the neighborhood that just as sought after by today’s house buyers, such as a sense of security in the landscape compound, a feeling of harmony with one’s surroundings, and an infrastructure which supports the lifestyle of house buyers.Neighborhood types, Property prices, Klang Valley, Malaysia

Effects of Technological Improvement in the ICT-Producing Sector on Business Activity

It seems to be taken for granted by many commentators that the sharp decline in prices of computers, telecommunications equipment and software resulting from the technological improvements in the information and communications technology (ICT)-producing sector is good for jobs and is a major driving force behind the non-inflationary employment miracle and booming stock market in the latter half of the nineties in the U.S. and their recurrence since 2004. We show that, in our model, a technical improvement in the ICT-producing sector by itself cannot explain a simultaneous increase in employment and a rise in firms valuation (or Tobins Q ratio). There are two cases. If the elasticity of equipment price (pI ) with respect to ICT-producing sectors productivity is less than one, labors value marginal productivity increases thus pulling up the demand wage and expanding employment. However, the increased output by adding to the capital stock and thus driving down future capital rentals causes a decline in firms valuation, q per unit, even though Tobins Q (= q=pI ) is up. If the elasticity is greater than one, equipment prices fall so dramatically that labors value marginal productivity declines, employment in the ICT-using sector expands proportionately more than the increase in capital stock, thus raising future capital rentals, so both firms valuation and Tobins Q rise; but then real demand wage falls and employment contracts. The key to generating a booming stock market alongside employment expansion is to hypothesize that when technical improvement in the ICT-producing sector occurs, the market forms an expectation of future productivity gains to be reaped in the ICT-using sector. Then we can explain not only the stock market boom and associated rise in investment spending and employment in the period 1995-2000 but also the subsequent decline in employment, in Tobins Q and in investment spending in 2001, with consumption holding up well as productivity gains in the ICT-using sector were realized. An anticipation of a future TFP improvement in the ICT-using sector can once more play the role of raising the stock market.Business asset valuation, investment spending, Employment

BASE LENDING RATE AND HOUSING PRICES: THEIR IMPACTS ON RESIDENTIAL HOUSING ACTIVITIES IN MALAYSIA

The construction sector, which had grown rapidly in the early 1990s, encountered slower grows after the financial crisis. The decline in the construction industry, however, is cushioned by the residential property construction. This paper examines empirically whether the increasing trend in residential property construction is related to changes in base lending rate and house prices. Pooled EGLS model (Cross Section Seemingly Unrelated Regression) is used to analyze the impact of lending rate and housing price upon the trading volume of residential housing activities. The results show base lending rate is the key determinant of residential housing activities. However, changes in housing prices may not necessarily influence residential housing activities in the country when there is a mismatch between current and desired housing for all. In view of the substantial number of housing left unsold, several recommendation and precautionary measures for housing provision should be made before it leads to a property glut. This study is crucial to housing developers and policy makers as any housing decisions not always should be made just on the basis of interest rates and house prices, but should pay more attention to the efficiency and effectiveness of housing delivery system in the country.Residential Housing Activities, Base Lending Rate, Housing Price Index

Future Job Prospects in Singapore

What forces have shaped our nations employment and remuneration record so far? Where is Singapores unemployment rate headed? What should policy-makers do about it? These are the questions tackled in this paper. It is shown that based on our historical experience, it would be necessary to achieve an annual real GDP growth rate of 7.1 percent in order to keep the unemployment rate unchanged. Moreover, a one-percentage point shortfall of the real GDP growth rate below 7.1 percent in any given year results in a rise in the unemployment rate of 0.12 percentage points over the previous year. Consequently, if the economy is able to generate at most 5 percent real GDP annual growth rate (the high end of the range of official medium-term projections of our economys growth rate, which is 3 to 5 percent), it would seem that the unemployment rate is set to rise from its current level based upon the historical relationship. Is there any reason, however, to believe that the Okuns Law relationship for a fast-developing country like ours might be expected to change once we have reached the status of a mature economy as we now have become? After all, in a mature economy like the US, the critical real GDP growth rate required to keep the unemployment rate steady is only 3 percent. It is likely that the Okuns Law relationship would indeed shift as the economy matures. As workers adjust their expectations to the reality that the economy has reached a new lower growth regime and they incorporate their revised growth expectations in their wage bargaining, the unemployment rate can remain steady despite slower growth. This steady structural rate of unemployment is, however, likely to be higher than in the past. In response to the worsened medium to long term outlook for the labor market, one is tempted to ask : Can anything be done by policy-makers to reduce the equilibrium rate of unemployment? I believe that reaching out for a weaker Singapore dollar in order to boost international competitiveness, and so to boost aggregate demand and hence employment, or reaching out for budgetary deficits as a direct means to boost aggregate demand is unlikely to have a lasting effect on the structural rate of unemployment. Instead that it would be better to consider policies aimed directly at influencing equilibrium unemployment. One proposal is to introduce an employment subsidy scheme aimed particularly at low-skilled workers, which has the effect of increasing job creation directly. Increased effort to create a business-friendly environment to encourage new start-ups by ensuring minimal red tape and enabling relatively easy financing for them will also work to increase the pace of job creation. Finally, the work of the Workforce Development Agency aimed at retraining low-skilled and older workers to meet the skills demand of new jobs and then matching them to firms offering the job vacancies should help somewhat in bringing down the structural rate of unemployment as our small geographical area works to our advantage when it comes to job-matching.Singapore, Employment, GDP

Home owning motivation in Malaysia

The residential property industry, which had grown rapidly in the 1980s, however, encountered overhang problems recently. Overhang of residential units has been getting worse and therefore, precautionary measures must be taken by the housing developers before it leads to a property glut. In order to address property overhang in the country, housing developers must recognize the importance of orienting their activities to consider how and why households are motivated to home owning. Factor analysis of the 25 questions was used to support the grouping of these questions into a smaller number of factors. Factors were used as constructs of the motivation of homeownership. The results conclude that Malaysian householders are motivated to become homeowners because they expect home owning will improve the home environment in which a child lives, improve neighborhood stability through higher properties maintenance and improvement, and longer tenure, and improve social capital and local amenities investments in the neighborhood. The motivation of home owning is crucial to housing developers as they have to be cautious before undertaking any new project. Housing developers should know what the market really wants and plan their products to take cognizance of the changing lifestyles of MalaysiansMotivation, Property overhang, Home owning, Housing provision, Malaysia

Future Job Prospects in Singapore

What forces have shaped our nation’s employment and remuneration record so far? Where is Singapore’s unemployment rate headed? What should policy-makers do about it? These are the questions tackled in this paper. It is shown that based on our historical experience, it would be necessary to achieve an annual real GDP growth rate of 7.1 percent in order to keep the unemployment rate unchanged. Moreover, a one-percentage point shortfall of the real GDP growth rate below 7.1 percent in any given year results in a rise in the unemployment rate of 0.12 percentage points over the previous year. Consequently, if the economy is able to generate at most 5 percent real GDP annual growth rate (the high end of the range of official medium-term projections of our economy’s growth rate, which is 3 to 5 percent), it would seem that the unemployment rate is set to rise from its current level based upon the historical relationship. Is there any reason, however, to believe that the Okun’s Law relationship for a fast-developing country like ours might be expected to change once we have reached the status of a mature economy as we now have become? After all, in a mature economy like the US, the critical real GDP growth rate required to keep the unemployment rate steady is only 3 percent. It is likely that the Okun’s Law relationship would indeed shift as the economy matures. As workers adjust their expectations to the reality that the economy has reached a new lower growth regime and they incorporate their revised growth expectations in their wage bargaining, the unemployment rate can remain steady despite slower growth. This steady structural rate of unemployment is, however, likely to be higher than in the past. In response to the worsened medium to long term outlook for the labor market, one is tempted to ask: Can anything be done by policy-makers to reduce the equilibrium rate of unemployment? I believe that reaching out for a weaker Singapore dollar in order to boost international competitiveness, and so to boost aggregate demand and hence employment, or reaching out for budgetary deficits as a direct means to boost aggregate demand is unlikely to have a lasting effect on the structural rate of unemployment. Instead that it would be better to consider policies aimed directly at influencing equilibrium unemployment. One proposal is to introduce an employment subsidy scheme aimed particularly at low-skilled workers, which has the effect of increasing job creation directly. Increased effort to create a business-friendly environment to encourage new start-ups by ensuring minimal red tape and enabling relatively easy financing for them will also work to increase the pace of job creation. Finally, the work of the Workforce Development Agency aimed at retraining low-skilled and older workers to meet the skills demand of new jobs and then matching them to firms offering the job vacancies should help somewhat in bringing down the structural rate of unemployment as our small geographical area works to our advantage when it comes to job-matching.

Effects of Labor Taxes on Hours of Market and Home Work: The Role of International Capital Mobility and Trade

This paper evaluates the Prescott (2004) hypothesis that permanently higher payroll taxes fully explain the decline in number of market hours worked in Europe (relative to America) over three decades. The Prescott model made assumptions that, in steady state, left out any incentive for either international capital mobility or international exchange of goods. We study a one-good model where the imposition of higher payroll taxes in one region leads to higher domestic real interest rate in that region. As a result, there are incentives for international capital outflows into the high payroll tax region with the consequence that number of market hours worked in the low payroll tax region also decline. With identical tastes and rate of time discount across the two regions, we find that the number of hours worked in the market, home work, and leisure are equalized across the two regions. In the multi-good model, when factor price equalization holds so free trade acts as a substitute for factor mobility, we show that there is also equalization of market work, home work, and leisure across the two regions.Payroll taxes, wealth decumulation, capital mobility