In Malaysia, house price has increased drastically. Problem arises in areas that received relatively lower number of FDI. The house price in these areas accelerated at growth which are somewhat equivalent to areas which benefit from FDI spillover. As the relationship between FDI and locals’ well-being is becoming crucial due to the escalating high price, this paper intends to examine the long-term impact of FDI on house price in Malaysia. Our long-run estimation results showed that FDI inflows have affected house price in Malaysia negatively between the period of 1999 and 2015. The effect however reversed when liberalization policy is included. With the presence of liberalization policy, FDI inflows have actually caused house price in KL and Penang (highly dynamic states) to increase in the long-run. The positive effect of FDI inflows on house price are also found in relatively slow-progressive states like Pahang and Kedah confirming the nationwide effect of liberalization policy regardless of economy level of a state. Other than FDI inflows, this study also examined house supply, gross domestic per capita and interest rate as independent variables.

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In Malaysia, house price has increased drastically. Problem arises in areas that received relatively lower number of FDI. The house price in these areas accelerated at growth which are somewhat equivalent to areas which benefit from FDI spillover. As the relationship between FDI and locals' well-being is becoming crucial due to the escalating high price, this paper intends to examine the long-term impact of FDI on house price in Malaysia. Our long-run estimation results showed that FDI inflows have affected house price in Malaysia negatively between the period of 1999 and 2015. The effect however reversed when liberalization policy is included. With the presence of liberalization policy, FDI inflows have actually caused house price in KL and Penang (highly dynamic states) to increase in the long-run. The positive effect of FDI inflows on house price are also found in relatively slow-progressive states like Pahang and Kedah confirming the nationwide effect of liberalization policy regardless of economy level of a state. Other than FDI inflows, this study also examined house supply, gross domestic per capita and interest rate as independent variables.