This paper studied how house prices were affected by macroeconomic factors from Q1 2009 to Q4 2018. The short and long-run effects of real income, nominal interest rates, inflation rate and stock prices on house prices in Malaysia were examined with the autoregressive distributed lag (ARDL) of a restricted error correction model (ECM). It was discovered that the selected macroeconomic factors were cointegrated with house prices. Income, represented by real Gross Domestic Product (GDP), significantly affected house prices in the short and long-run. Inflation and interest rate, proxied by Consumer Price Index (CPI) and Overnight Policy Rate (OPR), respectively, affected house prices significantly in the long-run. The stock market, tracked by Kuala Lumpur Composite Index (KLCI), had no significant impact on house prices signifying no wealth effect. Through the findings of an inelasticity of demand and an undesirable result of monetary policies, this paper concluded that more effective solutions needed to be carried out to ensure affordability of house ownership in Malaysia.
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