Examining key macroeconomic determinants of serviced apartments price index: the case of Kuala Lumpur, Malaysia

Abstract

Purpose Increasing overhang of serviced apartments poses a serious concern to the national property market. This study aims to examine the impacts of macroeconomic determinants, namely, gross domestic product (GDP), consumer confidence index (CF), existing stocks (ES), incoming supply (IS) and completed project (CP) on serviced apartment price changes. Design/methodology/approach To achieve more accurate, quality price changes, a serviced apartment price index (SAPI) was constructed through a self-developed hedonic price index model. This study has collected 1,567 transaction data in Kuala Lumpur, covering 2009Q1–2018Q4 for price index construction and data were analysed using the vector autoregressive model, the vector error correction model and the fully modified ordinary least squares (OLS) (FMOLS). Findings Results of the regression model show that only GDP, ES and IS were significantly associated with SAPI, with an R2 of 0.7, where both ES and IS have inverse relationships with SAPI. More precisely, it is predicted that the price of serviced apartments will be reduced by 0.56% and 0.21% for every 1% increase in ES and IS, respectively. Practical implications Therefore, government monitoring of serviced apartments’ future supply is crucial by enforcing land use-planning regulations via stricter development approval of serviced apartments to safeguard and achieve more stable property prices. Originality/value By adopting an innovative approach to estimating the response of price change to supply and demand in a situation where there is no price indicator for serviced apartments, the study addresses the knowledge gap, especially in terms of understanding what are the key determinants of, and to what extent they influence, the SAPI.

Modelling Property Overhang Using Stigmatised Property Dimensions

“…Minimal stigma is only known by interested persons and locals. However, for individual property, the minimal stigma can refer to any negative perception of the land titles, for example, the tenure of property (Cheng & Ling, 2023), multiple layer sub-lease, and the land size (Cradduck & Warren, 2019). House purchasers will be hesitant to purchase if the tenure of properties is a private lease scheme.…”

Factors Influencing Property Overhang in Residential and Serviced Apartments in Malaysia: A Thematic Review

“…Buyers' preferences play a vital factor in property overhang. Buyers consider the availability of a road network and public transport (Olanrewaju & Arazi, 2019), housing quality (Olanrewaju & Woon, 2017), preferred locations, neighborhood (Nor, 2021), substandard housing specifications (Cheng & Ling, 2022), type of houses (Nur et al, 2020), design consideration (Ab Rahim et al, 2019) and structure (Ab Rahim et al, 2019;Soon & Tan, 2019) before buying a house either for own stay or investment. Besides that, buyers' preferences are in conjunction with house prices (Yip et al, 2020).…”

“…The availability of competent personnel is concerned with increasing effective property management and good maintenance practices (Ab Rahim et al, 2019) in reducing property overhang. Consequently, technology, cost, time, and quality (Ab Rahim et al, 2019;Adzhar et al, 2021) are necessary to take a role in practicing maintenance management in the schemes to prevent inadequate maintenance (Cheng & Ling, 2022;Lee, 2014) and poor management of building facilities (Cheng & Ling, 2022). Hence, maintenance management is an ongoing management starting from the completion of the building.…”

“…The choice of the neighborhood is critical to gaining community involvement (Ab Rahim et al, 2019) in terms of safety (Hew et al, 2019), health, andenvironment (Ab Rahim et al, 2019;Adzhar et al, 2021). If not, it can bring social stigma (Ab Rahim et al, 2019;Adzhar et al, 2021) and a poor living environment (Cheng & Ling, 2022), which means it did not successfully meet the quality living standard for inhabitants (Lee, 2014). Thus, varied aspects are considered when a buyer buys a house, including the neighborhood.…”

“…A comprehensive feasibility study that suits buyer needs and preferences (Lee, 2014) is needed to prevent a mismatch between demand and supply (Mohd et al, 2020;Adzhar et al, 2021;Ab Rahim et al, 2019;Cheng & Ling, 2022). Hence, a lack of market and financial feasibility studies can foster a mismatch in product, location, and price (Ab Rahim et al, 2019;Adzhar et al, 2021) and pricing strategy (Sivadasan et al, 2020).…”