Urban house prices and business establishment in Malaysia: a sectoral approach
Abstract
The purpose of this study is to examine the long-run and short-run relationship between house prices and business formation in various industries. Using data from Malaysian states over the period of 2000–2016 and applying ARDL/PMG models, our results show that changes in house prices have a positive and significant association with business establishment in specific economic sectors, including manufacturing, wholesale and retail trade, information and communication, and financial and insurance in the long-run. However, the long-run relationship between house prices and business formation is negative and significant for electricity, gas, steam and air conditioning supply, construction, transportation and storage, accommodation and food service activities, and real estate industries. The short-run analysis indicates that there is a difference in the responses of business establishment in various industries to the changes in house prices.
Keyword : house prices, business formation, Malaysia, panel ARDL/PMG
How to Cite
Gholipour, H. F., Khin, S., Tan-Kantor, A., & Spong, H. (2021). Urban house prices and business establishment in Malaysia: a sectoral approach. International Journal of Strategic Property Management, 25(6), 459–468. https://doi.org/10.3846/ijspm.2021.15572
This work is licensed under a Creative Commons Attribution 4.0 International License.
References
Abdul Khalid, M. (2011). Household wealth in Malaysia: composition and inequality among ethnic groups. Jurnal Ekonomi Malaysia [Malaysian Journal of Economics], 45, 71–80.
Abraham, F., & Schmukler, S. L. (2017, October). Addressing the SME finance problem (Research and Policy Briefs, the World Bank Malaysia Hub. No. 9). https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3249560
Adelino, M., Schoar, A., & Severino, F. (2015). House prices, collateral, and self-employment. Journal of Financial Economics, 117(2), 288–306. https://doi.org/10.1016/j.jfineco.2015.03.005
Apergis, A., Simo-Kengne, B. D., Gupta, R., & Chang, T. (2015). The dynamic relationship between house prices and output: evidence from US metropolitan areas. International Journal of Strategic Property Management, 19(4), 336–345.
https://doi.org/10.3846/1648715X.2015.1072857
Bangura, M., & Lee, C. L. (2020). Housing price bubbles in Greater Sydney: evidence from a submarket analysis. Housing Studies. https://doi.org/10.1080/02673037.2020.1803802
Balasubramanyan, L., & Coulson, E. (2013). Do house prices impact business starts? Journal of Housing Economics, 22(1), 36–44. https://doi.org/10.1016/j.jhe.2013.01.001
Berggren, B., Fili, A., & Wilhelmsson, M. H. (2019). Homeownership and entrepreneurship: a regional and industrial analysis of house prices and startups. International Journal of Housing Markets and Analysis, 12(3), 456–473. https://doi.org/10.1108/IJHMA-01-2018-0007
Black, J., De Meza, D., & Jeffreys, D. (1996). House prices, the supply of collateral and the enterprise economy. The Economic Journal, 106(434), 60–75. https://doi.org/10.2307/2234931
Blackburne, E. F., & Frank, M. W. (2007). Estimation of nonstationary heterogeneous panels. The Stata Journal, 7(2), 197–208. https://doi.org/10.1177/1536867X0700700204
Braun, M. (2003). Financial contractibility and asset hardness. University of California-Los Angeles.
Bresnahan, T. F. (1989). Empirical studies of industries with market power. In Handbook of industrial organization (Chapter 17, Vol. 2, pp. 1011–1057). Elsevier. https://doi.org/10.1016/S1573-448X(89)02005-4
Companies Commission of Malaysia. (2020). Registration of business. https://www.ssm.com.my/Pages/Home.aspx#
Connolly, E., Gianni, L., & Read, M. (2015). Housing prices and entrepreneurship: evidence for the housing collateral channel in Australia (Technical report). Reserve Bank of Australia. https://www.rba.gov.au/publications/confs/2015/connolly-lacava-read.html
Corradin, S., & Popov, A. (2015). House prices, home equity borrowing and entrepreneurship. The Review of Financial Studies, 28(8), 2399–2428. https://doi.org/10.1093/rfs/hhv020
Davidsson, P., & Henrekson, M. (2002). Determinants of the prevalence of start-ups and high-growth firms. Small Business Economics, 19, 81–104.
https://doi.org/10.1023/A:1016264116508
Department of Statistics Malaysia. (2019). Small and medium enterprises (SMEs) performance 2018. https://www.dosm.gov.my/v1/index.php?r=column/cthemeByCat&cat=159&bul_id=R0Vka2RpeVJ0cUlpR3BqdjhudDZhdz09&menu_id=TE5CRUZCblh4ZTZMODZIbmk2aWRRQT09
Gholipour, H. F. (2013). Determinants of foreign investments in residential properties: evidence from Malaysian states. International Journal of Strategic Property Management, 17(3), 317–322. https://doi.org/10.3846/1648715X.2013.822436
Gholipour, H. F. (2020). Urban house prices and investments in small and medium-sized industrial firms: evidence from provinces of Iran. Urban Studies, 57(16), 3347–3362.
https://doi.org/10.1177/0042098019897887
Gholipour, H. F., Al-Mulali, U., & Mohammed, M. A. H. (2017). Wealth effect from real estate and outbound travel demand: the Malaysian case. Current Issues in Tourism, 20(1), 68–79.
https://doi.org/10.1080/13683500.2014.882886
Greene, W. H. (2008). Econometric analysis (6th ed.). Prentice-Hall.
Hájek, O., Nekolová, J., & Novosák, J. (2015). Determinants of new business formation – some lessons from the Czech Republic. Economics and Sociology, 8(1), 147–156.
https://doi.org/10.14254/2071-789X.2015/8-1/11
Harding, J. P., & Rosenthal, S. S. (2017). Homeownership, housing capital gains and self-employment. Journal of Urban Economics, 99, 120–135.
https://doi.org/10.1016/j.jue.2016.12.005
Harrison, R. T., & Hart, M. (1983). Factors influencing newbusiness formation: a case study of Northern Ireland.
Environment and Planning A, 15, 1395–1412.
https://doi.org/10.1068/a151395
Hurst, E., & Lusardi, A. (2004). Liquidity constraints, household wealth, and entrepreneurship. Journal of Political Economy, 112(2), 319–347. https://doi.org/10.1086/381478
Iacobuta, A., & Hatmanu, M. (2016). Factors influencing new business formation [Conference presentation]. The 11th edition of the International Conference “European Integration Realities and Perspectives”. http://217.73.162.40/index.php/eirp/article/view/1690
Inglesi-Lotz, R., & Gupta, R. (2013). The long-run relationship between house prices and inflation in South Africa: an ARDL approach. International Journal of Strategic Property Management, 17(2), 188–198. https://doi.org/10.3846/1648715X.2013.807400
Jabatan Penilaian dan Perkhidmatan Harta [Valuation and Property Services Department]. (2020). Property stock report. https://napic.jpph.gov.my/portal
Kerr, S. P., Kerr, W. R., & Nanda, R. (2015). House money and entrepreneurship (Harvard Business School Working Papers No. 15-069). Harvard Business School.
https://ideas.repec.org/p/hbs/wpaper/15-069.html
Lean, H. H., & Smyth, R. (2013). Regional house prices and the ripple effect in Malaysia. Urban Studies, 50(5), 895–922. https://doi.org/10.1177/0042098012459582
Li, L., & Wu, X. (2014). Housing prices and entrepreneurship in China. Journal of Comparative Economics, 42(2), 436–449. https://doi.org/10.1016/j.jce.2013.09.001
Lyons, K., & Kenney, M. (2007, December 15). Report to the World Bank on the Malaysian venture capital industry. California. https://kenney.faculty.ucdavis.edu/wp-content/uploads/sites/332/2016/03/world-bank-malaysia_vc_report.pdf
Manova, K. (2013). Credit constraints, heterogeneous firms, and international trade. Review of Economic Studies, 80, 711–744. https://doi.org/10.1093/restud/rds036
National Property Information Centre. (2019). https://napic.jpph.gov.my/portal
Okun, A. M. (1962). Potential GNP: its measurement and significance. In American Statistical Association (Ed.), Proceedings of the business and economics statistics section (pp. 98–104). American Statistical Association.
Pesaran, M. H., & Shin, Y. (1997, January). An autoregressive distributed lag modelling approach to cointegration analysis. Cambridge University Press. https://doi.org/10.1017/CCOL521633230.011
Pesaran, M. H., Shin, Y., & Smith, R. P. (1997). Estimating longrun relationships in dynamic heterogeneous panels (DAE Working Papers Amalgamated Series 9721).
Pesaran, M. H., Shin, Y., & Smith, R. P. (1999). Pooled mean group estimation of dynamic heterogeneous panels. Journal of the American Statistical Association, 94, 621–634.
https://doi.org/10.2307/2670182
Robson, M. T. (1996). Housing wealth, business creation and dissolution in the UK regions. Small Business Economics, 8, 39–48. https://doi.org/10.1007/BF00391974
Sandberg, W. R., & Hofer, C. W. (1987). Improving new venture performance: the role of strategy, industry structure, and the entrepreneur. Journal of Business Venturing, 2(1), 5–28. https://doi.org/10.1016/0883-9026(87)90016-4
Schmalz, M. C., Sraer, D. A., & Thesmar, D. (2017). Housing collateral and entrepreneurship. The Journal of Finance, 72(1), 99–132. https://doi.org/10.1111/jofi.12468
World Bank. (2021). Enterprise surveys indicators data. World Bank Group. https://www.enterprisesurveys.org/en/data
Abraham, F., & Schmukler, S. L. (2017, October). Addressing the SME finance problem (Research and Policy Briefs, the World Bank Malaysia Hub. No. 9). https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3249560
Adelino, M., Schoar, A., & Severino, F. (2015). House prices, collateral, and self-employment. Journal of Financial Economics, 117(2), 288–306. https://doi.org/10.1016/j.jfineco.2015.03.005
Apergis, A., Simo-Kengne, B. D., Gupta, R., & Chang, T. (2015). The dynamic relationship between house prices and output: evidence from US metropolitan areas. International Journal of Strategic Property Management, 19(4), 336–345.
https://doi.org/10.3846/1648715X.2015.1072857
Bangura, M., & Lee, C. L. (2020). Housing price bubbles in Greater Sydney: evidence from a submarket analysis. Housing Studies. https://doi.org/10.1080/02673037.2020.1803802
Balasubramanyan, L., & Coulson, E. (2013). Do house prices impact business starts? Journal of Housing Economics, 22(1), 36–44. https://doi.org/10.1016/j.jhe.2013.01.001
Berggren, B., Fili, A., & Wilhelmsson, M. H. (2019). Homeownership and entrepreneurship: a regional and industrial analysis of house prices and startups. International Journal of Housing Markets and Analysis, 12(3), 456–473. https://doi.org/10.1108/IJHMA-01-2018-0007
Black, J., De Meza, D., & Jeffreys, D. (1996). House prices, the supply of collateral and the enterprise economy. The Economic Journal, 106(434), 60–75. https://doi.org/10.2307/2234931
Blackburne, E. F., & Frank, M. W. (2007). Estimation of nonstationary heterogeneous panels. The Stata Journal, 7(2), 197–208. https://doi.org/10.1177/1536867X0700700204
Braun, M. (2003). Financial contractibility and asset hardness. University of California-Los Angeles.
Bresnahan, T. F. (1989). Empirical studies of industries with market power. In Handbook of industrial organization (Chapter 17, Vol. 2, pp. 1011–1057). Elsevier. https://doi.org/10.1016/S1573-448X(89)02005-4
Companies Commission of Malaysia. (2020). Registration of business. https://www.ssm.com.my/Pages/Home.aspx#
Connolly, E., Gianni, L., & Read, M. (2015). Housing prices and entrepreneurship: evidence for the housing collateral channel in Australia (Technical report). Reserve Bank of Australia. https://www.rba.gov.au/publications/confs/2015/connolly-lacava-read.html
Corradin, S., & Popov, A. (2015). House prices, home equity borrowing and entrepreneurship. The Review of Financial Studies, 28(8), 2399–2428. https://doi.org/10.1093/rfs/hhv020
Davidsson, P., & Henrekson, M. (2002). Determinants of the prevalence of start-ups and high-growth firms. Small Business Economics, 19, 81–104.
https://doi.org/10.1023/A:1016264116508
Department of Statistics Malaysia. (2019). Small and medium enterprises (SMEs) performance 2018. https://www.dosm.gov.my/v1/index.php?r=column/cthemeByCat&cat=159&bul_id=R0Vka2RpeVJ0cUlpR3BqdjhudDZhdz09&menu_id=TE5CRUZCblh4ZTZMODZIbmk2aWRRQT09
Gholipour, H. F. (2013). Determinants of foreign investments in residential properties: evidence from Malaysian states. International Journal of Strategic Property Management, 17(3), 317–322. https://doi.org/10.3846/1648715X.2013.822436
Gholipour, H. F. (2020). Urban house prices and investments in small and medium-sized industrial firms: evidence from provinces of Iran. Urban Studies, 57(16), 3347–3362.
https://doi.org/10.1177/0042098019897887
Gholipour, H. F., Al-Mulali, U., & Mohammed, M. A. H. (2017). Wealth effect from real estate and outbound travel demand: the Malaysian case. Current Issues in Tourism, 20(1), 68–79.
https://doi.org/10.1080/13683500.2014.882886
Greene, W. H. (2008). Econometric analysis (6th ed.). Prentice-Hall.
Hájek, O., Nekolová, J., & Novosák, J. (2015). Determinants of new business formation – some lessons from the Czech Republic. Economics and Sociology, 8(1), 147–156.
https://doi.org/10.14254/2071-789X.2015/8-1/11
Harding, J. P., & Rosenthal, S. S. (2017). Homeownership, housing capital gains and self-employment. Journal of Urban Economics, 99, 120–135.
https://doi.org/10.1016/j.jue.2016.12.005
Harrison, R. T., & Hart, M. (1983). Factors influencing newbusiness formation: a case study of Northern Ireland.
Environment and Planning A, 15, 1395–1412.
https://doi.org/10.1068/a151395
Hurst, E., & Lusardi, A. (2004). Liquidity constraints, household wealth, and entrepreneurship. Journal of Political Economy, 112(2), 319–347. https://doi.org/10.1086/381478
Iacobuta, A., & Hatmanu, M. (2016). Factors influencing new business formation [Conference presentation]. The 11th edition of the International Conference “European Integration Realities and Perspectives”. http://217.73.162.40/index.php/eirp/article/view/1690
Inglesi-Lotz, R., & Gupta, R. (2013). The long-run relationship between house prices and inflation in South Africa: an ARDL approach. International Journal of Strategic Property Management, 17(2), 188–198. https://doi.org/10.3846/1648715X.2013.807400
Jabatan Penilaian dan Perkhidmatan Harta [Valuation and Property Services Department]. (2020). Property stock report. https://napic.jpph.gov.my/portal
Kerr, S. P., Kerr, W. R., & Nanda, R. (2015). House money and entrepreneurship (Harvard Business School Working Papers No. 15-069). Harvard Business School.
https://ideas.repec.org/p/hbs/wpaper/15-069.html
Lean, H. H., & Smyth, R. (2013). Regional house prices and the ripple effect in Malaysia. Urban Studies, 50(5), 895–922. https://doi.org/10.1177/0042098012459582
Li, L., & Wu, X. (2014). Housing prices and entrepreneurship in China. Journal of Comparative Economics, 42(2), 436–449. https://doi.org/10.1016/j.jce.2013.09.001
Lyons, K., & Kenney, M. (2007, December 15). Report to the World Bank on the Malaysian venture capital industry. California. https://kenney.faculty.ucdavis.edu/wp-content/uploads/sites/332/2016/03/world-bank-malaysia_vc_report.pdf
Manova, K. (2013). Credit constraints, heterogeneous firms, and international trade. Review of Economic Studies, 80, 711–744. https://doi.org/10.1093/restud/rds036
National Property Information Centre. (2019). https://napic.jpph.gov.my/portal
Okun, A. M. (1962). Potential GNP: its measurement and significance. In American Statistical Association (Ed.), Proceedings of the business and economics statistics section (pp. 98–104). American Statistical Association.
Pesaran, M. H., & Shin, Y. (1997, January). An autoregressive distributed lag modelling approach to cointegration analysis. Cambridge University Press. https://doi.org/10.1017/CCOL521633230.011
Pesaran, M. H., Shin, Y., & Smith, R. P. (1997). Estimating longrun relationships in dynamic heterogeneous panels (DAE Working Papers Amalgamated Series 9721).
Pesaran, M. H., Shin, Y., & Smith, R. P. (1999). Pooled mean group estimation of dynamic heterogeneous panels. Journal of the American Statistical Association, 94, 621–634.
https://doi.org/10.2307/2670182
Robson, M. T. (1996). Housing wealth, business creation and dissolution in the UK regions. Small Business Economics, 8, 39–48. https://doi.org/10.1007/BF00391974
Sandberg, W. R., & Hofer, C. W. (1987). Improving new venture performance: the role of strategy, industry structure, and the entrepreneur. Journal of Business Venturing, 2(1), 5–28. https://doi.org/10.1016/0883-9026(87)90016-4
Schmalz, M. C., Sraer, D. A., & Thesmar, D. (2017). Housing collateral and entrepreneurship. The Journal of Finance, 72(1), 99–132. https://doi.org/10.1111/jofi.12468
World Bank. (2021). Enterprise surveys indicators data. World Bank Group. https://www.enterprisesurveys.org/en/data