THE INFLUENCE OF GDP, INTEREST RATE, WAGE, INFLATION AND EXCHANGE RATE ON RESIDENTIAL PROPERTY PRICE IN INDONESIA

Authors

  • Badrud Duja Directorate General of State Asset Management MINISTRY OF FINANCE, INDONESIA
  • Heri Supriyanto Directorate General of State Asset Management MINISTRY OF FINANCE, INDONESIA

DOI:

https://doi.org/10.21837/pm.v17i9.614

Keywords:

gross domestic product, wage, exchange rate, residential property price index

Abstract

Over the past years, Indonesia’s economic growth has been recorded among the top developing countries. The economic growth is believed to contribute to the increase on residential property prices. The main objective of this study is to analyse the influence of determinants of residential property prices in Indonesia by examining the dynamic relationships of residential property prices reflected through the Residential Property Price Index (RPPI) with Gross Domestic Product (GDP), investment interest rates, wages, inflation and the exchange rate against the US dollar using secondary data over a period of thirteen-years between 2002Q1 and 2014Q4. By applying the Engle-Granger co-integration test
and the error correction model, this research aims to see the relationship between the variables both in the short- and long-term. The results of the study indicated that macroeconomic factors that were significantly related to Indonesian residential property prices were GDP, wages, inflation, and exchange rates against the US dollar, while the investment interest rate was not included in these factors. Furthermore, based on the results of the regression analysis on research data, government policy in setting minimum wage standards has the greatest impact on residential property prices in the property sector in Indonesia. Thus, the results of this research are expected to provide the government with better viewpoints that will assist them in enacting better policies in the residential property sector.

Downloads

Download data is not yet available.

References

Gallin, J. (2003). The long-run relationship between house price and income: Evidence from local housing markets. Real Estate Economics, 34(3), 417-38.

Hoffman, B. (2001). The determinant of private sector credit in indutrialized countries: Do property price matter? International Finance, 7, 203-234.

Hong, L. (2013). The dynamic relationship between real estate investment and economic growth: Evidence from prefecture city panel data in China. IERI Procedia, 7 (2014) 2-7.

Mahalik, M. K., & Mallick, H. (2011). What causes asset price bubble in an emerging economy? Some empirical evidence in the housing sector of India. International Economic Journal, 25(2), 215-237.

Phyrr, S. A., Born, W. L., & Webb, J. R. (1990). Development of a dynamic investment strategy under alternative inflation cycle scenarios. Journal of Real Estate Research, 5(2), 177-194.

Downloads

Published

2019-05-06

How to Cite

Duja, B., & Supriyanto, H. (2019). THE INFLUENCE OF GDP, INTEREST RATE, WAGE, INFLATION AND EXCHANGE RATE ON RESIDENTIAL PROPERTY PRICE IN INDONESIA. PLANNING MALAYSIA, 17(9). https://doi.org/10.21837/pm.v17i9.614