An integrated framework of system dynamics and structural equation modeling for housing price trends

Housing prices in Malaysia are rising due to high demand, limited supply, and affordability issues. Despite government initiatives such as affordable housing schemes, many are still unable to purchase homes due to stagnant income growth and stringent loan requirements. As a result, rising housing prices continue to be seen as the main cause of housing problems. Key challenges include difficulty securing housing financing, affordability concerns, and ensuring mortgage repayments stay below one-third of monthly income. These issues make it increasingly difficult for buyers to secure loan options. Previous studies have used various single modelling approaches to identify the factors influencing housing prices. This study, therefore, examines the factors affecting housing prices in Malaysia by integrating Structural Equation Modeling (SEM) with System Dynamics (SD). The integration of SEM and SD uses a conceptual model, with a questionnaire as the data collection instrument. The sample consists of consumers who have purchased a house. SEM is employed to test the proposed hypotheses by examining the relationships between factors influencing housing prices. There are four main group factors affecting housing prices which are housing satisfaction (HS), housing financial (HF), housing policy (HP) and household income (HI). Each main factor has its own set of questions: Housing Satisfaction and Housing Financial each contain 17 questions, Housing Policy includes 10 questions, and Household Income has 5 questions. The SEM results were used to initially develop the SD model, which will then be refined based on the influencing factors. Once the SD model is validated, the next phase involved evaluating various intervention strategies and their impact on housing prices. The intervention of various strategies includes tax rate changes, developer loan interest rate, and household income shows impacts on house pricing in Malaysia. This study provides a comprehensive framework for understanding the feedback effects between factors influencing housing prices, using an integrated approach. It captures the dynamic behavior of the housing market and evaluates strategies, offering valuable insights for authorities, particularly the Ministry of Housing and Local Government (KPKT), in addressing housing issues.