Neighborhood preferences
of house buyers: the case
of Klang Valley, Malaysia
Tan Teck-Hong
School of Business, Sunway University College, Bandar Sunway, Malaysia
Abstract
Purpose – The paper attempts to examine the impacts of neighborhood types, as defined by a
gated-guarded neighborhood with landscape compound and a freehold tenure neighborhood on
residential property values in Klang Valley, Malaysia.
Design/methodology/approach – A weighted least squares method together with a
heteroscedasticity consistent covariance matrix estimator is used to estimate the coefficients of
structural, locational and neighborhood attributes of dwellings on house prices.
Findings – Results show that the gated-guarded neighborhood with landscape compound could
increase residential property values by 18.1 per cent. Additionally, the positive perception of a freehold
property in the neighborhood could induce a price premium of 23.7 per cent.
Research limitations/implications – It is reasonable to believe that neighborhood types play a
role in determining residential property values.
Practical implications – In order to meet the increasingly affluent and discerning house buyers,
developers, instead of just offering dream homes in prime locations, should provide intangible benefits
in the neighborhood that are just as sought after by today’s house buyers – such as a sense of security in
the landscape compound, a feeling of harmony with one’s surroundings and an infrastructure which
supports the lifestyle of house buyers.
Originality/value – House buyers in Malaysia are increasingly aware of the value of gated-guarded
and freehold neighborhoods. However, there is little evidence to assess the value provided by such
neighborhoods in Klang Valley, Malaysia. The paper aims to determine the responsiveness of the
willingness to pay to changes in neighborhood types.
Keywords Property, Prices, Malaysia
Paper type Research paper
Introduction
A massive over construction of houses by Malaysian housing developers has created the
problem of property overhang. The term property overhang means housing units that
have been issued with a certificate of fitness for occupation and have remained unsold for
more than nine months (Ministry of Finance’s Valuation and Property Service
Department, 2006). As reported in Ministry of Finance’s Valuation and Property Service
Department (2009), the residential overhang units increased from 23,866 units worth RM
(Malaysian Ringgit) 3.82 billion in 2007 to 26,029 units worth RM 4.476 billion in 2008.
Most of the overhang units surprisingly are affordable to most households and priced at
RM 150,000 and below. These unsold houses do not attract the target market and cater to
the housing needs of the target group as they are situated in poor locations with no
adequate amenities and less employment opportunities.
In order to address the mismatch in the housing provision, it is important to know
what the market really wants as house buyers are becoming more cautious before
The current issue and full text archive of this journal is available at
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IJHMA
4,1
58
Received 4 January 2010
Revised 21 June 2010
Accepted 21 June 2010
International Journal of Housing
Markets and Analysis
Vol. 4 No. 1, 2011
pp. 58-69
q Emerald Group Publishing Limited
1753-8270
DOI 10.1108/17538271111111839
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