Testing for the existence of housing sub-markets in Penang, Malaysia

Abstract

This study attempts to demonstrate that residential sub-markets do exist in any geographic area by takingresidential properties in Penang, Malaysia, as a case. The hedonic model was used to identify the existence ofsub-markets in the study area. The model involved a clean sample of 120 house prices in 2006 and eightindependent structural and locational variables. Six major areas in Penang were used to represent a priori spatialsub-markets in the house price model. The results showed that the sub-market variables appeared to bestatistically insignificant in the hedonic model. However, results from paired-sample t-test and Chow Testshowed that sub-markets did exist in Penang. This study concluded that it is insufficient to rely only on aregression model to test for sub-market existence. Instead, some appropriate diagnostic tests must be applied tothe sample