Housing Price Misalignments from Fundamentals Before the 1997–98 Financial Crisis: Evidence from Malaysia

This paper attempts to assess the presence and extent of house price misalignments from fundamental values, with particular focus on the pre-Asian financial crisis years in Malaysia. The main findings suggest two episodes where overpricing of houses were historically large, namely 1990-92 and 1995-97. However, the magnitude of housing price misalignments before 1997 was not large enough to be considered as bubbles. As such, ‘housing price bubbles’ could not have been a contributor to Malaysia’s 1997-98 financial crisis.