The role of government expenditure (productive and non-productive) towards housing prices in emerging markets and developing economies, and advanced economies / Rainah Ginsad

The real house price has increased continuously since the beginning of the 20th century in most emerging market economies and advanced economies. It indicates the cost of owning a house has increased and has become an alarming concern to policymakers as it impacts society’s wellbeing. Thus, in many countries, the government monitors and highly regulates the housing industry to ensure housing affordability is high and does not burden society. The United Nation’s Sustainable Development Goal (SDG) 2030 highlighted the sustainable development goal for the people is to end poverty and make cities and human settlements inclusive, safe, resilient, and sustainable. In many countries, policymakers are obliged to provide affordable housing to society for wellbeing enhancement. Hence, the government allocates the budget for the housing policy’s implementation, which may affect the household’s savings and may influence the housing market demand in the long run. Although the relationship between government expenditure and housing price has not been widely researched, the existing literature exhibited inconsistent findings on the significant relationship between the variables. This study aims to examine the impact of productive government expenditures (defence, economic affairs, housing and community amenities, education, and health) and non-productive government expenditures (recreation, culture, and religion; and social protection) on housing prices, as well as the long-run relationship between the variables in selected countries, which classified as emerging markets and developing economies, and advanced economies. Annual data between 2008 and 2018 were collected from 11 emerging market and developing economies and 22 countries of advanced economies, which were analysed following the static panel data analysis procedure. Results showed that total government expenditure was significant in influencing housing prices in advanced economies but insignificant in emerging markets and developing economies. Education is the only productive government expenditure that showed a significant impact on housing prices in emerging economies, while none of the productive government expenditures found significant in influencing housing prices in advanced economies. Meanwhile, social protection is a non-productive government expenditure that significantly influences housing prices in advanced economies. Productive and non-productive government expenditures are evaluated as cointegrated with housing prices in the long run. The findings of this study provide new insight concerning the relationship between housing prices and productive and non-productive government expenditure. Moreover, the findings of this study may imply the policymakers to analyse further the relationship between housing prices and the government spending on education in emerging markets and developing economies, and social protection in advanced economies concerning housing policies to resolve housing price issues. Future research may employ fiscal policy as the independent variable, as the role of taxes in explaining the housing market should not be neglected.