Foreign Investment and Housing Market Stability in Developing Economies: Empirical Evidence from Malaysia

Sustainable property development in developing economies requires a careful balance between attracting foreign capital and maintaining housing affordability for local residents. While foreign direct investment (FDI) serves as a crucial engine for economic growth by enhancing productive capacity and international competitiveness, its effects on local housing markets remain inadequately understood in policy frameworks. This study examines how economic development strategies can be designed to harness FDI benefits while preventing residential market distortions in rapidly industrializing regions. Using Malaysia’s Kulim Hi-Tech Park and Batu Kawan Industrial Park as empirical cases, we analyze the relationship between foreign capital inflows and residential property prices from 2000 to 2022 through time-series regression analysis supplemented by stakeholder consultations. Our findings reveal that FDI significantly influences housing price dynamics in industrial zones, with both positive economic spillovers and challenges for housing affordability. The results demonstrate that targeted policy interventions—including affordable housing mandates, developer incentives, and strategic land use planning—can effectively moderate price appreciation while maintaining investment attractiveness. This research contributes to evidence-based policymaking by identifying integrated mechanisms that promote sustainable and inclusive growth in emerging economies seeking to balance industrial advancement with equitable housing access. The Malaysian experience offers valuable practical insights for policymakers in developing nations navigating the complex relationship between international investment, housing markets, and social welfare.