Malaysia has gone through rapid economic growth since the launch of the National Economic Policy in the 1970s. Rapid economic growth is often closely linked to the rate of urbanization and level of development in a country. This leads to a natural increase of urban population, higher net migration and the reclassification of urban boundaries. The increase in the concentration of urban areas is evident according to the figures from the Department of Statistics (cited by Siwar and Yusof, 1997, p. 1524-1525). From 1957 to 1970, the urban population grew by 3.3%; and from 1971 to 1990, the urban population grew by 4.9%. Also, the percentage of urban population as a percentage of total population in 1970, 1980 and 1991 was 27%, 34% and 51% respectively.

The rapid urbanization has also been closely correlated to the level of development and economic transformation. The table below illustrates the transformation of the Malaysian economy from a producer of raw materials to an economy driven by manufacturing.

It has been observed that the percentage share of agriculture decreased significantly from 32.1% to 18.6%, while the percentage share of manufacturing almost doubled between 1970 and 1990.

During the early years of urbanization, housing demand in the capital city arose as a need due to industrialization, employment creation and income growth (BNM, 1992).  The number of government backed projects to construct housing for middle-income and upper-income households grew significantly from the late 1970s. In the 1980s, the public sector had a strong presence in the housing market and was responsible for 20% to 35% of new housing units built (Malpezzi and Mayo, 1997). Since then, development of the economy has led to improvements in the GNP per capita and the improvements in standards of living.