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Market fundamentals, public policy and private gain: house price dynamics in Singapore

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  • Sau Kim Lum

Abstract

This paper presents new evidence on the impact of market fundamentals and public policy variables on house price behaviour in the Singapore private housing market. It develops a structural model of house price determination that focuses on government policies in two areas: deregulatory regime shifts in the public housing market and a land supply programme aimed at dampening house price inflation by releasing state land for private residential development. Using data from 1975 to 1995, the empirical strategy applies the Johansen cointegration approach for estimating a reduced form error correction model of long-run price determination and short-run dynamics. While demand and supply fundamentals are important determinants of long-run equilibrium house prices, short-run dynamics are significantly affected by policy changes in the public housing market and by the release of state land. Private house prices adjust slowly and shocks can have long-lasting disequilibrating effects. A key implication of the results is the importance of explicitly recognizing the linkages between a state-controlled public housing sector and a market-driven private housing market in the design and implementation of government policies with respect to land and housing.

Suggested Citation

  • Sau Kim Lum, 2002. "Market fundamentals, public policy and private gain: house price dynamics in Singapore," Journal of Property Research, Taylor & Francis Journals, vol. 19(2), pages 121-143, January.
    • Handle: RePEc:taf:jpropr:v:19:y:2002:i:2:p:121-143
    DOI: 10.1080/09599910210125232
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    Cited by:

    1. Ivan D. Trofimov Nazaria Md. Aris Dickson C. D. Xuan, 2018. "Macroeconomic and Demographic Determinants of Residential Property Prices in Malaysia," Zagreb International Review of Economics and Business, Faculty of Economics and Business, University of Zagreb, vol. 21(2), pages 71-96, November.
    2. Phang, Sock-Yong, 2004. "House prices and aggregate consumption: do they move together? Evidence from Singapore," Journal of Housing Economics, Elsevier, vol. 13(2), pages 101-119, June.
    3. Sing, Tien-Foo & Tsai, I-Chun & Chen, Ming-Chi, 2006. "Price dynamics in public and private housing markets in Singapore," Journal of Housing Economics, Elsevier, vol. 15(4), pages 305-320, December.
    4. Gary John Rangel & Jason Wei Jian Ng, 2017. "Macroeconomic Drivers of Singapore Private Residential Prices: A Markov-Switching Approach," Capital Markets Review, Malaysian Finance Association, vol. 25(2), pages 15-31.
    5. Deo Bardhan, Ashok & Datta, Rajarshi & Edelstein, Robert H. & Sau Kim, Lum, 2003. "A tale of two sectors: Upward mobility and the private housing market in Singapore," Journal of Housing Economics, Elsevier, vol. 12(2), pages 83-105, June.
    6. Arrazola, María & de Hevia, José & Romero, Desiderio & Sanz-Sanz, José Félix, 2014. "Determinants of the Spanish housing market over three decades and three booms: Long run supply and demand elasticities," Working Paper Series 18852, Victoria University of Wellington, Chair in Public Finance.
    7. Arrazola, María & de Hevia, José & Romero, Desiderio & Sanz-Sanz, José Félix, 2014. "Determinants of the Spanish housing market over three decades and three booms: Long run supply and demand elasticities," Working Paper Series 3604, Victoria University of Wellington, Chair in Public Finance.
    8. W D A Bryant, 2009. "General Equilibrium:Theory and Evidence," World Scientific Books, World Scientific Publishing Co. Pte. Ltd., number 6875, January.
    9. Tilak Abeysinghe & Jiaying Gu, 2016. "Estimating fundamental and affordable housing price trends: a study based on Singapore," Applied Economics, Taylor & Francis Journals, vol. 48(49), pages 4783-4798, October.
    10. Trofimov, Ivan D. & Md. Aris, Nazaria & C. D. Xuan, Dickson, 2018. "Macroeconomic and demographic determinants of residential property prices in Malaysia," MPRA Paper 85819, University Library of Munich, Germany.
    11. G. K. Randolph Tan, 2006. "Robust Inference for Measures of Persistence in Singapore Sectoral Property Price Indexes," Journal of Property Research, Taylor & Francis Journals, vol. 23(4), pages 305-321, October.
    12. Edelstein, Robert H. & Lum, Sau Kim, 2004. "House prices, wealth effects, and the Singapore macroeconomy," Journal of Housing Economics, Elsevier, vol. 13(4), pages 342-367, December.
    13. Paul Oslington, 2012. "General Equilibrium: Theory and Evidence," The Economic Record, The Economic Society of Australia, vol. 88(282), pages 446-448, September.
    14. Li, Xiaolu & Tang, Yang, 2018. "When natives meet immigrants in public and private housing markets," Journal of Housing Economics, Elsevier, vol. 41(C), pages 30-44.
    15. Kim, Young Se & Rous, Jeffrey J., 2012. "House price convergence: Evidence from US state and metropolitan area panels," Journal of Housing Economics, Elsevier, vol. 21(2), pages 169-186.

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