CPF AND PRIVATE HOUSING PRICE IN SINGAPORE, 1981-1998

Abstract

This study examines whether there is a significant relationship between CPF publichousing policies, CPF private-housing policies and private-housing price and their inter¬ temporal causality structure in Singapore. Econometric work using the Cointegration and Granger Causality methodologies has been largely ignored in previous work in the literature. The key contribution of this study is to suggest a new understanding of CPF housing schemes, housing price and demand fundamentals. In general, using Cointegration techniques, CPF housing polices do not appear to have sustained long run impact on the private-housing market. However, interesting short run dynamics emerge when Granger causality tests are applied. In particular, this study finds an asymmetric behavior of housing demand using CPF savings during the up and down cycle of the housing market. Demand of private-housing under the Residential Properties Scheme (RPS) appears to be price inelastic during upturn, but not during down turn. While independent relationship was discovered between demand of private-housing under the Public Housing Scheme (PHS) and price, irregardless of the state of the market.